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(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding and had valid materials to hold that nothing was conveyed by Texmo Industries to the assessee by way of an asset in accordance with the agreement except the use of the trade mark and access to the technical information?"

2. Though the said questions have been set out as two questions, they actually relate to the question whether the expenditures of Rs. 21,60,682, Rs. 2,83,655 and Rs. 4,23,291 in the above said three assessment years, respectively, incurred by the assessee as royalty payments to Texmo Industries, Coimbatore, under the agreement dt. 1st Jan., 1977, between them, are revenue expenditures deductible under s. 37(1) of the Act or capital expenditures not deductible thereunder. (The above said agreement was literally between Texmo Industries and one, C. K. Industries, but the said C. K. Industries changed its name subsequently to Aquapump Industries, who is the assessee. So, the agreement is really only between Texmo Industries and the assessee).

3. As per the abovesaid s. 37(1), inter alia, only if the expenditure in question is not capital expenditure, but is revenue expenditure, it is allowable as deduction in computing the total income under the head "Profits and gains of business or profession". In that context only, the Tribunal below held that the above referred to expenditures incurred by the assessee are revenue expenditures on the footing that no capital asset of enduring nature had been acquired by the assessee by incurring those expenditures in paying the abovesaid sums in question as royalty to Texmo Industries and on the footing that nothing was conveyed by Texmo Industries and on the footing that nothing was conveyed by Texmo Industries to the assessee by way of an asset in accordance with the relevant agreement entered into between them except the use of the trade mark and access to technical information.

1. In consideration of the royalties hereinafter reserved Texmo has agreed to allow C. K. Industries to manufacture the article referred above for a period of five years from 1st April, 1977, and this period of licence can be extended thereafter for such periods as may be mutually agreed upon.

2. Texmo has agreed to allow CKI the use of the trade mark 'Texmo' for the production and marketing the licensed products according to the design specifications and standards of Texmo.

3. Texmo has agreed to furnish technical information pertaining to the manufacture of its licensed products.

4. Texmo has agreed to offer guidance to CKI in the procurement of the following drawings/description/specification :...

5. Texmo shall make available the services of their personnel for :

(a) Discussion with the engineers of CKI and advice on the projection and pre-planning for the new CKI factory including determination of the sequence of tasks to be taken up, specification and selection of equipment and materials; and
(b) Transfer of specialised skills and knowledge, regarding all aspects of the production of the licensed products....