BAJAJ TEMPO LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference under section 256(1) of the Income -tax Act, 1961, refers for the opinion of this court the following questions : '1. Whether, on the facts and in the circumstances of the case and on a true interpretation of the agreement dated January 12, 1964, the payment of Rs. 48,312 was in the nature of capital expenditure ?

(2.) WHETHER , on the facts and in the circumstances of the case, the Tribunal was right in holding that the capital expenditure of the assessee of Rs. 48,312 representing payment to the foreign collaborator was entitled to development rebate and depreciation and in dismissing Miscellaneous Application No. 32/PN/75 -76 ?' 2. Of these two questions, the first question has been referred at the instance of the assessee, while the second question has been referred at the instance of the Revenue. The year of assessment is 1966 -67.

(3.) IT is necessary to mention certain other facts at the outset. The assessee was manufacturing three -wheeler tempos which were known as Viking Tempos. The gear boxes fitted on these vehicles were not being manufactured by the assessee earlier, but were supplied by the German company and were merely fitted into the Viking Tempos by the assessee. Presumably, to avoid a drain on foreign exchange, the assessee decided to manufacture the gear boxes in its own factory with the help of its existing plant and machinery, but needed technical know -how for the said manufacture. Consequently, the assessee entered into an agreement with the German company for acquiring the requisite technical know -how.