MYSORE KIRLOSKAR LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE references are made by the Income-tax Appellate Tribunal, Bangalore Bench in relation to the assessment for the assessment years 1962-63, 1964-65, 1965-66. 1968-69, The assessee is common to all these cases. The questions relate to the payment of certain sums of money to foreign companies by the assessee under certain agreements entered into with them. One question that is being common for all these years is in regard to the payments made under an agreement with M/s. Alfred Herberts Ltd., U. K. (hereinafter referred to as Her" berts). The agreement with that company was on 1-8-1958. The payments made in the several assessment years were 1,000, 2,000, 1,000 and 3,250. In relation to the assessment year 1965-66. questions relate to payments made to a Company M/s. Landis Tool Company, U.S.A. (hereinafter referred to as Landis) of 12,000 dollars and to M/s. Monarch Machine Tools Company of U.S.A. of 10,000 dollars, also. The Tribunal held that the payments made to Herberts and Landis were capital in nature while the payment made to Monarch Machine Tools Co., was revenue in nature. The Appellate Assistant Commissioner had held that the payment made to Monarch Machine Tools Co., was revenue in nature and the Tribunal dismissed the appeal that had been filed by the Department against that order, The reference in regard to Monarch Machine Tools Co., is at the instance of the Commissioner while others are at the instance of the assessee.

(2.) IN regard to an earlier assessment year namely 1960-61, a similar payment that had been made to Herberts Ltd., and been held to be capital in nature by the Tribunal and there was a reference to this Court at the instance of the assessee. This court held that the view taken by the Tribunal was correct. On behalf of the assessee the principles enunciated by the High Court of Bombay in Commr. of I.-T., Bombay v. CIBA Pharma Pvt, Ltd., ((1965) 57 ITR 428) (Bom) had been relied upon. This Court, however, distinguished that case and was of the opinion that the payment was made in regard to a new product and the principle enunciated by the High Court of Bombay in Ciba Pharma Private Ltd., was not applicable, as the agreement in relation to that case was only for a period of 5 years and further it was concerned with a pharmaceutical industry and technical knowledge in that field would become outmoded within the course of months and years and therefore the ratio of that decision was not applicable to the facts of this case.

(3.) THE question that is common to all the years which relates to the payment to Alfred Herbert Limited is as follows: