TMI Blog2006 (11) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... the Clutch Unit at Hosur in Tamil Nadu which was transferred through an agreement dt. 20th Jan., 1997 to its subsidiary company and all assets and liabilities were also transferred to the subsidiary company against which the assessee received a total consideration of Rs. 8,40,26,000. As per the agreement, the transfer of the unit took place w.e.f. 1st Feb., 1997. It seems the sale consideration was not credited to block of assets and thus depreciation was claimed on such assets also. In response to the query, it was submitted that the assessee had sold all the assets on lump sum basis and therefore, sale consideration in the sense of any sale value was not credited to any block of assets. In this respect, reliance was placed on the decision of Hon'ble Supreme Court in the case of CIT vs. Electric Control Gear Mfg. Co. (1997) 141 CTR (SC) 302 : (1997) 227 ITR 278 (SC) and the decision of Karnataka High Court in the case of Syndicate Bank Ltd. vs. Addl. CIT (1985) 45 CTR (Kar) 68 : (1985) 155 ITR 681 (Kar). The AO observed that the decision of the Hon'ble Supreme Court in the case of Electric Control Gear Mfg. Co. was in respect of chargeability of tax in respect of items mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the actual cost of the assessee less all depreciations actually allowed to him under this Act, or under the Indian IT Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian IT Act, 1886 (2 of 1886), was in force: Provided that in determining the WDV in respect of buildings, machinery or plant for the purposes of cl. (ii) of sub-s. (1) of s. 32, 'depreciation actually allowed' shall not include depreciation allowed under sub-cls. (a), (b) and (c) of cl. (vi) of sub-s. (2) of s. 10 of the Indian IT Act, 1922 (11 of 1922). where such depreciation was not deductible in determining the WDV for the purposes of the said cl. (vi); (c) in the case of any block of assets,- (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the WDVs of all the assets falling within that block of assets at the beginning of the previous year and adjusted,- (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year; (B) by the reduction of moneys payable in respect of any asset falling within that block, which is sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... royed during that previous year together with the amount of the scrap value, if any. This clause makes it clear that whenever an asset is sold or discarded or demolished or destroyed, the assessee is duty-bound to reduce the WDV of such assets. Thus, the procedural part of the provision regarding depreciation allowance, i.e. s. 43(6) also makes it clear that when the assets are sold, the assessee is not entitled to depreciation. We also find that lower authorities have correctly observed that the decision of Hon'ble Supreme Court in the case of Electric Control Gear Mfg. Co. was rendered in respect of entirely different issue. There, the issue was regarding chargeability of tax in respect of items mentioned in s. 41(2) and therefore, this decision will have no bearing on the allowance of depreciation. In these circumstances, we find nothing wrong with the order of the CIT(A) and confirm the same. Ground No. (2) 7. After hearing both the parties, we find that the AO disallowed a sum of Rs. 2,29,500 out of total claim of royalty amounting to Rs. 9,5S,027, because TDS on this was paid on 18th June, 1997 which was beyond the time specified in r. 30 r/w s. 40(a)(i). He also disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs. 64,04,083, rent amounting to Rs. 4,05,000, interest on APSEB deposits amounting to Rs. 18,356 and other income amounting to Rs. 36,71,796 from the business profits for the purpose of deduction under s. 80HHC. The learned CIT(A) after analyzing the items in detail held that the AO should exclude only 90 per cent of net interest amount from the business profits and he gave further direction that other items should be examined and if they do not fall under the exclusionary categories under cl. (baa) of Explanation to s. 80HHC, then the same should not be excluded. The Revenue has also raised this issue in ITA No. 888/Mad/2001 that interest should have been disallowed on the gross basis and not on net basis. 11. Though the learned counsel for the assessee pointed out that some of the interests were received from Telco who is one of the customers of the assessee and therefore, the same could not have been excluded in view of the decision of the Madras High Court in the case of CIT vs. The Madras Motors Ltd. (2002) 174 CTR (Mad) 221 : (2002) 257 ITR 60 (Mad), however, we are not in agreement with this contention because interest was considered as part of the receipts d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He held that this expenditure was of capital nature and therefore, not allowable. The learned CIT(A) deleted the addition by following his own order in the case of Rane Madras Ltd. for asst. yr. 1996-97 in ITA No. 39/1999-2000, dt. 23rd Dec., 1999. 15. Before us, the learned Departmental Representative strongly relied on the grounds of appeal filed and supported the order of the AO. On the other hand, the learned counsel for the assessee pointed out that the order relied on by the CIT(A) for asst. yr. 1996-97 in the case of Rane Madras Ltd. has already been confirmed by the Tribunal in ITA Nos. 409/Mad/2000 and 631/Mad/2001. 16. After considering rival contentions carefully, we find that in an identical circumstance in the case of Rane Madras Ltd., the Tribunal had allowed such expenditure as revenue expenditure in ITA Nos. 409/Mad/2000 and 631/Mad/2001 by order dt. 20th Jan., 2006. We are of the considered view that expenditure incurred on consultancy fee paid, training of task force and other members in UK and expenditure in connection with re-arrangement of machines, etc. cannot be called capital expenditure. They are clearly of revenue in nature and have been correctly allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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