TMI Blog2008 (8) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001 (2) TMI 57 - MADRAS HIGH COURT] and PanAmSat International Systems Inc. [ 2006 (8) TMI 238 - ITAT DELHI-A] , we are of the view that the VSAT uplinking charges paid by the assessee company to its parent company were not in the nature of fees for technical services and the same being not liable for deduction of tax at source, the disallowance made by the AO by invoking the provisions of s. 40(a)(1) was not sustainable. Similarly, we are of the view that the amount paid by the assessee company to its parent company on account of reimbursement of expenditure incurred in respect of global accounts manager cannot be treated as payment of salary so as to attract the deduction of tax at source. Undisputedly, the global management staff employed at headquarters were the employees of the parent company viz. Expeditors, USA and there being no employer employee relationship between the said employees and the assessee company, the reimbursement of expenses incurred in relation to them on proportionate basis by the assessee company to the parent company could not be treated as in the nature of salary paid by the assessee company. It was a case of reimbursement of common expenses incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such asset is required to be increased or as the case may be reduced correspondingly, inter alia, for the purposes of depreciation. It was also held that the amendment made to s. 43A w.e.f. 1st April, 2003 was prospective and would accordingly apply in relation to AY 2003-04 and subsequent years - As the assessment year involved in this appeal is 2001-02, we respectfully follow the precedent, uphold the impugned order of the ld CIT(A) on this issue. Ground No. 3 of the Revenue's appeal is accordingly dismissed. Claim for depreciation at a higher rate of 60 per cent on items such as UPS, printers, scanners, modem, NT server etc. - Allowed by AO as well as by the ld CIT(A) @ 25 per cent - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of a co-ordinate Bench of this Tribunal in assessee's own case for AY 2003-04, held that the peripherals such as printers, scanners, NT server, etc. form integral part of the computer and the same, therefore, are eligible for depreciation at a higher rate as applicable to a computer - Respectfully following the precedent, we set aside the impugned order of the ld CIT(A) and direct the AO to allow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue is dismissed whereas the appeal of the assessee is treated as allowed as indicated above. - VIMAL GANDHI, PRESIDENT AND P.M. JAGTAP, A.M. For the Appellant : S.D. Kapila For the Respondent : Durga Charan Dash ORDER P.M. JAGTAP. A.M. 1. These two appeals, one by the assessee being ITA No. 2684/Del/2005 and other by the Revenue being ITA No. 2691/Del/2005 are cross-appeals which are directed against the order of learned CIT(A)-XIV, New Delhi, dt. 31st March, 2005. 2. First, we shall take up the Revenue's appeal being ITA No. 2691/Del/2005, ground No. 1 of which relates to the disallowance made by the AO on account of expenditure in respect of VSAT uplinking charges amounting to Rs. 43,60,772 and global accounts manager expenses amounting to Rs. 18,60,874 which stands deleted by the learned CIT(A). 3. The assessee in the present case is a company which is engaged in the business of supplying chain management, logistics and freight forwarding services in relation to movement of goods and cargo within India and outside India by road, rail, air or ship. This business involves activities of packaging, warehousing, loading/unloading, transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by the assessee company, he held that the said amount was also liable to be disallowed as per the provisions of Section 40(a)(iii). He, therefore, disallowed the entire amount of Rs. 62,21,646 provided by the assessee company on account of amounts payable to the parent company towards VSAT uplink charges and global account managers salary. 5. The matter was carried before the learned CIT(A) and the submissions made before the AO were reiterated on behalf of the assessee company before him. The learned CIT(A) found merit in the said submissions and accepting the same, he held that the communication charges for VSAT uplinking were not covered in the definition of fees for technical services as given in Explanation below Section 9(1)(vii). He held that no tax from the payment of the said charges thus was deductible at source and the disallowance made by the AO by invoking the provisions of Section 40(a)(i) was not sustainable. As regards the amount payable towards global account managers salary, he found that the same represented reimbursement of expenses incurred by global account managers for taking care of global customers of Expeditors Group who had operations in many co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount in question having been paid merely for the use of services for transmission of data, the same cannot be treated as payment for fees for technical services so as to attract the deduction of tax at source as rightly held by the learned CIT(A). In support of this contention, he relied, inter olio, on the decision of Hon'ble Madras High Court in the case of Skycell Communications Ltd. and Anr. v. Dy. CIT and Ors. and that of Delhi Bench of Tribunal in the case of Dy. CIT v. Panamsat International Systems Inc. (2006) 103 TTJ (Del) 861. 8. As regards the expenditure on account of global account manager, the learned Counsel for the assessee submitted that the parent company viz. Expeditors, USA is a centralized hub for coordinating all information relating to cargo movements and recoveries from inter se units. He submitted that global management staff is placed at the headquarters for looking after this co-ordination work and the expenses incurred in relation to them are apportioned amongst all the associate enterprises including the assessee company on the basis of revenue generation. He submitted that the expenses so apportioned are reimbursed by all the associate co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailing communication facility for transmitting data without there being any right conferred upon the assessee for use of any secret process or formula. In the case of Skycell Communications Ltd. (supra) cited by the learned Counsel for the assessee, it was held by the Hon'ble Madras High Court that mere collection of a fee for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services. It was also held that the fact that the service provider had installed sophisticated technical equipment does not on that score make it provision of a technical