Suhas Chandra Sen, J. - (1.) The Tribunal has referred the following two questions of law under Section 256(2) of the Income-tax Act, 1961 : "1. Whether, on the facts and in the circumstances of the case and on a correct construction of the agreement dated September 2, 1963, the Tribunal misdirected itself in law in holding that the conclusion of the Commissioner of Income-tax to the effect that under the said agreement the assessee had been able to start a new line of production and had obtained a benefit of enduring nature was misconceived and not tenable in law"
(2.) Whether, on the facts and in the circumstances of the case, and on a correct construction of the agreement dated September 2, 1963, the Tribunal was right in holding that the payment of Rs. 10,19,693 made by the assessee to the foreign company is allowable as revenue expenditure ?" 2. In the assessment order for the assessment year 1973-74, the Income-tax Officer allowed a sum of Rs. 1,19,693 paid by the assesseo-company to the Federal-Mogul-Bower-Bearings, a company incorporated in USA, as royalty. After the assessment was completed, the Commissioner of Income-tax took the view that the amount was not allowable as deduction and passed an order under Section 263 directing the Income-tax Officer to disallow the above expenditure.
(3.) The assessee preferred an appeal to the Tribunal. The Tribunal was of the view that the assessee had acquired a licence for the use of know-how and the amount in dispute was paid in terms of the licensing agreement and was allowable as business expenditure. The Commissioner of Income-tax has questioned the correctness of the decision of the Tribunal in this reference.;