{"id":212182,"date":"1997-02-11T00:00:00","date_gmt":"1997-02-10T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/ms-jonas-woodhead-sons-ltd-vs-the-commissioner-of-income-tax-on-11-february-1997"},"modified":"2018-09-29T21:36:57","modified_gmt":"2018-09-29T16:06:57","slug":"ms-jonas-woodhead-sons-ltd-vs-the-commissioner-of-income-tax-on-11-february-1997","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/ms-jonas-woodhead-sons-ltd-vs-the-commissioner-of-income-tax-on-11-february-1997","title":{"rendered":"M\/S. Jonas Woodhead & Sons Ltd., … vs The Commissioner Of Income-Tax, … on 11 February, 1997"},"content":{"rendered":"
Supreme Court of India<\/div>\n
M\/S. Jonas Woodhead & Sons Ltd., … vs The Commissioner Of Income-Tax, … on 11 February, 1997<\/div>\n
Author: G Pattanaik<\/div>\n
Bench: S.C. Agrawal, G.B. Pattanaik<\/div>\n
           PETITIONER:\nM\/S. JONAS WOODHEAD & SONS LTD., MADRAS.\n\n\tVs.\n\nRESPONDENT:\nTHE COMMISSIONER OF INCOME-TAX, MADRAS\n\nDATE OF JUDGMENT:\t11\/02\/1997\n\nBENCH:\nS.C. AGRAWAL, G.B. PATTANAIK\n\n\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
\t\t      J U D G M E N T
\n     G.B. PATTANAIK, J.\n<\/p>\n
     These two\tappeals by  special leave at the instance of
\nthe assessee  are directed  against the\t order of the Madras
\nHigh Court  answering the  question posed  in favour  of the
\nrevenue and  against the  assessee. The Income-tax Appellate
\nTribunal, Madras  Bench, referred  the following question to
\nthe Madras High Court for its opinion:\n<\/p>\n
     “Whether, on  the facts  and in the
\n     circumstances  of\t the  case,  the
\n     Tribunal was  right in holding that
\n     25%  of  the  amount  paid\t by  the
\n     assessee as royalty to Messrs Jonas
\n     Woodhead  &   Sons.,  was\t capital
\n     expenditure   and\t therefore   not
\n     allowable\tas  revenue  expenditure
\n     under the provisions of the Income-
\n     tax under\tthe  provisions\t of  the
\n     Income-tax\t Act,\t1967,  for   the
\n     assessment years  1967-68 and 1968-
\n     69?”<\/p><\/blockquote>\n
     The aforesaid question of law arose out of order of the
\nAppellate Tribunal arising out of assessment proceedings for
\nthe assessment\tyears 1967-68  and 1968-69.  The assessee, a
\nlimited company\t incorporated in  March 1963 to carry on the
\nbusiness of  manufacture of automobiles springs entered into
\nan  agreement  with  M\/s.  Jonas  Woodhead  and\t Sons  Ltd.,
\n(hereinafter referred  to as  “foreign company”)  of  United
\nKingdom\t for   manufacture  of\tall  types  of\tsprings\t and
\nsuspension for\troad and  rail vehicles. Under the terms and
\nconditions of  the agreement  between  the  parties  it\t was
\nstipulated that\t the foreign firm will give the assessee the
\ntechnical information  and know-how  relating to the setting
\nup of  a plant\tsuitable for  manufacture of the products as
\nwell as the technical know-how relating to the setting up of
\nthe plant  itself, the\tdrawings, estimates, specifications,
\nmanufacturing methods, blue prints of production and testing
\nequipment  and\tother  data  and  information  necessary  to
\nmanufacture the\t products and to set up proper and efficient
\nplants. The  said agreement between the parties also provide
\nthat in consideration of the information to be furnished and
\nservices to  be rendered to the assessee by the foreign firm
\nthe assessee  shall pay\t a  royalty  at\t the  rates  of\t the
\nlicensed products, turnover of the assessee to be calculated
\nin accordance  with the\t provisions of\tthe  agreement.\t The
\nproduction of  the assessee  commenced on  1.1.1966  and  in
\nterms of  the agreement\t the assessee  made payments  of Rs.
