COMMISSIONER OF INCOME TAX Vs. GREAVES COTTON LIMITED

JUDGEMENT

(1.) THE question referred to us for our decision at the instance of the Revenue and arising" out of the respondent's assessment for the assessment year 1974-75 is, as to whether the Tribunal was right in holding that the sum of Rs. 13,75,906 being the foreign collaboration fee paid to the foreign collaborator should be allowed as a revenue expenditure in computing the income of the assessee for the assessment year 1974-75.

(2.) THE assessee is a manufacturer of cranes. It had, in response to a tender, floated by the Cochin shipyard offered to design, manufacture, supply and erect crane of 150 tonnes capacity. THE petitioner had not manufactured a crane of that capacity earlier and the purchaser, Cochin shipyard, having insisted upon the petitioner involving a reputed foreign crane manufacturer at all stages from the stage of design to the time of erection. THE petitioner entered into an agreement with a German company for obtaining design and drawings, as also for the supervision in India of the manufacture and of the erection of the crane at the Cochin shipyard. THE agreement so entered into sets out the fact that this is a one time arrangement for the manufacture, supply and erection of the 150 tonne crane for the Cochin shipyard. Clause (B) of the recitals in the agreement specifically sets out that the arrangement is intended as limited to "this particular crane only".

(3.) LEARNED counsel for the Revenue, however, submitted that the assessee had received enduring benefit of lasting nature, as the assessee was free to use the drawings and designs, not only for the manufacture of this crane, but, for the manufacture of 150 tonnes capacity crane at any point of time in the future. That certainly was not the intention of the parties, as disclosed in the agreement. The arrangement was specifically for the purpose of executing a single order and the supply from the foreign collaborator was secured at the instance of and for the benefit of the purchaser, who had insisted upon the same. An expenditure, which is of revenue nature cannot be treated as otherwise, by speculating on the possible user of the technical data or the design in future by the assessee. There was no evidence whatever before the Income-tax Officer or before the Tribunal to show that the assessee had commenced manufacture of 150 tonnes capacity cranes on a commercial basis, and had produced such cranes, and/or marketed them after the execution of this order, by utilising the designs and drawings provided by the collaborator. The benefit, which the assessee had secured in this case, was the benefit which was meant for and utilised in the manufacture of the crane supplied to the Cochin Shipyard and no more.