service. In the case of Panamsat International Systems Inc. (supra), Delhi Bench of Tribunal has held that the payment of service fee by broadcaster for use of transponder to transmit the signals and not for use of any process does not amount to royalty and the same cannot be considered and taxed as fees for technical services under the relevant article of the DTAA. Keeping in view both these judicial pronouncements cited by the learned Counsel for the assessee and having regard to all the facts of the case, we are of the view that the VSAT uplinking char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil and Natural Gas Corporation Ltd. v. Dy. CIT (2002) 77 TTJ (Del)(SB) 387 : (2002) 83 ITD 151 (Del)(SB) wherein it was held that the event i.e. the change in the value of foreign currency in relation to Indian currency having already taken place in the current year, the loss incurred by the assessee was a fait accompli and not a notional one. 12. At the time of hearing before us, the learned representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the Judgment of Hon'ble Delhi High Court in the case of CIT v. Woodward Governor India (P) Ltd. Ors. (2007) 210 CTR (Del) 354 : (2007) 294 ITR 451 (Del) wherein it was held that the liability arising out of contracts had already stood accrued the minute the contract was entered into and the mere postponement of the payment of such liability to a future date would not extinguish the same so as to render it notional or contingent. It was also held that any increase in such liability as a result of fluctuation in the value of foreign currency in relation to Indian currency thus was a fait accompli and such increase in liability as per the exchange rate prevailing on the last d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would accordingly apply in relation to asst. yr. 2003-04 and subsequent years. As the assessment year involved in this appeal is 2001-02, we respectfully follow the judgment of Hon'ble Delhi High Court in the case of Woodward Governor India (P) Ltd. (supra) and uphold the impugned order of the learned CIT(A) on this issue. Ground No. 3 of the Revenue's appeal is accordingly dismissed. 16. Now, we shall take up the assessee's appeal being ITA No. 2684/Del/2005, ground No. 1 of which relates to the assessee's claim for depreciation at a higher rate of 60 per cent on items such as UPS, printers, scanners, modem, NT server etc. which stands allowed by the AO as well as by the learned CIT(A) @ 25 per cent. 17. At the time of hearing before us, the learned representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of a co-ordinate Bench of this Tribunal in assessee's own case for asst. yr. 2003-04 rendered vide its order dt. 19th July, 2007 in ITA No. 4364/Del/2006 wherein it was held that the peripherals such as printers, scanners, NT server, etc. form integral part of the computer and the same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts represented expenditure incurred in respect of premises taken on temporary lease of one to three years and it was required to be incurred to make the leasehold premises suitable for warehousing as per the requirement of the customers. It was also contended that the said expenditure was mainly incurred on wooden partition, paneling, repair of flooring, false ceiling, etc. and the same being temporary structures was allowable as deduction in full. 21. The submissions made on behalf of the assessee on this issue as above were not found acceptable by the learned CIT(A). According to him, a higher depreciation of 100 per cent was allowable only under the block buildings for purely temporary erections such as wooden structures and the expenditure incurred by the assessee company being mainly on furniture and fixtures, depreciation thereon at 100 per cent could not be allowed. He also examined the bills produced by the assessee company in support of the expenditure in question and found that there was one final bill dt. 18th May, 2000 for interior works by Vriksha Consolids amounting to Rs. 10,63,857 for civil work, wood work, flooring, electricals, additional works, etc. Keepi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation to Section 30 to treat the said expenditure as of capital nature ignoring firstly that the expenditure incurred being of revenue in nature, the said Explanation was not applicable at all and secondly, that the factory sheds in respect of which the said expenditure was incurred had been taken on lease by the assessee company only for a period of one to three years. In this regard, he invited our attention to a copy of the lease agreement placed at page No. 70 of the assessee's paper book as well as to the details of expenditure in question claimed to be incurred on repairs placed at page No. 65 of his paper book. He also invited our attention to the provisions of Sections 30(a)(i) and 30(a)(ii) to point out that the words used therein are repairs and current repairs respectively. He contended that the word used in Section 30(a)(i) which is applicable in respect of premises taken on lease is repairs , the scope of which is wider than the words current repairs . His contention in this regard was that the expenses in question incurred by the assessee company being in the nature of repairs, the same have to be allowed irrespective of whether the same are of capital na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of relevant bills have also been filed in the assessee's paper book and a perusal of the same shows that as per the description given therein, the majority of the expenses were incurred for providing and fixing partitions, work-stations, meeting room tables, false ceiling etc. besides flooring and electrical work which are apparently of capital nature. At the same time, it is also observed that the said expenses were inclusive of expenses incurred on demolition of brick work, removal of existing partitions, relocation of cabinet unit, painting of old walls, fixing of vertical blinds etc. which are of revenue nature being incurred on repairs. The expenditure claimed to be incurred by the assessee company on repairs thus was on capital account as well as on revenue account and it is, therefore, necessary to examine the same in detail with respect to each item to ascertain their exact nature being capital or revenue. A similar exercise is also required to be done in respect of expenses of Rs. 8,64,918 claimed to be incurred by the assessee company on temporary erections in the premises taken on lease for godown purposes as the perusal of the details of the said expenses cle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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