\n24,\/000\/- and  Rs. 47,000\/- respectively to the foreign firm
\nfor assessment\tyears 1967-68 and 1968-69 as royalty. In the
\nassessment proceedings\tthe  Income-tax\t Officer  disallowed
\n1\/4th of  the aforesaid\t payments on  the ground  that\tsuch
\npayment represented  the consideration\tfor service provided
\nby the\tforeign\t company  of  an  enduring  nature  and\t is,
\ntherefore, a capital receipt. The assessee preferred appeals
\nbefore\tthe   Appellate\t Assistant  Commissioner  and  being
\nunsuccessful therein  preferred second appeal to the Income-
\ntax Appellate  Tribunal. The  Tribunal having  dismissed the
\nsecond appeal  an application  was filled  by  the  assessee
\nunder Section 256(1) of the Income-tax Act for referring the
\nquestion of  law as  already indicated\tto the High Court of
\nMadras for  being answered.  The High  Court by the impugned
\njudgment answered  the question in favour of the revenue and
\nagainst the  assessee. The  assessee thereafter\t moved\tthis
\nCourt and  on leave  being granted,  these appeals have been
\nregistered. In answering the question posed in favour of the
\nrevenue the  High Court\t considered the different clauses of
\nthe agreement between the parties and is of the opinion that
\nthe assessee  acquired a  benefit of  enduring nature  which
\nwill constitute “acquisition of an asset and amount paid for
\nthe same  would constitute  capital expenditure”.  The\tHigh
\nCourt  also   came  to\t the  conclusion  that\tthe  payment
\nstipulated under  clause 12 of the agreement by the assessee
\nto the\tforeign firm  was not  the remuneration for using of
\nthe rights  granted by\tthe foreign  firm  but\ta  composite
\npayment\t for  all  the\tservices  rendered  and\t information
\nfurnished by  the said\tforeign firm  to the assessee in the
\nsetting up  of the  factory as well as in the manufacture of
\nthe licensed  products in  that factory. The judgment of the
\nHigh Court  has since  been reported  in 117  (1979) ITR 55.
\nMrs. Janaki  Ramachandran, the learned counsel appearing for
\nthe appellant  contended that the High Court was in error in
\nanswering the question in favour of the revenue on a finding
\nthat the  payment  was\tmade  to  the  foreign\tcompany\t for
\nobtaining advantage  of enduring  benefit in  as much  as it
\ndoes not  offer advantage  of enduring nature acquired by an
\nassessee which\tcould be  held to  be a capital expenditure.
\nAccording to  the learned  counsel the\tpayments made by the
\nassessee to  the foreign firm for the technical know-how and
\nassistance rendered  by the  said foreign  firm enabled\t the
\nassessee to  carry on its business more efficiently and more
\nprofitably leaving  fixed capital  untouched and, therefore,
\nthe said  payment or  any part\tof it cannot be held to be a
\ncapital expenditure.  In support of this contention reliance
\nwas placed  on the  decision of\t this court  in the  case of
\nEmpire Jute  Co. Ltd.  vs. Commissioner\t of Income-Tax,<\/a>\t 124
\n(1980) ITR  1. According  to the  learned  counsel  for\t the
\nappellant a  technical know-how or technical advice received
\nfrom a\tforeign firm  cannot be\t held to be a tangible asset
\nand any\t payment made  to the foreign firm for such know-how
\nis nothing  but a  revenue expenditure.\t The learned counsel
\nplaces\treliance  on  the  decision  of\t Bombay\t High  Court
\nreported in  123 (1980)\t ITR 539.  The learned\tcounsel also
\nurged that  the payment\t required to be made by the assessee
\nto the\tforeign firm  was merely  for the better conduct and
\nimprovement of the existing business and as such was revenue
\nin nature and can’t held to be a capital expenditure.\n<\/p>\n
