COMMISSIONER OF INCOME TAX Vs. AQUAPUMP INDUSTRIES

JUDGEMENT

(1.) THESE tax cases by the Revenue under S. 256 of the IT Act, 1961 (hereinafter referred to as "the Act"), respectively, relate to the asst. yrs. 1978 -79 to 1980 -81 and the common questions referred to this Court are as follows :

(2.) THOUGH the said questions have been set out as two questions, they actually relate to the question whether the expenditures of Rs. 21,60,682, Rs. 2,83,655 and Rs. 4,23,291 in the above said three assessment years, respectively, incurred by the assessee as royalty payments to Texmo Industries, Coimbatore, under the agreement dt. 1st Jan., 1977, between them, are revenue expenditures deductible under S. 37(1) of the Act or capital expenditures not deductible thereunder. (The above saidagreement was literally between Texmo Industries and one, C.K. Industries, but the said C.K. Industries changed its name subsequently to Aquapump Industries, who is the assessee. So, the agreement is really only between Texmo Industries and the assessee).

(3.) IN order to answer the above question (capital or revenue expenditure), we have to, first of all, see the relevant portions of the abovesaid agreement, which are as follows :