In Brief
Honda Siel Cars India Ltd. challenged income tax reassessments treating a USD 30.5 million technical fee payable to its parent Honda Motors Japan as capital rather than revenue expenditure. The assessee argued it acquired only a limited right to use technical information during the agreement's currency, while revenue contended the fee related to setting up the company's new manufacturing unit. The Supreme Court upheld the High Court's decision that the expenditure was capital in nature, noting that since no prior manufacturing business existed, the technical know-how and collaboration agreement were integral to establishing the automobile manufacturing unit itself, making payments for such enduring business foundation capital expenditure.
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