     Mr. Chaudhary,  the learned  counsel appearing  for the
\nrevenue on  the\t other\thand  contended\t that  the  question
\nwhether a particular payment made by the assessee would form
\na part\tof revenue  expenditure or capital expenditure would
\ndepend upon  the relevant facts and the terms and conditions
\nof the agreement between the parties under which the payment
\nis made.  According  to\t the  learned  counsel\tthe  various
\nclauses of  the\t agreement  having  been  analysed  and\t the
\nTribunal having\t found that  the  foreign  firm\t not  merely
\nprovided  the\ttechnical  know-how  for  manufacturing\t the
\nproduct but  also gave\tplan and designs and established the
\nfactory for  manufacture of  the products  and the  business
\nconcerned being\t totally new  business and  even  after\t the
\nconclusion of the agreement period the assessee was required
\nmerely to  return the  plans and  designs, but\tthere was no
\nembargo on  the\t assessee  to  manufacture  the\t product  in
\nquestion and  the payments  under the  agreement being\tof a
\ncomposite nature the Tribunal was fully justified in holding
\nthe part  of the  payments made by the assessee did form the
\ncapital expenditure  and the High Court was wholly justified
\nin answering the reference in favour of the revenue.\n<\/p>\n
     The question  whether a  particular payment  made by an
\nassessee under\tthe terms  of the  agreement forms a part of
\ncapital expenditure or revenue expenditure would depend upon
\nseveral factors,  namely, whether  the assessee\t obtained  a
\ncompletely  new\t  plan\twith  a\t complete  new\tprocess\t and
\ncompletely new\ttechnology for manufacture of the product or
\nthe payments  was made\tfor the technical know-how which was
\nfor the\t betterment of\tthe product  in question  which\t was
\nalready being  produced; whether  the improvisation made, is
\nthe part  and parcel  of the  existing\tbusiness  or  a\t new
\nbusiness was  set up  with the\tso-called technical know-how
\nfor which  payments were  made; whether\t on  expiry  of\t the
\nperiod of  agreement the  assessee is  required to give back
\nthe plans  and designs which were obtained, but the assessee
\ncould manufacture  the product\tin the factory that has been
\nset up\twith the  collaboration of  the\t foreign  firm;\t the
\ncumulative effect on a construction of the various terms and
\nconditions of  the agreement;  whether the  assessee derived
\nbenefits coming\t to its\t capital for  which the\t payment was
\nmade. This  court in  the case of Alembic Chemical Works Co.
\nLtd. vs. Commissioner of Income Tax, Gujarat,<\/a> 177 (1989) ITR
\n377  has   indicated  that   “in  the  infinite\t variety  of
\nsituational diversities\t in which  the concept\tof  what  is
\ncapital expenditure  and what  is revenue  arises, it is not
\npossible to  form any general rule even in the generality of
\ncases, sufficiently  accurate and  reasonable comprehensive,
\nto draw\t any clear  line of demarcation”. This Court further
\nheld that  there is  no single definitive criterion which by
\nitself\tis  demarcative,  whether  a  particular  outlay  is
\ncapital or  revenue. And  therefore, “once  for all” test as
\nwell  as   the\ttest   of  “enduring  benefit”\tmay  not  be
\nconclusive. Consequently,  the various\tterms and conditions
\nof the\tagreement, the\tadvantages derived  by\tan  assessee
\nunder the agreement, are all to be taken in account and then
\nit has\tto be  decided whether\tthe whole  or a\t part of the
\npayment thus  made is  a capital  expenditure or  a  revenue
\nexpenditure.\n<\/p>\n
     In the  case of Commissioner of Income-Tax, Bombay City
\nI vs.  CIBA of\tIndia Ltd.,<\/a>  69 (1968) ITR 692, the question
