COMMISSIONER OF INCOME TAX Vs. BRAKE LININGS LIMITED

JUDGEMENT

(1.) PURSUANT to the direction by this court, the following question has been referred for the opinion of this court by the Income -tax Appellate Tribunal (in short, 'the Tribunal') under Section 256(2) of the Income -tax Act, 1961 (in short, 'the Act') :

(2.) THE basic issue related to the question as to whether technical know -how for which rupees one lakh was paid was revenue expenditure or capital expenditure. The Tribunal, in the appeal filed by the assessed, held that it was a capital expenditure, and, thereforee, the claim as revenue expenditure had been rightly disallowed. While holding so, the Tribunal held that the sum so disallowed as capital expenditure will have to be added up to the cost of the assessed -company's business asset on a pro rata basis. A prayer for reference under Section 256(1) of the Act was rejected but subsequently on being moved under Section 256(2) of the Act, this court directed the question, as set out above, to be referred.

(3.) WE find that the forums below, including the Tribunal, have taken into account the following aspects to determine that the expenditure has to be capital in nature, they are as follows :