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Sandvik Asia Limited Versus The Joint Commissioner of Income Tax, Special Range 5, Pune

2015 (4) TMI 1114 - ITAT PUNE

Deduction under Section 37(1) in respect of lump sum know how fees - Held that:- In view of introduction of provisions of section 35AB of the Act which were inserted by the Finance Act, 1985 w.e.f. 01.04.1986, we are of the view that in cases of payment of lump sum consideration for acquiring technical know-how, the provisions of section 35AB of the Act are attracted and the expenditure is not allowable under section 37(1) of the Act, which is general provision and specifically excludes expendit .....

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into play and the provisions of section 37(1) of the Act are not applicable for units established prior to 01.04.1998. Following the same parity of reasoning, we hold that provisions of section 35AB of the Act are to be applied to the lump sum consideration paid for acquisition of technical know-how by the assessee.

Non-deduction of tax at source on the balance two installments, which were paid in the succeeding assessment years, in view of the provisions of section 40(a)(i) - Held th .....

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ew of non-deduction of tax at source on the balance two installments, which were paid in the succeeding assessment years, in view of the provisions of section 40(a)(i) of the Act. Admittedly, the assessee had deducted tax at source on the installment paid during the financial year and has paid tax at source on the balance installments in the succeeding years. In this regard, we find merit in the plea of learned Authorized Representative for the assessee that this was at best of the case of short .....

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corporate deposits, bank interest, NSC interest and interest received on income-tax refunds are the items to be excluded while computing profits eligible for deduction under section 80HHC of the Act. No merit in the plea of assessee as the training course fees in no way can be attributed to export business and hence cannot form part of profits of business, which are eligible for deduction under section 80HHC of the Act.

Inclusion of interest income received from the Income-tax Departm .....

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asset is acquired and put to use for the purpose of business for less than 180 days in that previous year, then the deduction under section 32(1) of the Act in respect of such asset is to be restricted to 50% of the amount prescribed. The assessee was entitled to claim depreciation @ 100%. However, since the asset was acquired in use for less than 180 days, the depreciation had to be allowed at 50%, in view of the provisions of the Act

Computation of deduction under section 80M - Hel .....

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the Appellant: Shri Jehangir D Mistri For the Respondent: Smt. M.S. Verma, CIT ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of CIT(A)-III, Pune, dated 28.03.2003 relating to assessment year 1997-98 against order passed under section 143(3) of the Income Tax Act, 1961. 2. The assessee has raised the following grounds of appeal:- 1. Deduction under Section 37(1) of the Income-tax Act, 1961 (&qu .....

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urpose of its business. The CIT(A) erred in holding that the lump sum knowhow fees paid by the Appellant were in the nature of a capital asset and hence, entitled to deduction of ₹ 47,80,002 (being 1/6th of the amount paid during the year under consideration under Section 35AB of the Act. The CIT(A) ought to have held that a deduction of ₹ 8,82,46,665/- paid for supply of technical know-how be allowed under Section 37(1) of the Act, 1.2 The CIT(A) ought to have held that .....

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p> 1.4 In view of the above, the Appellant prays as follows: Deduction of the entire amount of ₹ 8,82,46,665/- be allowed under Section 37(1) of the Act, without invoking the provisions of Section 40(a)(i) of the Act; Without prejudice to the above, deduction of ₹ 2,98,70,014/- being amount paid during the Financial Year 1996-97 (comprising of technical knowhow fees of ₹ 2,39,20,012/- plus tax thereon of ₹ 47,60,002/- and R&D cess of ₹ .....

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ons of Section 40(a)(i) of the Act, Without prejudice to the above, deduction of ₹ 49,78,336/- being 1/6th of ₹ 2,98,70,014/- i.e., amount actually paid during the year under consideration, be allowed under Section 35AB of the Act, even if provisions of Section 40(a)(i) of the Act are invoked. 2. Computation of relief under Section 80HHC 2.1. The CIT(A) erred in rejecting the Appellant's claim that interest of ₹ 81,90,000/- (comprising of in .....

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) erred in rejecting the Appellant's claim that no adjustment on account of training course fees of ₹ 5,66,000/- should be made under Explanation (baa) to Section 80HHC of the Act while computing "Profits and Gains of Business or Profession". The Appellant prays that no such adjustment should be made on account of the training course fees. 3. Addition of interest income of ₹ 7,43,523/- paid on Income-tax The CIT(A) erred in holding that gross int .....