\nfor consideration  was whether\tthe contribution  payable by
\nthe assessee  at the  rate of  6 per cent of the net ceiling
\nprice of  firm categories  which the  assessee\tproduced  on
\ngetting the  formulae, scientific  data, working  rules\t and
\nprescriptions pertaining to the manufacture or processing of
\nproducts discovered  and developed  in the  Swiss  company’s
\nlaboratory can\tbe held to be a business expenditure or is a
\ncapital expenditure. This Court held on consideration of the
\nagreement between  the parties\tthat the  assessee  did\t not
\nbecome entitled\t exclusively even  for\tthe  period  of\t the
\nagreement,  to\tthe  patents  and  trademark  of  the  Swiss
\ncompany; it  had merely\t access to  technical knowledge\t and
\nexperience in  the  pharmaceutical  field  which  the  Swiss
\ncompany commanded.  The assessee on that account have a mere
\nlicence for a limited period of a technical knowledge of the
\nSwiss company with the right to use the patent and trademark
\nof that\t company. The  assessee acquired under the agreement
\nmerely the right to trade for the purpose of carrying on its
\nbusiness as  a\tmanufacturer  or  dealer  and  obtained\t the
\ntechnical knowledge  of Swiss company for limited period. By
\nmaking a technical knowledge available the Swiss company did
\nnot part  with any  asset  of  its  business,  nor  did\t the
\nassessee acquire  any asset  or\t advantage  of\tan  enduring
\nnature for  the benefits of its business and, therefore, the
\nsaid contribution  was merely  a revenue  expenditure  or  a
\nbusiness expenditure.\n<\/p>\n
     In the  case of  Commissioner of  Income-Tax vs. Lucas-
\nT.V.S.\tLimited,<\/a>  110  (1977)  ITR  338,  the  question\t for
\nconsideration before  the Madras  High Court was whether the
\npayments made  under the  collaboration agreement  with\t the
\nforeign firm  by the  assessee for  the exclusive  right and
\nlicence to  make various  items of electrical equipments for
\nvehicles by  the foreign  firm is  a capital  expenditure or
\nrevenue expenditure.  The Madras  High\tCourt  came  to\t the
\nconclusion that\t since under  the agreement the assessee had
\nno right  to manufacture  fresh articles on the basis of the
\nknow-how which\thad obtained from the foreign firm after the
\nexpiry of  the period  of licence,  the payments made by the
\nassessee to the foreign firm for the technical know-how will
\nbe in  the nature  of a\t licence fee  and will constitute an
\nexpenditure in\tcomputation of\tprofits and gains and cannot
\nbe held to be a capital expenditure.\n<\/p>\n
     In the  case  of  Commissioner  of\t Income-Tax,  Madras
\n(Central) vs.  Sarada Binding Works, 102 (1976) ITR 187, the
\nquestion for consideration was whether the consideration for
\na transaction which consist of partly a fixed annual sum and
\npartly a  periodical payment  at a certain percentage of the
\nprofits earned\tby the assessee from the said business would
\nbe treated  in its  entirety as\t a capital  expenditure or a
\nrevenue expenditure.  The Madras  High\tCourt  came  with  a
\nconclusion that\t the fixed  sum paid  towards  part  of\t the
\nconsideration will be a capital payment while the periodical
\npayment of  sum which are definite and which depend upon the
\nfuture profits\tcannot be  treated as a capital expenditure.
\nIn other  words, the  Court answered the question that since
\nthe payment  in question  to be made by the assessee was not
\nrelated to any specified sum but a percentage of the profits
\nto be earned which were indefinitive in nature. Such payment
\ncould be treated only as a revenue expenditure.\n<\/p>\n
     In the  case of  Agarwal Hardware\tWorks (P)  Ltd., vs.
