CIT Vs. EICHER MOTORS LTD.

JUDGEMENT

(1.) THIS order shall also govern the disposal of connected 1 I. T. A. Nos. 27 of 2003 ; 29 of 2003 and 43 of 2003 as these appeals under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for short), are at the instance of the revenue against the orders of the Income Tax Appellate Tribunal relating to the assessment years 1989 -90 ; 1990 -91 ; 1991 -92 and 1992 -93.

(2.) I . T. A. No. 28 of 2003 was admitted for final hearing on the following substantial questions: (1) Whether the Income Tax Appellate Tribunal, Indore erred in holding that the amount paid to Mitsubishi Motors Corporation by the assessee as royalty was allowable as revenue expenditure ? (2) Whether, on the facts and circumstances of the case, the Tribunal was justified in law in permitting the assessee to raise additional ground relating to funded interest when no such claim was ever made before the assessing officer or Commissioner (Appeals) ? (3) Whether, on the facts and circumstances of the case, the Tribunal was justified in law in confirming the order of the Commissioner (Appeals) in allowing the depreciation on notional foreign exchange fluctuation ?

(3.) NECESSARY facts are undisputed. The assessee, a public limited company, is an automobile manufacturer. It entered into a technical assistance agreement with Mitsubishi Motors Corporation (MMC) Japan, for a licence to use and utilize technical know -how and drawings, designs etc. to manufacture the light commercial vehicles (LCVs) and sale thereof under the brand name of MMC in the defined territory during the currency of the licence agreement. It was agreed between the parties that the assessee would pay royalty in periodic instalments at 3 per cent, of MMC FOB Japanese port price, for the use of technical know -how and assistance and information and services provided for manufacture/assembly of licenced products. The assessee, as a licensee, paid royalty under the agreement to MMC in different assessment years as under: Assessment years Royalty paid in lakhs Rs. 1988 -89 41.001989 -90 31.181990 -91 52.231991 -92 98.081992 -93 172.271993 -94 137.571994 -95 163.18