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been disallowed. The Appellant prays that the above addition of ₹ 7,43,523 in respect of interest be deleted. 4. Depreciation on pollution control and energy savings device The CIT(A) erred in restricting the depreciation on certain pollution control and energy savings device to 50% instead of 100%. The CIT(A) ought to have held that depreciation at the rate of 100% should be allowed on these assets. The Appellant prays that 100% of the depreci .....

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TI. 6. The Appellant prays that the AO be directed to grant all such reliefs arising from the preceding grounds as also reliefs consequential thereto The appellant craves leave to add to, alter, by deletion, substitution, modification or otherwise all or any of the foregoing grounds of appeal either before or during the hearing of this appeal. 3. The issue in ground of appeal No.1 raised by the assessee is against the claim of deduction under section 37(1) of the .....

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oceedings the learned Authorized Representative for the assessee claimed the entire expenditure to be allowed under section 37 of the Act, as per letter dated 01.02.2000. The Assessing Officer observed that the said claim of the assessee could not be entertained as allowance or disallowance of such claims were governed by provisions of section 35AB of the Act as the assessee would get enduring benefit from the technical know-how so received. Thus, the claim of the assessee for allowan .....

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ed as deduction by the assessee. Without prejudice to the same, further deduction of ₹ 2,86,80,014/- being the actual payment made for the use of know-how under the said agreement was claimed as allowable under section 37(1) of the Act. Further plea of the assessee without prejudice to the above, was that the expenditure to be considered for deduction under section 35AB of the Act should be taken at 1/6th of the total expenditure of ₹ 8.82 crores and hence, deduction of &# .....

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w-how and as per the agreement, the consideration for the technical know-how and technical assistance was payable in three installments i.e. first installment of 1/3rd on receipt of government s approval, next installment of 1/3rd on delivery of know-how and the balance installment of 1/3rd on commencement of production under the said know-how, but not later than four years from the date of receipt of know-how. Further, royalty of 5% on domestic sales and 8% of the export sales was to be paid fo .....

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made wrong claim of deduction of ₹ 47,80,002/- under section 35AB of the Act being 1/6th of the total amount paid by the assessee in the subject year. Further contention of the assessee before the CIT(A) was that entire expenditure in respect of the lump sum consideration of US$ 2 million should be held to be revenue in nature and it was also clarified that the technical know-how was obtained with regard to the same business of cutting tools. As no new business come into existence nor ther .....

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nditure was not debited to the Profit & Loss Account ending 31st March, 1997 as the accounting year of the assessee was calendar year and only for tax purpose, it had drawn the accounts for the financial year. The learned Authorized Representative for the assessee claimed that liability for payment of the technical know-how of the whole of lump sum amount accrued in this assessment year since it had made the payment of first installment as per the agreement and had started receiving the tech .....

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license, the assessee did not have right to assign it or sub-license it. Though the agreement was for a period of 7 years, but even after the expiration of the agreement, the assessee had the right to continue without any time limit to use the know-how made available under the agreement. The said know-how after expiry of 7 years and the termination of the agreement could be used by the assessee in all the countries, free of charge and also to use in India, the same free of charge. The CIT(A) in .....

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ant deals with cutting tools the knowhow was for a new type of cemented carbide products. Therefore, I am of the considered view that the lump consideration for acquiring know how for the use for the purpose of business was covered by provisions of section 35AB and the appellant was entitled for deduction of 1/6th of the amount so paid. The CIT(A) further held that the liability for the technical know-how fees accrued to the assessee during the previous year relevant to assessment year 1997-98 a .....

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ird installment of ₹ 26,51,997/- was paid on 06.06.1998 and in view of the provisions of section 40(a)(i) of the Act, all the deductions towards any expenditure incurred on sum payable outside India including royalty was allowable as only in the year in which tax payable thereon, was deducted or paid. The CIT(A) thus, observed that even presuming that the assessee had made a proper claim under section 35AB of the Act, but the said deduction was subject to overriding provisions o .....

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d order of CIT(A). 9. The learned Authorized Representative for the assessee after taking us through the orders of Assessing Officer and CIT(A) and factual aspects of the case, pointed out that the acquisition of technical know-how was the right to use the technology and no right was assigned to the assessee in the technical knowhow. Reliance was placed on the ratio laid down by the Hon ble Supreme Court in Alembic Chemical Works Co Ltd Vs CIT [1989] 177 ITR 377 (SC). It wa .....

