LEILA SETH - (1.) These six income-tax references at the instance of the Commissioner of Income-tax, pertain to the assessment years 1965-66 to 1969-70 and 1972-73. The point in issue in each of them pertains to the question of doductibility of royalty. The question posed for our opinion under Section 256(1) of the Income tax Act, 1961 (to be referred to in short as the "the Act",) in the first of the two years is as follows : "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the royalty amounts paid by the assessee to the foreign collaborators for the assessment years 19.65-66 and 1966-67 were of revenue nature ?"
(2.) The question posed in the subsequent three years is identical except that the assessment years 1967-68, 1968-69 and 1969-70 have been inserted in place of 1965-66 and 3966-67. The question posed for the year 1972-73 is substantially the same, though sightly differently worded and is set out: "Whether on the facts and in the circumstances of the case. the Tribunal was right in law in holding that Royalty amounting to Rs. 39,666 paid by the assessee to the foreign collaborators for the assessment year 1972-73 was of revenue nature ?"
(3.) The assessee. M/s. Sharma Engine Valves Ltd., is engaged in the manufacture of valves. A company known as B. K. Khanna & Co. Pvt. Ltd. (in short "Khanna") entered into an agreement dated 25th October, 1961 with a foreign company, Bayerioches Leichtmetal Work Kommanditgeselischaft of Munchen (to be referred as ''DLW") to manufacture valves in India. DLW was already engaged in the design, manufacture and sale of valves in Germany and export thereof. Article I of the agreement provided that the period of the agreement was for ten years; therefcre it was automatically renewable, with prior approval of the Government of India, unless terminated by six months registered notice, from year to year.;