Karnataka High Court
Addl. Commissioner Of Income-Tax, ... vs Nippon Electronics (India) (P.) Ltd. on 13 March, 1980
Equivalent citations: [1982]134ITR457(KAR), [1982]134ITR457(KARN)
JUDGMENT Srinivasa Iyengar, J.
1. The Income-tax Appellate Tribunal, Bangalore Bench, has referred the following question for the opinion of this court:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 50,652 is allowable as a revenue expenditure ?"
2. The assessee had entered into collaboration agreements with two Japanese companies. The business of the assessee consisted in the manufacture of electric components such as capacitors and switches. The two companies with which the collaboration agreements had been entered into were M/s. Nippon Communication Industrial Co. Ltd. and M/s. Sensei Electric Co. Ltd. The assessment year was 1971-72 and, during the previous year, the assessee had paid a sum of Rs. 41,687 to M/s. Nippon Communication Industrial Co. Ltd. and Rs. 9,322 to the other company by way of royalty. The claim of the assessee that these expenditures were in the nature of revenue expenditure was not accepted by the ITO. On appeal, the AAC upheld the claim of the assessee and, on a further appeal by the department, the Tribunal upheld the view of the AAC.
3. At the instance of the department, the Tribunal has made this reference. Reliance had been placed on behalf of the department, before the Tribunal, on the ruling of this court in the case of Mysore Kirloskar Ltd. v. CIT [1968] 67 ITR 23. The Tribunal held that the facts in the instant case were distinguishable and it observed as follows:
"The real point for consideration is whether the payment of royalty to the two Japanese companies was for the right to manufacture the licensed articles or for the actual user of the technical know-how, data, and information supplied by the japanese companies. In our opinion, the royalty payments are clearly attributable to the latter and hence they are payments of a revenue nature."
4. The conclusion reached by the Tribunal on the material on record, appears to us to be correct. It must be pointed out that the earlier decision of this court in Mysore Kirloskar Ltd. v. CIT [1968] 67 ITR 23, has been reversed in Mysore Kirloskar Ltd. v. CIT [1978] 114 ITR 443 (Kar) [FB], when a similar question arose subsequently in regard to the very same Mysore Kirloskar Ltd. The view taken by the Tribunal is in accord with the principle enunciated in this later decision. Accordingly, we answer the question in the affirmative and in favour of the assessee.
5. Parties to bear their own costs.