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the provisions of section 40(a)(i) of the Act and the proviso thereunder. It was contended by the learned Authorized Representative for the assessee that the proviso only applies if main section applies. It was further submitted by the learned Authorized Representative for the assessee that no amounts were debited to Profit & Loss Account, but only liability was shown in the balance sheet and further explanation of the learned Authorized Representative for the assessee was that the year endi .....

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n technical know-how of ₹ 1.55 crores was debited to the Profit & Loss Account. Further, in financial year 1998-99, similar amount of technical know-how was amortized and claimed as deduction in the Profit & Loss Account. The learned Authorized Representative for the assessee pointed out that the liability to pay ₹ 8.82 crores accrued in the first year and even if assuming the provisions of section 35AB of the Act were to be applied, then 1/6th on the whole amount was to be a .....

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refer to in the paras hereinafter. The learned Authorized Representative for the assessee further pointed out that the right to use and the non-transferable right to use the benefit was revenue in nature as held by the Hon ble Supreme Court in CIT Vs. Wavin India Ltd. (1999) 236 ITR 314 (SC). As far as the application of section 35AB of the Act was held to be applicable only to capital payments and where the expenditure has been incurred for update of know-how, then it was revenue in nature. Th .....

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inted out by the learned Departmental Representative for the Revenue that process was different as there was shifting of tools aided by computers and the new technology acquired by the assessee was different. Further objection of the learned Departmental Representative for the Revenue was that there was passage of rights and also passage of know-how as once the agreement had come into operation, the technology had been passed on not for a period of 7 years, but for ever and where there was defin .....

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d by it and assessee also showed its willingness to sell the products both in the domestic market and also outside India. As per clause 2.4 of agreement, in addition to know-how, everything else was passed to the assessee as independent manufacturer. Further, reference was made to the termination clause and its effect in clause 8 of the agreement. The claim of learned Departmental Representative for the Revenue was that there was actual acquisition of know-how and not only the rights .....

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Works Co Ltd Vs CIT (supra), the submissions of learned Departmental Representative for the Revenue was that these related to era of pre-section 35AB of the Act and was not applicable. 12. The learned Authorized Representative for the assessee in rejoinder explained that the CAD/CAM was a programme to design tools and there was no acquisition of any asset and once there was no acquisition of any asset, then no question of acquisition of capital asset. The learned Authorized Representa .....

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of section 35AB of the Act were intended for expenditure which were otherwise capital in nature and in case of every transfer of know-how, the same could not be said to have been passed on. In the case of assessee, the transfer was for a period of 7 years and thereafter, Sandvik was to give ancillary help only. It was further clarified by the learned Authorized Representative for the assessee that whether the expenditure was capital or revenue in nature, the decisions of Tribunal in Saroj Kumar .....

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, then no disallowance could be made for short deduction of tax. Where the whole amount is to be treated as deductible in the first year of claim itself, then short deduction of tax at source would not attract the provisions of section 40(a)(i) of the Act, in view of the ratio laid down by Pune Bench of the Tribunal in assessee s own case relating to assessment year 1994-95. 13. We have heard the rival contentions and perused the record. The assessee during the year under consideratio .....

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arketing and sale of such products as well as of patent and trade marks relating thereto. On the other hand, the assessee was supplying different types of products to Sandvik for sale through its international sales organization. It is further provided in the said Preamble Whereas, SAL, has expressed an interest in obtaining long term access to Sandvik know-how as well as patent rights for the purpose of manufacturing, marketing and selling certain cemented carbide products, primarily .....

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further groups of such tools and systems are to be identified in Appendix A:2, A:3 etc., such further appendix or appendices to form an integral part of this Agreement. 14. Further, Sandvik know-how is defined as under:- 1.7 "Sandvik know-how" shall mean all specifications, drawings, procedures, processes, performance and procurement standards, and all other related information necessary for or useful for the manufacture according to Article 2 and being specifie .....

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ce and assistance to be provided by the Sandvik shall be given to the extent required by the assessee to be able to manufacture the products with quality corresponding to the quality reached in Sandvik own production of the products. Under clause 2.4 of the agreement, it is enlisted the nature of advice and assistance to be provided by Sandvik to assessee in the field of manufacturing, raw material and packaging. Further, under clause 2.6 of the agreement, it was agreed that Sandvik shall make p .....

