TMI Blog2013 (10) TMI 924X X X X Extracts X X X X X X X X Extracts X X X X ..... ,53,906/- was paid under the original agreement for the period of 3 years from 23.6.97 to 22.6.2000 and Rs. 32,90,805/- was paid under the new agreement which is extension of original agreement from 23.6.2000 to 22.6.2002, for a period of 2 years - Main purpose of these agreements was to increase the productivity from present average level of 210 wheels pear hours to 340 wheels per hours and further for reduction of rejections substantially - Main object of the second agreement was to improve productivity, resolution of licenses, chronic quality problems, reducing process rejection/rework and technical up-gradation in the existing car line and introducing of the manufacturing facility of tractor wheels – Held that:- The object was to effect economy and efficiency in the manufacturing process. The acquisition of the knowledge has helped in substantial increase in production but in face of swift changes occurring in the technological world, it cannot be said that the changed method of the technology acquired by the appellant would be of permanent nature. Reliance has been placed upon the judgment in the case of CIT vs Swaraj Engines Ltd [2006 (5) TMI 57 - PUNJAB AND HARYANA HIGH C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before the Ld. C IT(A) that this issue has already been decided in the earlier years in favour of the Revenue by the Tribunal. The Ld. CIT(A) following the order of the Tribunal decided the issue against the assessee. 5. Before us, the Ld. Counsel for the assessee admitted that issue has been decided in the earlier years against the assessee. 6. On the other hand, the Ld. DR relied on the orders of the CIT(A) and the Tribunal. 7. After considering the rival submissions, we find that this issue came up for consideration of the Tribunal in ITA No. 756/Chd/2011 for assessment year 2008-09 and the same was decided vide para 8 following the earlier order against the assessee. Para 8 of the said order reads as under:- "8. We have perused the aforesaid order passed by this Tribunal. The operative portion reads as under : 14. It is agreed by the parties that the decision of the Commissioner of Income-tax (A) is contrary to the decision of the Jurisdictional High Court in the case of CIT Vs. M/s Abhisek Industries, 286 ITR 1. In this case, the Hon'ble High Court held that sales-tax subsidy quantified at percentage of fixed capital investment is a revenue receipt. Since the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in deleting the addition made by the AO by assessing the Die Tooling charges of Rs. 6,57,48,421/- as capital expenditure which was claimed by the assessee as revenue expenditure. 3. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in deleting the addition made by the AO by assessing the Technical know-how expenditure of Rs. 48,53,094/- as capital expenditure which was claimed by the assessee as revenue expenditure. 4. It is prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer may be restored. 17. After hearing both the parties, we find that during assessment proceedings the Assessing Officer noticed that assessee has claimed expenses on die tooling charges amounting to Rs. 6,57,48,421/-. On a query, it was mainl y submitted that these expenses was incurred for development of die tools to manufacture the automotive wheel rims. The expenditure was incurred with an objective of improving the existing products and to bring improvement in the components manufactured by the assessee. Reliance was placed on the order of the Tribunal in assessment year 2004-05. However, the Assessing Officer did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure has been incurred with an object of improving the existing products already manufactured by the company and does not relate to setting up to altogether new product or for setting up of a new unit. The company by incurring such expenditure has only effected economy and efficiency in manufacturing of the existing products and obtained only business advantage. As the expenditure incurred is not of enduring nature to put it in the category of capital expenditure and hence, the same may please be allowed as revenue expenditure." However, the ld assessing officer treated the impugned amount as capital expenditure which was deleted by the ld CIT(A) against which the revenue is in appeal before the Tribunal. We have found that the Tribunal in the case of DCIT vs Metalman Auto Private Ltd (78 ITD 327) Chandigarh, on identical fact, decided in favour of the assessee. It was held to be revenue in nature since the expenditure were incurred for modernization of existing projects, which was already manufacturing the same products, and simply to increase the business more efficiently and more profitability, especially when the expenses were incurred for making technological change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the assessee by the decision of the Tribunal for assessment year 2001-02 in I.T.A.No. 750/Chandi/2005, order dated 30.7.2007. The said order has further been followed in assessment year 2003-04 in I.T.A.No. 897/Chandi/2006, order dated 30.7.2007. For the sake of ready reference and adopting the reasoning we reproduce para Nos.9 to 11 of the order of the Tribunal in I.T.A.No. 750/Chandi/2005 (supra) as under :- "9. Next ground raised by the revenue is that the ld CIT(A) erred in allowing relief to the assessee on account of disallowance of expenses on technical know-how at Rs.58,44,711/- treating them as revenue as against capital expenditure as assessed by ld assessing officer. In nutshell, the ld Sr DR supported the assessment order. Reliance was placed upon the decision in 224 ITR 342 and 251 ITR 155. On the other hand, the ld counsel for the assessee filed the copy of agreement by contending that it was expansion of the business. Reliance was placed upon 236 ITR 471, 269 ITR 369, ITA No.1469/Chd/95 and 236 ITR 314(SC). 10. We have considered the rival submissions and perused the material available on the file. The assessee paid a sum of Rs. 58,44,711/-, under techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysed. it says that these expenses are linked to the expansion of the present unit and virtually it is a new unit, therefore, the expenses are of capital nature whereas the conclusion of the ld CIT(A) is as under:- "The assessee was paying technical know how fees to M/s Ring Tech Co., Japan to increase the production and to reduce the rejections so as to improved the production quality and make the operation profitable. No capital asset as such has been acquired by the company, which could be considered to be of enduring nature. The object was to effect economy and efficiency in the manufacturing process. The acquisition of the knowledge has helped in substantial increase in production but in face of swift changes occurring in the technological world, it cannot be said that the changed method of the technology acquired by the appellant would be of permanent nature. The Hon'ble Supreme Court decision in the case of Alembic Chemical Works Co Ltd v CIT reported in 177 ITR 377 is applicable to the facts of the case. So also the decision of the Hon'ble ITAT, Chandigarh Bench in the case of DCIT v Metalman Auto P. Ltd 78 ITD 327. Taking into account all the above facts and following the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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