Rajes Kumar, J. - (1.) Income-tax Appellate Tribunal, Delhi has referred the following question under Section 256(1) of the Income Tax Act, 1961, (hereinafter referred to as "the Act") for opinion of this Court. "Whether on the facts and in the circumstances of the case, the Hon'ble IT AT was Justified in confirming the order of learned CIT (A) who deleted the addition of Rs. 12,89,251/- treated as capital expenditure on account of technical know-how ?"
(2.) The present reference relates to the assessment year 1985-86.
(3.) The brief facts of the case are follows: Assessee respondent (hereinafter referred to as "Assessee") is a company and engaged in the business of manufacture and sale of sugar machinery parts. The assessee entered into an agreement on 11.04.1984 with a company in West Germany (herein-after referred to as "BMA"). The said company was engaged in the manufacture of machinery and equipment for the sugar industry. In the course of the assessment proceedings the assessing officer came across a claim for deduction to the tune of Rs. 15,16,766/- being the amount payable to M/s BMA "on account of acquisition of technical know-how." The assessing officer after an examination of the various clauses/articles of the agreement between the parties came to the conclusion that the assessee had acquired "a benefit of enduring nature" and, the same represented capital expenditure. According to him the net result of the aforesaid agreement between the parties resulted in "absolute transfer of technical knowledge" and the assessee was free to manufacture the machinery specified in the said agreement even after its expiry. The assessing officer also held that the assessee became the absolute owner of technical know-how relating to the manufacture of cane sugar mills vis-a-vis the specifications described in the agreement. In coming to the aforesaid conclusions the assessing officer placed reliance on the decision of the Hon'ble Supreme Court in the case of Scientific Engineering House P. Ltd. v. CIT, 157 ITR 86.;