Judgment:
Y.V. Anjaneyulu, J.
1. The Commissioner of Income-tax seeks reference of the following question in connection with income-tax assessment year 1980-81 :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the expenditure of Rs. 1,15,000 incurred by the assessee on acquisition of technical know-how is not capital expenditure ?'
2. We have heard learned standing counsel. We are unable to accept his connection that the expenditure incurred by the assessee is of capital nature. In our opinion, the principle is well-settled by a number of decisions of the Supreme Court as well as of this court.
3. The assessee-company is engaged in the manufacture of locomotives used in mines and industries for haulage of coal and other materials. The company has been carrying on business for quite some time. In connection with the manufacture of locomotives, the assessee-company entered into an agreement with M/s. Ventra Engineering Consultants (P.) Ltd. for securing technical know-how for manufacture of locomotives and wagons. It is not in dispute that M/s. Ventra Engineering Consultants (P.) Ltd. was in possession of technical know-how for manufacture of diesel locomotives and narrow gauge wagons. Pursuant to the agreement entered into by the assessee with M/s. Ventra Engineering Company, a sum of Rs. 1,15,000 was paid during the accounting year relevant for the assessment year 1980-81 towards fees for supply of drawings, designs and supervision of the manufacture of locomotives manufactured by the assessee. The question for consideration was whether the sum of Rs. 1,15,000 paid by the assessee-company to M/s. Ventra Engineering Company was capital in nature.
4. Learned standing counsel relied on the decision of the Supreme Court in Scientific Engineering House P. Ltd. v. CIT : [1986]157ITR86(SC) . Attention is invited to the observation of the Supreme Court that drawings, designs, charts, plans, processing data and other literature comprised in the documentation service fell within the definition of 'plant' in section 43(3) on such a capital asset. Drawing inspiration from the aforesaid observations, learned standing counsel contended that the drawings, designs, etc., supplied by M/s. Ventra Engineering Company in the present case should also be treated as a capital asset.
5. We must point out that in the case relied upon by learned standing counsel, the expenditure incurred on the payment of technical collaboration fee consisting of drawings, designs, charts, plans, etc., was capitalized by the company. A claim for depreciation was made before the tax authorities on the expenditure so capitalized. The Revenue declined to grant depreciation on the ground that the drawings, designs, charts, etc., did not constitute 'books' so that they did not fall within the definition of 'plant' in section 43(3) of the Income-tax Act, 1961. That view was upheld by this court and the decision of this court was challenged in the Supreme Court. The only question that fell for consideration in the Supreme Court was whether the contention of the assessee in that case that the designs, drawings, charts, plans, etc., constitute 'Plant' and depreciation ought to be allowed as claimed by the assessee in that case. In our opinion, the observation of the Supreme Court in the aforementioned case made in a different context altogether cannot govern the consideration in a case where the claim was that it was revenue expenditure.
6. In the present case, it is not a dispute that the assessee has been carrying on business in the manufacture of locomotives. It is also not denied that the technical collaboration fee was paid to M/s. Ventra Engineering Company for the purpose of technical information furnished for the manufacture of products. In our opinion, the expenditure incurred by an assessee in obtaining technical information for the manufacture of goods is clearly on revenue account and is governed by the decision of the Supreme Court in CIT v. Ciba of India Ltd. : [1968]69ITR692(SC) .
7. For the aforesaid reasons, we are unable to accept the Revenue's contention that the expenditure incurred in the present case by the assessee see was on capital account and ought to be treated in that manner for the purpose of tax assessment. We decline to call upon the Tribunal to refer the aforesaid question. The application is accordingly rejected.