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2013 (10) TMI 924 - AT - Income TaxDie tooling charges as revenue expenditure or capital expenditure – Held that:- Tribunal in the case of DCIT vs Metalman Auto Private Ltd [2000 (6) TMI 123 - ITAT CHANDIGARH-A] 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 changes. It is not the case of the revenue that new machinery was installed rather the assessee incurred expenses for the improvement of product and quality with an object of achieving maximum output by improving the already existing machinery, therefore, it cannot be said that it is setting up of altogether new business – Decided in favor of Assessee. Expenditure as Revenue or capital - The assessee paid a sum of Rs. 58,44,711/-, under technical collaboration agreement, to M/s Ring Tech Company. Japan. A sum of Rs. 25,53,906/- 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 COURT], wherein the assessee claimed deduction for an amount of Rs. 26,65,340/- paid to M/s Kirloskar Oil Engines Ltd as royalty on the basis of agreement for the purposes of acquiring technical know how. It was decided in favour of the assessee by upholding the decision of the Tribunal.
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