1. The assessee during the assessm ent year 1977-78 claimed a deduction of a sum of Rs.21,490 paid as royalty to I for providing technical know-how for the manufacture of automobile air-cleaners.
2. The agreement was for a period of five years. The assessee under the agreement was obliged to pay a royalty of Rs.2 per air-cleaner manufactured with the assistance received from I. The claim of the assessee was that the sum paid was revenue expenditure and allowable in Revenue expenditure in the case of payment made for supply of technical know-how. The test laid down by the Supreme Court reads as under (headnote): "The question whether a particular payment made by an assessee under the terms of an agreement forms a part of capital expenditure or Revenue expenditure, would depend upon several factors, namely, whether the assessee obtained completely new plant with a complete new process and completely new technology for manufacture of the product or the payment was made for the technical know-how which was for the betterment of the product in question which was already being produced; whether the improvisation made is part and parcel of the existing business or a new business was set up with the so-called technical know-how for which payments were made; whether on expiry of the period of agreement the assessee is required to give back the plans and designs which were obtained, but the assessee could manufacture the product in the factory that has been set up with the collaboration of the foreign firm; the cumulative effect on a construction of the various terms and conditions of the agreement; whether the assessee derived benefits coming to its capital for which the payment was made."
3. Applying the test laid down by the Supreme Court, it is clear that the assessee had entered into the agreement with the object of improving its business and it is not a case of a new business. Viewing the matter from any angle, we are of the view that the Appellate Tribunal has come to the correct conclusion in holding that the payment made by the assessee under the collaboration agreement should be regarded as Revenue expenditure. Following the decisions of the Supreme Court in Alembic Chemical Works Co. Ltd.'s case (1989) 177 ITR 377 and Jonas Woodhead & Sons' case (1997)
4. 224 ITR 342 and the decision of this Court in Aquapump Industries' case (1996) 218 ITR 427, all cited supra, we hold that the Tribunal was correct in holding 'that the payment made under the collaboration agreement should be allowed as Revenue expenditure.
5. In this view of the matter, we answer the questions of law referred to us in the various tax cases in the affirmative and against the Revenue. However, in the circumstances of the case, there will be no, order as to costs. .