\nCommissioner of\t Income-Tax, West  Bengal-I,<\/a> 121  (1980) ITR
\n510, the question for consideration before the Calcutta High
\nCourt was  whether the\tpayments made  by the  assessee to a
\nforeign firm  for use  of certain patents would be a capital
\nexpenditure or\ta revenue  expenditure.\t The  Calcutta\tHigh
\nCourt on  consideration of the agreement between the parties
\ncame to\t the conclusion\t that since  patents are not useable
\nafter termination  of the  agreement and  the  payments\t are
\nindefinitive in\t nature based  on production  of goods,\t the
\nassessee does  not acquire any capital asset and, therefore,
\nsuch payments  made under  the agreement are for the purpose
\nof business and derive business expenditure.\n<\/p>\n
     In the case of Commissioner of Income-Tax. Bombay City-
\nI vs. Tata Engineering & Locomotive Co Pvt. Ltd.,<\/a> 123 (1980)
\nLTR 538,  the question\tfor consideration  before the Bombay
\nHigh Court  was whether the payments made by the assessee to
\nthe  foreign   firm  for  the  technical  know-how  and\t the
\ntechnical advice would be a capital expenditure or a revenue
\nexpenditure. The  Court answered  the  question\t that  since
\nunder the  agreement the  assessee did not acquire a benefit
\nof enduring  nature and the so-called foreign know-how which
\nis  availed  of\t in  lieu  of  payment\tis  in\tsubstance  a
\ntransaction of acquiring the necessary technical information
\nwith regard  to the  technique of  production and as such it
\ncannot be  held to be a capital expenditure and is a revenue
\nexpenditure.\n<\/p>\n
     In the case of Empire Jute Co. Ltd. vs. Commissioner of
\nIncome-Tax,<\/a> 124 (1980) ITR 1, the question for consideration
\nbefore this  Court was\twhether the  payments  made  by\t the
\nassessee for purchase of “loom hours” was in the nature of a
\ncapital expenditure  or a  revenue expenditure.\t In the said
\ncase the  assessee company  was carrying  on the business of
\nmanufacture of\tjute and  was a\t member of Indian Jute Mills
\nAssociation. The agreement had been entered into between the
\nmembers associations restricting the number of working hours
\nper week  for which  the mills\twere entitled  to work their
\nlooms. The assessee company purchased “loom hours” from four
\nother  mills   for  a  sum  of\tRs.  2,03,255\/-\t during\t the
\nassessment year\t 1960-61 and  claimed deduction treating the
\nsame as\t a revenue  expenditure. The  Tribunal accepted\t the
\nassessee’s contention  and had\tallowed deduction  but on  a
\nreference being\t made, the  High Court\thad  held  that\t the
\namount paid by the assessee for purchase of “loom hours” was
\nin  the\t nature\t of  capital  expenditure  and\tas  such  no
\ndeduction could be claimed. This Court reversed the decision
\nof  the\t  High\tCourt  and  held  that\tthe  acquisition  of
\nadditional “loom  hours” did not add to the fixed capital of
\nthe assessee;  the permanent  structure of  which the income
\nwas obtained remained same. The expenditure incurred for the
\npurpose of  operating the looms for longer working hours was
\nprimarily  and\tessentially  related  to  the  operation  of
\nworking of  the looms  which constituted  the profit  making
\napparatus of the appellant and was expenditure laid out as a
\npart of\t the process  of profit earning. It was an outlay of
\nbusiness in order to carry it on and to earn a profit out of
\nthis expense  as an expense of carrying it on; it was a part
\nof the\tcost of\t operating the\tprofit earning apparatus and
\nwas clearly  in the nature of revenue expenditure. The Court
\nfurther observed as under:\n<\/p>\n
     “There   may    be\t  cases\t   where
\n     expenditure, even\tif incurred  for
\n     obtaining an  advantage of enduring
\n     benefit, may,  none the less, be on
\n     revenue account  and  the\ttest  of
\n     enduring benefit may break down. It
\n     is not  every advantage of enduring
\n     nature acquired by an assessee that
\n     brings   the    case   within   the
\n     principle laid  down in  this test.\n<\/p>\n
     What is material to consider is the
\n     nature  of\t  the  advantage   in  a
\n     commercial sense  and  it\tis  only
\n     where  the\t  advantage  is\t in  the
\n     capital field  that the expenditure
\n     would   be\t  disallowable\t on   an
\n     application of  this test.\t If  the
\n     advantage\t consists    merely   in
\n     facilitating the assessee’s trading
\n     operations\t   or\t enabling    the
\n     management\t and   conduct\tof   the
\n     assessee’s business  to be\t carried
\n     on\t  more\t efficiently   or   more
\n     profitably while  leaving the fixed
\n     capital untouched,\t the expenditure
\n     would be  on revenue  account, even
\n     though the advantage may endure for
\n     an indefinite  future. The\t test of
\n     enduring benefit is, therefore, not
\n     a certain\tor conclusve test and it
\n     cannot  be\t  applied  blindly   and
\n     mechanically without  regard to the
\n     particular facts  and circumstances
\n     of a given case.”\n<\/p>\n
     Thus the  so-called test  of obtaining enduring benefit
\nwas held  not to  be a\tconclusive test\t and  could  not  be
\napplied blindly\t and  mechanically  without  regard  to\t the
\nparticular facts and circumstances of a given case.\n<\/p>\n
     In the  case of  Alembic Chemical\tWorks Co.  Ltd.\t vs.
