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TMI Blog1976 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income-tax Act, 1961?" The assessment year involved is 1962-63 for which the relevant accounting year ended on September 30, 1961. The assessee is an Indian company (hereinafter referred to as the Indian company "). It is engaged in the manufacture and sale of oxygen and other products both in gases and liquid forms, including the manufacture and sale of electrodes, welding rods, welding equipment, medical equipment and accessories. The Indian company was a 100 per cent. subsidiary company of the British Oxygen Co. Ltd., London (hereinafter referred to as " the English company "). During the year under consideration the Indian company ceased to be a 100 per cent. subsidiary company of the English company and the English company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to use those information, processes and inventions even after the termination of this agreement; therefore, it should be held that the Indian company has obtained an enduring advantage of a permanent nature under this agreement and accordingly it should also be held that the above expenditure incurred by the Indian company is in the nature of a capital expenditure, and hence, the present case is not covered by Ciba's case [1968] 69 ITR 692 (SC), but by the decision of the Madras High Court in the case of Fenner Woodroffe and Co. Ltd. v. Commissioner of Income-tax [1976] 102 ITR 665. Dr. Debi Pal, the learned counsel for the assessee, has disputed the above submissions of Mr. Pal and has submitted that the present case is fully co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e all information, processes and inventions, so communicated and made available to the English company and the right to manufacture, use and sell the products of the Indian company in the English company's territory subject to any limitations or restriction to which such use and the manufacture of such products by the Indian company may be subject. 5. The English company shall, accordingly, from time to time, at the expense of the Indian company communicate and make available to the Indian company-- (i) All information, processes and inventions resulting from the said research, and (ii) all information, processes and inventions acquired under agreements with others, save in so far as the English company is prohibited from communicating or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price paid by the English company to any other party for the registered design and all costs and expenses in connection with such acquisition from any other party and any costs and expenses of the English company of applying for and obtaining design registration in the Indian company's territory in respect thereof. The proportionate part of such cost of acquisition shall be mutually agreed or, failing agreement, shall be fixed by M/s. Cooper Brothers & Co. 11. Each of the parties hereto hereby covenants with the other of them that save in so far as it may be necessary to apply for patent protection or to incorporate any information, improvements or inventions in its products it will not disclose and shall procure that there shall not be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions of Mr. Pal in view of the above clauses of the agreements. The English company did not sell any information, processes and inventions to the Indian company. Under clause 22 of the agreement the Indian company is not entitled to use them after the termination of this agreement. The Indian company is prohibited from disclosing these information, processes and inventions during the currency and also after the determination of this agreement in view of its clause 11 . Though this agreement is for a period of ten years, it can be terminated earlier as provided in clause 23. Therefore, it cannot be said that the Indian company has incurred the expenditure for the purposes of bringing into existence any asset or advantage of an enduring na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o provision for return by the assessee of all copies of information, processes and scientific data of materials to the supplier company after the termination of their agreement and the terms of both these agreements are substantially the same.
And this court, after considering Ciba's case [1968] 69 ITR 692 at pages 701, 702 (SC), accepted the contention made on behalf of the assessee that the expenditure in question was a revenue expenditure and the deduction claimed by the assessee was allowable under section 10(2)(xv) of the Indian Income-tax Act, 1922.
Accordingly, we return our answer to the question in the affirmative and in favour of the assessee, with no order as to costs.
DIPAK KUMAR SEN J.--I agree. X X X X Extracts X X X X X X X X Extracts X X X X
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