TMI Blog2010 (12) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been treated as a revenue expenditure - Decided in favour of the assessee Regarding addition on account of repairs and maintenance (building) - It has been contended that the expenditure on SLFS was incurred for storage of hazardous waste and to prevent pollution of air, water and ground; that SLFS was a statutory requirement under the Water (Prevention and Control of Pollution) Act, 1974 and under the Air (Prevention and Control of Pollution) Act, 1981, so as to make necessary provision for disposal of hazardous waste - As such, in view of the nature of the expenditure, which remains, undisputedly, a statutory requirement enabling the assessee to carry on its business - Appeal is rejected - ITA No.1552(Del)2010 - - - Dated:- 8-12-2010 - A.D. Jain, K.D. Ranjan, JJ. Y. Kakkar, Sr. DR for the Appellant Neeraj Jain and Pinky Kapur, CA for the Respondent ORDER Per: A D Jain: This is Department's appeal for the assessment year 2005-06, taking the following grounds:- "1. In the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts by allowing the depreciation @ 60% on computer peripherals and accessories amounting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties and gone through the material available on record. From the order passed by the Assessing Officer, it is clear that he has not examined the nature and character of computer peripherals whether they could be used independently. We, therefore, set aside the matter to the file of the AO with the direction to examine the nature of each and every item. If they are independent of functioning, the depreciation will be allowable as in the case of any other plant and machinery. However, if they are integral part of the computer, the depreciation will be allowable @ 60%. The AO will keep in mind the decision of the ITAT in the case of 'Simaran Majumdar'(supra) and 'Expeditors International'(supra). Needless to say that the AO will provide the assessee of being heard before deciding the issue." 5. Before us, the ld. DR has contended that the ld. CIT(A) has erred in allowing depreciation on computer peripherals and accessories @ 60%, though the I.T. Rules allowing 60% depreciation only on computer and computer software and not on computer peripherals and accessories. 6. As opposed to this, the learned counsel for the assessee has contended that all equipments/parts run with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected the AO to allow the claim of the assessee, following the decision of the Hon'ble High Court in the assessee's own case for assessment year 2002-03, in "Climate Systems India Limited v. CIT" 319 ITR 113(Del), copy placed at pages 237 to 238 of the APB, wherein it was held that the said payment of royalty which was a continuous process, should have been treated as revenue expenditure. 12. In this regard, the ld. DR has argued that the ld. CIT(A) has erred in deleting the addition of Rs.41,27,464/-, made by the AO on account of disallowance in the royalty expenses which amount was rightly capitalized by the AO; that the ld. CIT(A) erred in ignoring that the entry was under Technical Know-how Agreement for right to use Technical Know-how which, undoubtedly, is of capital nature. The ld. DR has placed reliance on 'Jonas Woodhead and Sons (India) Ltd. v. CIT' 224 ITR 342(SC) and 'CIT v. Shriram Bearings Ltd.' 251 ITR 155(Cal). 13. The learned counsel for the assessee, on the other hand, has contended that under the TC Agreement, the assessee only acquired right to use the technology and other technical information for the purpose of production of Radiators, using the CAB te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy at APB 56 to 67) and in the assessee's case for assessment years 2003-04 and 2004-05 (supra). It has been contended that further, the said Tribunal order for assessment year 2002-03 has also been upheld by the Hon'ble Delhi High Court, in the assessee's case, reported at 319 ITR 113(Del)(supra). 14. Apropos this issue, at the outset, it is seen that the Hon'ble jurisdictional High Court has decided this issue in favour of the assessee, holding that under the Agreement, payments were to be made by the assessee in two parts, i.e., a lumpsum fee for transfer of technology, which the assessee had admitted as being of capital nature and royalty payment in consideration of providing technology services; that the payment of royalty depended on the quantum of domestic as well as export sales which would decrease or increase every year, depending on the decrease or increase in the sales; that this payment was not because of 'transfer' of technology, but for providing 'technical services'; and that so, the payment of royalty, which was a continuous process, should have been treated as a revenue expenditure. 15. The Department has not been able to bring anything on record opposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total: 7,12,500/- 20. The AO was of the opinion that the above expenditure of Rs.7,12,500/ was capital in nature. He, therefore, disallowed the same after allowing depreciation @ 10%. The net addition worked out was of Rs.6,41,250/-. 21. The ld. CIT(A) deleted the addition, holding the expenditure to be an allowable business expenditure. The ld. CIT(A) followed 'CIT v. Sakhi Textiles Ltd.' 250 ITR 449(Mad) and 'CIT v. Steel Complex Ltd.' 238 ITR 1054(Ker). 22. The ld. DR has contended that the expenditure provided an enduring benefit over a period of years to the assessee which fact has wrongly been over-looked by the ld. CIT(A) while wrongly deleting the addition correctly made. 23. The learned counsel for the assessee, on the other hand, has supported the action of the ld. CIT(A). It has been contended that the expenditure on SLFS was incurred for storage of hazardous waste and to prevent pollution of air, water and ground; that SLFS was a statutory requirement under the Water (Prevention and Control of Pollution) Act, 1974 and under the Air (Prevention and Control of Pollution) Act, 1981, so as to make necessary provision for disposal of haza ..... X X X X Extracts X X X X X X X X Extracts X X X X
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