INDIAN TELEPHONE INDUSTRIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question of law referred in I.T.R. C. No. 116 of 1974 under s. 256(1) of the I.T. Act (hereinafter referred to as "the Act") by the Income-tax Appellate Tribunal, Bangalore Bench (hereinafter referred to as "the Tribunal"), reads as follows:

(2.) IN I.T.R.C. No. 117 of 1974, the question of law referred is the same but the expenditure in respect of which the relief claimed is Rs. 5,96,000 instead of Rs. 5,96,000.

(3.) BTM was a subsidiary of Standard. Standard and BTM were manufacturing cross-bar telephone exchange under the trade mark "Pentaconta ". By the I-agreement, Standard agreed to finance the setting up of a factory for the manufacture of Pentaconta switching equipment and to cause BTM to provide the required technical information and know-how and to sell certain machinery to the assessee, which was designated by the Government of India, to establish such a factory. Standard agreed to invest US $ 1,250,000 of which the sum of $ 750,000 was in cash and the balance in know-how valued at $ 500,000 in the share capital of the assessee and also to lend to the assessee $ 1,000,000 as loan. Standard was, among other things, entitled to receive royalty.