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2011 (11) TMI 515 - KARNATAKA HIGH COURT
Commissioner of Income-tax, Central Circle Versus Luwa India Ltd.

Royalty payment - obtaining new technology and know-how and rights and services - capital expenditure v/s revenue expenditure - Held that:- Licence that was granted does not confer any proprietary right in obtaining technical know-how, the licence is granted as per the agreement subject to payment of royalty to make use of know-how and technology. The royalty payable is depending upon the sales made and export. Mere fact that said know-how and patent has been acquired even before commencement of production in this case would not in any way material itself having regard to the agreement and payment of royalty. Therefore, expenditure made towards royalty is revenue expenditure - Decided against the Revenue.

Foreign tour expenses of wife of the president of company - capital v/s revenue - Held that:- Tribunal allowed the expenditure on finding that wife of the President of the respondent-company accompanied the President to the Budget Conference to discharge social obligation and visit was towards part of the business of the assessee - no infirmity found in the order - Decided against the Revenue.

Depreciation on discarded assets - A.O. following block of assets method reduced value of discarded assets from block of assets thus adding back proportionate depreciation to total income - Held that:- It is well settled that depreciation can be claimed only in respect of machinery that are used in the manufacture of the product and when certain machinery out of the block assets have been discarded, the question of claiming depreciation for the machinery would not arise. Therefore, depreciation claimed has to be proportionately reduced in respect of the machineries discarded - in favour of Revenue.