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or the way and the manner in which Sandvik know-how and advice are applied by the assessee. Clause 3 of the agreement talks about license. Clause 3.1 of the agreement reads as under:- 3.1 SAL is hereby granted the right and license to use the Sandvik Patent Rights and the Sandvik know-how for the manufacture in India of the productions, and for the marketing and sale of the products in India and elsewhere through the Sandvik Sales organization provided, however, that Sandvik shall hav .....

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sale of products manufactured by the assessee in Europe and North America, but no such control was in respect of sale of products in India and elsewhere through Sandvik sales organization. Under clause 3.2 of the agreement, the assessee had the right, subject to Sandvik approval to apply for or maintain such patent/s in the name of Sandvik or the relevant subsidiaries. A secrecy clause vis-à-vis use of Sandvik know-how was agreed upon between the parties under clause 5 of the agreement, w .....

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such employees from disclosing the same, to others. The foregoing shall not relate to any information which SAL can show by written record to have been in its possession at the time of its disclosure by Sandvik or which is or becomes public knowledge through no fault of SAL's part. The Sandvik know-how may be used by SAL for the purpose of the design, manufacturing, marketing and sale of the Products only. 17. Under clause 6.1 of the agreement, it was agreed that the .....

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Sandvik know-how and 1/3rd at the commencement of production, but not later than four years from the receipt of Sandvik know-how. The validity of the said agreement was for a period of 7 years as per clause 7.2 of the agreement. The effects of termination are enlisted in clause 8 of the agreement, which reads as under:- 8. Effects of Termination 8.1 Notwithstanding the expiration of this Agreement, SAL shall have the right, subject to the compliance with the obligations in .....

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, save as stated in the last paragraph, be payable as stated herein with regard to all Products manufactured during a period of seven years from the commencement of commercial production of the Products. After the expiration of said period SAL shall have the right to use the Sandvik know-how in all countries free of charge and to use in India also free of charge any invention under the Sandvik Patent Rights (Indian), As to the sale by SAL outside India or for use outside India of any .....

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year in question as the Agreement has been valid and be made within two months from the date of expiry of this Agreement. SAL's rights according to Article 2 and Article 3 shall then terminate with immediate effect. 8.4 The termination of this Agreement shall not effect SAL's secrecy obligations according to Article 5 above or its obligation under this Article U, which obligations shall continue to apply as set out in those articles. 18. Even after the termination .....

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ow and the innovations being the object of Sandvik patent rights. Notwithstanding the termination of the agreement, the royalty shall be payable with regard to all products manufactured during the period of 7 years from the commencement of commercial production of the products. After the expiry of said period, the assessee shall have the right to use Sandvik know-how in all the countries free of charge and to use in India also free of charge. Further, the termination of agreement also could not .....

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paras hereinabove, the assessee while filing the return of income had claimed said expenditure to be allowable under the provisions of section 35AB of the Act. 19. The provisions of said section 35AB read as under:- 35AB. (1) Subject to the provisions of sub-section (2), where the assessee has paid in any previous year 44[relevant to the assessment year commencing on or before the 1st day of April, 1998] any lump sum consideration for acquiring45 any know-how for use for t .....

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e previous year by the assessee shall be deducted in computing the profits and gains of the business for that year, and the balance amount shall be deducted in equal instalments for each of the two immediately succeeding previous years. 46[(3) Where there is a transfer of an undertaking under a scheme of amalgamation or demerger and the amalgamating or the demerged company is entitled to a deduction under this section, then, the amalgamated company or the resulting company, as the cas .....

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the working of a mine, oil well or other sources of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto).] [Expenditure for obtaining licence to operate telecommunication services.] 20. The section provides that within the stipulated period, where any lump sum consideration is paid for acquiring any know-how for use or for the purpose of business, then 1/6th of the amount so paid shall be deducted in computing p .....

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Co Ltd Vs CIT (supra). The plea of the assessee in this regard, was that the expenditure incurred by the assessee over a period of seven years even if was an expenditure of enduring benefit and applying the ratio laid down by the Hon ble Supreme Court in Empire Jute Co Ltd Vs CIT (supra) and also Alembic Chemical Works Co Ltd Vs CIT (supra), such expenditure is to be allowed as deduction under section 37(1) of the Act and the provisions of section 35AB of the Act were not applicable. .....

