COMMISSIONER OF INCOME TAX Vs. ELECTRO STEELCASTINGS LTD.

JUDGEMENT

(1.) THE present reference at the instance of the Commissioner of Income Tax, Orissa, raises the following question : Whether the Tribunal was justified in holding that a sum of Rs. 13,93,793 paid as technical assistance fees can be treated as revenue expenditure to be allowed as deduction ?

(2.) THE facts indicate, inter alia, that the assessee -company entered into an agreement dated December 15, 1979, with Bradly and Foster Ltd. of the United Kingdom. Under the terms of the said agreement the assessee was to receive technical know -how regarding production of grinding media and other associated parts as well as vertical shaft mills, rings and rollers. In consideration for the supply of such information, the assessee -company paid to its foreign collaborators a lump sum amount of Rs. 13,93,793. This amount was climbed as a revenue deduction. The Inspecting Assistant Commissioner (Assessment) in his assessment order held that the payment was in the nature of compensation to acquire secret documents patents, designs and other information for manufacturing of the product and that it will create assets of enduring nature and will give a lasting benefit to the assessee. However, the Commissioner of Income Tax (Appeals) held that the expenditure was allowable as revenue deduction. The Revenue preferred an appeal before the Tribunal. The Tribunal upheld the order of the Commissioner of Income Tax (Appeals).

(3.) IN the course of hearing our attention is drawn to the decision in Alembic Chemical Works Co. Ltd. v. CIT : : [1989] 177 ITR 377 (SC) . The Supreme Court, while considering the case decided by the High Court is reported in ITR No. 78 of 1970 and by reversing the decision of the High Court, observed (headnote) :