\nCommissioner of Income-Tax, Gujarat,<\/a> 177 (1989) ITR 377, the
\nquestion for  consideration was whether the lump-sum payment
\nmade by\t the assessee  for obtaining the know-how to produce
\nhigher yield  and sub-culture  of high\tyielding  strain  of
\nPenicillin would  be a\tcapital\t expenditure  or  a  revenue
\nexpenditure. The  Tribunal had\trejected the  claim  of\t the
\nassessee  holding   the\t expenditure   to   be\t a   capital
\nexpenditure. On appeal to this Court it was held:\n<\/p>\n
     “(i) It  would  be\t unrealistic  to
\n     ignore  the   rapid   advances   in
\n     research  in   antibiotic\t medical
\n     microbiology  and\tto  attribute  a
\n     degree    of    endurability    and
\n     permanence to  the technical  know-
\n     how at any particular stage in this
\n     fast  changing   area  of\t medical
\n     science. The  state of  the art  in
\n     some  of\tthese  areas   of   high
\n     priority  research\t  is  constantly
\n     updated so\t that the know-how could
\n     not be  said to bear the element of
\n     the requisite  degree of durability
\n     and nonephemerality  to  share  the
\n     requirements and  qualifications of
\n     an\t enduring   capital  asset.  The
\n     rapid  strides   in   science   and
\n     technology in the field should make
\n     us a little slow and circumspect in
\n     too   readily    pigeon-holing   an
\n     outlay, such as this, as capital.\n<\/p><\/blockquote>\n
     (ii) In  the  infinite  variety  of
\n     situational  diversities  in  which
\n     the  concept  of  what  is\t capital
\n     expenditure  and  what  is\t revenue
\n     arises, it\t is well nigh impossible
\n     to formulate any general rule, even
\n     in\t  the\tgenerality   of\t  cases,
\n     sufficiently      accurate\t     and
\n     reasonably comprehensive,\tto  draw
\n     any  clear\t  line\tof  demarcation.