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uestion, which was already produced and where even on the expiry of agreement, the assessee deemed to derive benefits and manufacture the product in the factory. The issue was whether the entire payment made could be held as revenue expenditure, the Hon ble High court had disallowed 25% of the sum paid as royalty as capital expenditure not allowable as revenue expenditure, which was upheld by the Hon ble Supreme Court. 22. Further, the learned Authorized Representative for the assesse .....

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by the learned Authorized Representative for the assessee. In all these case laws, the distinction drawn was between capital and revenue expenditure and if revenue in nature, then its allowability under section 37(1) of the Act. 23. Another reliance was placed upon by the learned Authorized Representative for the assessee was on the decision of Chandigarh Bench of the Tribunal in DCIT Vs. Metalman Auto (P.) Ltd. (2001) 78 ITD 327 (Chd.) for the proposition that where the expenditure .....

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ble as being on capital account. Further reliance was placed on the ratio laid down by the Kolkata Bench of the Tribunal in Wellman Incandescent India Ltd. Vs. DCIT (1995) 55 ITD 338. However, the facts of present case are different, where the assessee had acquired the technical know-how for production of new items and hence the ratio of above decision was not applicable. 24. The learned Departmental Representative for the Revenue in reply had pointed out that the issue has now been s .....

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urt - Indore Bench of the Tribunal in CIT Vs. Bright Automotives & Plastics Ltd. (2004) 141 TAXMAN 582 (MP), wherein it was held that in order to attract the provisions of section 35AB, it may not be necessary for the assessee to actually become absolute owner of know-how. Where the assessee is able to run his business effectively with the aid of know-how obtained by him pursuant to an agreement on payment of consideration, then the provisions of section 35AB of the Act gets attracted and it .....

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f the Act are applicable in respect of any expenditure, section 35AB would apply and such expenditure would be outside the purview of section 37(1) of the Act. It was thus, held that where the assessee had acquired a benefit of enduring nature and the expenditure in connection thereof being capital in nature, was not deductible under section 37(1) of the Act. The learned Departmental Representative for the Revenue further pointed out that the ratio laid down by the Hon ble Supreme Cou .....

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n by the Hon ble Madhya Pradesh High Court, it was pointed out by the learned Authorized Representative for the assessee that the facts of the case of the assessee were distinguishable and in respect of the decision of Ahmedabad Bench of the Tribunal in APS-Star Industries Ltd. Vs. DCIT (supra), the issue was whether it fell within the realm of capital or revenue expenditure. 26. The Hon ble Supreme Court in Alembic Chemical Works Co Ltd Vs CIT (supra) while deciding the issue of allo .....

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see on the ratio laid down by Hon ble Apex Court in Empire Jute Co Ltd Vs CIT (supra) for the proposition of test of enduring benefit. The Hon ble Apex Court while applying the test for determining whether the expenditure was capital or revenue in nature, observed that there may be cases where expenditure even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. The Hon ble Apex Court further propounded .....

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th these decisions were delivered prior to introduction of section 35AB of the Act, which was inserted by the Finance Act, 1985, w.e.f. 01.04.1986. 27. In the facts of case before the Hon ble Supreme Court in Drilcos (India) (P.) Ltd. Vs. CIT (supra), the assessee had acquired technical know-how under an agreement for consideration, which was to be paid in installments. The question for determination was whether the expenditure could be claimed as deduction under section 37 of the Act .....

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ess for that previous year and the balance amount shall be deducted in equal instalments for each of the five immediately succeeding previous years. Explanation to the said section says that the word 'know-how' means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine. If one carefully analyzes Section 35AB of the Act, it is clear that prior to 1st April, I986 there was some doubt as to whether such expenditure co .....

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rpreting Section 35AB of the Act. Section 35AB of the Act says that the expenditure should have been incurred for the purposes of the business of the assessee. In the present case, the Technical Assistance Agreement was entered into between the assessee and the American company for acquiring know-how which was, in turn, to be used in the business of the assessee. Once Section 35AB of the Act comes into play, then Section 37 of the Act has no application. 28. A bare reading of section .....

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five immediately succeeding previous years. Explanation, appended below the section, defines know-how and reads as under:- For the purpose of this section, know-how means any industrial information of technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil well or other sources of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto). 29. Section 35AB of the Act does n .....

