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6. In Tax Cases Nos. 982 and 983 of 1986, the Tribunal has referred the following common question of law under Section 256(1) of the Income-tax Act, 1961, for our consideration :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the technical know-how fees paid to India Radiators Ltd. is an admissible deduction while computing the income of the assessee ?"

7. Mr. C. V. Rajan, learned counsel for the Revenue, forcibly submitted that the Tribunal was not correct in holding that the amount paid to India Radiators Ltd. should be allowed as revenue expenditure as the assessee had obtained an enduring benefit by virtue of the technical collaboration agreement. He submitted that the knowledge obtained by the assessee would enure even after the period of the agreement and, therefore, the amount was rightly disallowed by the Income-tax Officer as capital expenditure.

9. We have carefully considered the submissions of learned counsel for the parties. It is clear that the agreement was only for a period of five years and it cannot be said that the assessee had obtained an enduring benefit by virtue of the agreement and the period of five years cannot be regarded as a long period to confer an enduring benefit on the assessee. Further, the assessee obtained the technical knowledge for the manufacture of air cleaners in the automobile field and it is a common knowledge that fast changes are taking place in the automobile field and the rapid technological change in the field of automobile is evident from the new types of vehicles coming to the market. The Appellate Tribunal also perused the terms of the agreement and gave its finding that the assessee was given a licence to use the technical assistance received from India Radiators Ltd. Though the Appellate Tribunal found that under the collaboration agreement there is no specific prohibition against the use of the knowledge obtained by virtue of the agreement even after the termination of the agreement, Clauses 22 and 23 of the agreement which were relied upon by the Tribunal show that the assessee has no proprietary interest over the drawings or the know-how obtained under the collaboration agreement. We are of the view that the payment made by the assessee was for the production of the articles manufactured by the assessee and it cannot be regarded as a payment for acquisition of capital assets. The view of the Appellate Tribunal that the payment was made for the use of the capital assets during the period of five years appears to be reasonable and there is no warrant to differ from the finding of the Appellate Tribunal that the payment was made for the use of the knowledge during the period of the agreement.

10. In Alembic Chemical Works Co. Ltd, v. CIT [1989] 177 ITR 377, the Supreme Court has held that it would be unrealistic to ignore the rapid advances in the medical field and to attribute a degree of endurability and permanence to the technical know-how at any particular stage in this fast changing area of medical science. We are of the view that the view expressed by the Supreme Court with reference to the medical field would equally apply to the automobile field and it is not possible to attribute a degree of endurability and permanence to the technical knowledge obtained by the assessee in the automobile field. The Supreme Court further held that there is no single definitive criterion which by itself is determinative whether a particular outlay is capital or revenue and the "once for all" payment test is also inconclusive and what is relevant is the purpose of the outlay and its intended object and effect considered in a common sense way having regard to the business realities. In the light of the tests laid down by the Supreme Court, we are of the view that the purpose of the outlay in the instant case was for the use of the technical know-how during the period of the agreement, and the object of the agreement was the better production of the product and when the business reality in the automobile field is taken into account, the payment made by the assessee cannot be regarded as capital expenditure as it cannot be said that the assessee had acquired capital assets by virtue of the payment under the agreement. The agreement, as found by the Tribunal, clearly shows that the assessee had the licence benefit to use the technical knowledge during the period of the agreement and, therefore, it is not possible to say that the assessee had obtained an enduring benefit by virtue of the payment made to the collaborator.