\n     However,  some  broad  and\t general
\n     tests have been suggested from time
\n     to time  to ascertain on which side
\n     of\t the  line  the\t outlay\t in  any
\n     particular case might reasonably be
\n     held  to\tfall.  These  tests  are
\n     generally efficacious  and serve as
\n     useful  servants;\tbut  as\t masters
\n     they tend to be overexacting.\n<\/p><\/blockquote>\n
     (iii) The\tquestion  in  each  case
\n     would necessarily\tbe  whether  the
\n     tests relevant  and significant  in
\n     one  set\tof   circumstances   are
\n     relevant  and  significant\t in  the
\n     case   on\t hand\talso.\tJudicial
\n     metaphors\tare   narrowly\t to   be
\n     watched, for,  starting as\t devices
\n     to liberate thought, they end often
\n     by enslaving it.\n<\/p><\/blockquote>\n
     The idea  of “once for all” payment
\n     and “enduring  benefit” are  not to
\n     be treated\t as  something\takin  to
\n     statutory conditions;  nor are  the
\n     notions of “capital” or “revenue” a
\n     judicial fetish.  What  is\t capital
\n     expenditure and what is revenue are
\n     not eternal verities but must needs
\n     be flexible so as to respond to the
\n     changing  economic\t  realities   of
\n     business. The  expression “asset or
\n     advantage of  an  enduring\t nature”
\n     was  evolved   to\t emphasise   the
\n     element of\t a sufficient  degree of
\n     durability\t  appropriate\tto   the
\n     context.\n<\/p><\/blockquote>\n
     There is  also no single definitive
\n     criterion\twhich,\t by  itself,  is
\n     determinative whether  a particular
\n     outlay is\tcapital or  revenue. The
\n     “once for all” payment test is also
\n     inconclusive. What\t is relevant  is
\n     the purpose  of the  outlay and its
\n     intended\tobject\t  and\t effect,
\n     considered in  a  common-sense  way
\n     having  regard   to  the\tbusiness
\n     realities. In  a  given  case,  the
\n     test of  “enduring\t benefit”  might
\n     break down.”<\/p><\/blockquote>\n
     It would  thus appear  that  the  courts  have  applied
\ndifferent tests like starting of a new business on the basis
\nof  technical\tknow-how  received  from  the  foreign-firm,
\nexclusive  right  of  the  company  to\tuse  the  patent  or
\ntrademark which\t it receives  from  the\t foreign  firm,\t the
\npayments made  by the  company to the foreign-firm whether a
\ndefinite one  or dependant upon certain contingencies, right
\nto use\tthe technical know-how of production or the activity
\neven  after  the  completion  of  the  agreement,  obtaining
\nenduring benefit  for a\t considerable part on account of the
\ntechnical informations received from a foreign-firm, payment
\nwhether made  “once for all” or in different instalments co-
\nrelatable to the percentage of gross turnover of the product
\nto ultimately  find out\t whether the  expenditure or payment
\nthus made  makes an accretion to the capital asset and after
\nthe court  comes to  the conclusion  that it does so then it
\nhas to be held to be a capital expenditure. As has been held
\nby this\t Court and  already indicated  in  Alembic  Chemical
\nWork’s case  [177  (1989)  ITR\t377)  no  single  definitive
\ncriterion by  itself could  be determinative and, therefore,
\nbearing in  mind the changing economic realities of business
\nand the\t varieties of  situational diversities\tthe  various
\nclauses of the agreement are to be examined. But in the case
\nin hand the Tribunal having considered the different clauses
\nof the\tagreement and  having come  to the  conclusion\tthat
\nunder the agreement with the foreign firm what was set up by
\nthe assessee was a new business and the foreign firm had not\n<\/p>\n
– only\tfurnished information and the technical know-how but
\nrendered valuable  services in\tsetting up  of\tthe  factory
\nitself and  even after\tthe expiry of the agreement there is
\nno embargo  on the  assessee to\t continue to manufacture the
\nproduct in question, it is difficult to hold that the entire
\npayment made  is a  revenue expenditure\t merely because\t the
\npayment is  required to\t be made  on a certain percentage of
\nthe rates  of the  gross turnover  of the  products  of\t the
\nincome as  royalty. In\tour considered opinion, in the facts
\nand circumstances  of the  case the  High  Court  was  fully
\njustified in  answering\t the  reference\t in  favour  of\t the
\nrevenue\t and   against\tthe   assessee.\t These\tappeals\t are
\naccordingly dismissed  but in  the circumstances without any
\norder as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India M\/S. Jonas Woodhead & Sons Ltd., … vs The Commissioner Of Income-Tax, … on 11 February, 1997 Author: G Pattanaik Bench: S.C. Agrawal, G.B. Pattanaik PETITIONER: M\/S. JONAS WOODHEAD & SONS LTD., MADRAS. Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX, MADRAS DATE OF JUDGMENT: 11\/02\/1997 BENCH: S.C. AGRAWAL, G.B. PATTANAIK ACT: HEADNOTE: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-212182","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nM\/S. 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