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placed upon by the learned Authorized Representative for the assessee on series of decisions to draw difference between revenue and capital expenditure. 30. Another aspect of the issue is whether such expenditure is allowable under section 37 of the Act. The Ahmedabad Bench of the Tribunal in APS-Star Industries Ltd. Vs. DCIT (supra) on the said issue held as under:- 19. Regarding the applicability of section 37(1) we have held above that the lump sum consideration paid by .....

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acquiring technical knowhow for an indefinite period. There is no stipulation, as we have already noted above, in the collaboration agreement for the return of documentation, drawings and designs on expiration of the agreement alter 10 years to the German Company and there is no bar on the assesses in continuing with the manufacture of the contract products by utilisation of the technical knowhow even after the period of 10 years. The assesses has thus acquired a benefit of enduring nature and t .....

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ng nature. A similar test based on the fact whether the Technical knowhow could be used after the termination of the agreement has been approved by the Hon'ble Supreme Court in the case of CIT v. IAEC (Pumps) Ltd [1998] 232 ITR 316 for determining whether the expenditure is capital or revenue in nature. Applying the ratio of the aforementioned decisions of the Apex Court in the instant case, since the assessee is entitled to use the technical information for the manufacture of the products e .....

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lted in an enduring benefit to the assessee which lies in the capital field. The expenses have essentially resulted in augmentation and expansion of the profit-earning apparatus of the assessee company. Such expenses which are inextricably connected with the capital structure of the company would clearly be of capital nature and therefore outside the purview of section 37(1). It has been held by the Hon'ble Supreme Court in Empire Jute Co. Ltd v. CIT [1980] 124 ITR 1 and Alembic Chemical Wor .....

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arious documents such as drawings, designs, charts, plans included in the technical documentation provided by the foreign collaborator obviously form the tools by using which the business of manufacturing the textile machinery spare parts was to be done by the assessee and for acquiring such technical knowhow through these documents, a lump sum payment was made. This expenditure was incurred by the assessee as and by way of purchase price of such documentation and was of a capital nature inasmuc .....

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he view adopted by us. 31. In view of introduction of provisions of section 35AB of the Act which were inserted by the Finance Act, 1985 w.e.f. 01.04.1986, we are of the view that in cases of payment of lump sum consideration for acquiring technical know-how, the provisions of section 35AB of the Act are attracted and the expenditure is not allowable under section 37(1) of the Act, which is general provision and specifically excludes expenditure covered under sections 30 to 36 of the .....

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cable for units established prior to 01.04.1998. Following the same parity of reasoning, we hold that provisions of section 35AB of the Act are to be applied to the lump sum consideration paid for acquisition of technical know-how by the assessee. 32. Another plea raised by the assessee was that the assessee had only acquired the right to use the technical know-how. The reading of clauses of agreement with special reference to clause 8 i.e. effect of termination of agreement reflects .....

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nd we find no merit in the plea of the assessee that the consideration to be paid in installments was paid for the use of technical know-how and not for the acquisition of technical know-how and hence not covered under section 35AB of the Act. The section itself provides that any lump sum consideration paid for acquiring any know-how, for use, for the purpose of his business is to be deducted in six installments. Under the agreement, the technical know-how received by the assessee was in relatio .....

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ow is to be subjected to the provisions of section 35AB of the Act vis-à-vis its claim of deduction of the said amount. The CIT(A) vide observations on page 11 of appellate order had held that the liability for payment of technical know-how accrued in assessment year 1997-98 itself and the deduction under section 35AB of the Act had to be allowed on full amount. The Revenue is not in appeal against the said observations of the CIT(A). Accordingly, we uphold the order of CIT(A) in this reg .....

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tion under section 35AB of the Act on the full amount, had not allowed the claim of the assessee in view of non-deduction of tax at source on the balance two installments, which were paid in the succeeding assessment years, in view of the provisions of section 40(a)(i) of the Act. Admittedly, the assessee had deducted tax at source on the installment paid during the financial year and has paid tax at source on the balance installments in the succeeding years. In this regard, we find merit in the .....

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ing from the orders of the authorities below, it appears that though the claim of the assessee is under head "provision for doubtful debts", in actuality the claim is based on certain deductions claimed to be made by the Government buyers as liquidated damages for late supply of goods, etc. The Commissioner of Income-tax (Appeals) in his order dated 28.11.1997 has referred to two journal entries in this regard and on that basis directed the Assessing Officer to allow the claim, subject .....

