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10. Since the principle enunciated in Jeffrey's case [1965] 56 ITR 580 (HL) has been reiterated and followed in Bombay decision in cilag Ltd.'s case [1968] 70 ITR 760 (Bom), it would be sufficient if we refer to the decision in that case. In the case of Cilag Ltd. [1968] 70 ITR 760 (Bom), the assessee was engaged in the manufacture and development of chemicals, medical, pharmaceutical, biological, bacteriological and related products and specialities. It had carried on extensive research work and was maintaining laboratories for a continuous research and further advancement and improvement. It had its trade all over the world including India. The vast experience, the extensive knowledge and the practical experience in the pharmaceutical field, which Cilag Ltd. had acquired, it was using in its trade. Finding that it would be more desirable and practicable in the circumstances which were existing to set up a machinery in India for the purpose of manufacturing its own products than to trade in India with goods brought in from Switzerland it entered into an agreement with Cilag Hind which was a 60% subsidiary of Cilag Ltd. under which Cilag Hind was to be the sole importer and distributor of the products of Cilag Ltd. In India. It was also to be provided by Cilag Ltd. with active substance necessary for the conditioning of the products of Cilag Ltd. in India. Apart from these two things, Cilag Ltd. was also to put at the disposal of Cilag Hind its know-how for the manufacture of the active substances and also of its product. Cilag Hind was to pay to Cilag, compensation, fee, royalty or payment in respect of any of the active substances hitherto or now manufactured or that may be manufactured thereafter by Cilag Hind in India with the assistance of such information, processes, formulae, scientific data and assistance equivalent to a net figure of 5% of the cost thereof, such cost to be computed on the basis of the cost of the raw materials at the site of the manufacture and the cost of production including manufacturing charges. This court took the view that the royalties received by the assessee were "income from business" and the assessee was entitled to have them set off against loss of the assessee in business of the previous years carried forward under section 24(2). The principle that has been enunciated in this decision and which has been extracted from the reported judgment in Handley Page v. Butterworth [1935] 19 TC 328 (CA) appears at page 767 (See [1968] 70 ITR 760) of the report and the material observations run as follows :