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quot;provision for doubtful debts". In our considered opinion, it would meet the ends of justice if the matter is restored to the file of the Assessing Officer with directions to consider the true nature of the claim in the light of the observations of the Commissioner of Income-tax (Appeals) in para 6.3 of his order dated 28.11.1997 and not be guided by merely the nomenclature of the head under which the claim has been made. Needless to say, in carrying out the aforesaid exercise, the Asse .....

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me order of the Commissioner of Income-tax (Appeals). 21. In the appeal of the Revenue, following two Grounds have been raised: " (1) On the facts and in the circumstances of the case, the ld CIT(A) erred in deleting the addition of ₹ 1,99,43,610/- made by the AO on account of excise duty payment on finished goods which is not included in the value of closing stock. (2) On the facts and in the circumstances of the case, the ld CIT(A) erred in taxing t .....

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the assessee. 23. Before us, it was a common ground between the parties that for the assessment year 1992-93, similar issue has been adjudicated by the Tribunal vide its order in ITA No 119/PN/96 dated 13.9.2011 in favour of the assessee. In view of the precedent, copy of which has been placed on record, the decision of the Commissioner of Income-tax (Appeals) deleting the addition of ₹ 1,99,43,610/- on account of Excise Duty payable on finished goods not included in the valuati .....

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of the assessee in view of the decision of the Delhi Bench of the Tribunal in the case of R N Agarwal v. ITO. Against such a decision, Revenue is presently in appeal before us. 25. Before us, it was a common point between the parties that similar issue arose in assessee's own case for the assessment year 1992-93 in ITA No 119/PN/96 (supra) wherein the issue has been decided against the assessee and in favour of the Revenue, by way of a majority decision vide order dated 13.9.2011 .....

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fficer is restored. Thus, on this Ground Revenue succeeds. 26. In the result, appeal of the Revenue is partly allowed. 34. In view thereof, we allow the alternate plea raised by the assessee that the provisions of section 35AB of the Act are to be applied on the total liability of ₹ 8.82 crores and 1/6th on said amount is to be allowed as deduction in the hands of the assessee. The ground of appeal No.1 raised by the assessee is thus, partly allowed. 35. T .....

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and d) interest received on income-tax refunds of ₹ 7,08,000/- 36. The learned Authorized Representative for the assessee pointed out that the above said issue of exclusion of items of income enlisted in ground of appeal No.2.1 was decided against the assessee by the Tribunal in assessee s own case in ITA No.580/PN/2000, relating to assessment year 1996-97, order dated 02.02.2001. The Tribunal vide para 29 on page 20 had considered the said receipts and vide para 31 .....

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. Following the same parity of reasoning, we hold that the items of income i.e. interest on inter-corporate deposits, bank interest, NSC interest and interest received on income-tax refunds are the items to be excluded while computing profits eligible for deduction under section 80HHC of the Act. The ground of appeal No.2.1 is thus, dismissed. 37. The issue vide ground of appeal No.2.2 is against computation of profits eligible for deduction under section 80HHC of the Act .....

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r nature. We find no merit in the plea of assessee as the training course fees in no way can be attributed to export business and hence cannot form part of profits of business, which are eligible for deduction under section 80HHC of the Act. Confirming the order of CIT(A), we dismiss the ground of appeal No.2.2 raised by the assessee. 40. The issue vide ground of appeal No.3 raised by the assessee is in relation to inclusion of interest income received from the Income-tax Department i .....

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sions of section 40(a)(ii) of the Act. 42. The learned Authorized Representative for the assessee before us fairly pointed out that the issue is to be decided against the assessee. In view thereof, we uphold the order of CIT(A) in holding that the total interest paid by the assessee in the year under consideration i.e. ₹ 10,82,787/- is to be added to the income of the assessee. The ground of appeal No.3 raised by the assessee is thus, dismissed. 43. The issue in groun .....

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@ 50%. The authorities below were of the view that the depreciation allowable for assets used for less than 180 days in any previous year had to be restricted to 50% of the amount calculated at prescribed percentage. 45. The assessee is aggrieved by the said disallowance. However, in view of the second proviso to section 32(1) of the Act, wherein asset is acquired and put to use for the purpose of business for less than 180 days in that previous year, then the deduction under section .....

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