TMI Blog2010 (8) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case and in law the CIT(A) has erred in treating the Royalty Payment of ₹ 10,50,105/- as revenue expenditure though the facts stated by the AO clearly indicate that it is a capital expenditure and has accordingly allowed depreciation on the same. 3. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of the hearing. 2. The assessee in the present case is manufacture of glass syringes, surgical blades and needless, I.V. Cannula, Scalpvein Infusion Sets, Capillary Tubes and Cannula. The AO has discussed the issue regarding royalty in para 5 of his order. The assessee company entered into in technical collaboration agreement with Star Syringe Ltd. (Licensor). Under the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical collaboration of agreement with Star Syringe Ltd. (Licensor). Under the agreement, the licensor gave technical assistance in relation to assembly manufacture, distribution and sale of products. The assessee was required to pay royalty @ 5% of sale of the product. The AO held that the agreement is for 10 years which can be renewed further. The assessee has acquired know-how which gives an advantage of enduring nature. Applying the decisions of Hon ble Supreme Court in the case of Southern Switch Gears Ltd. Vs. CIT, 232 ITR 359 and that of Madras High Court in the case of CIT Vs. Southern Switchgears Ltd., 148 ITR 272, 25% of the total royalty expenses were considered as capital expenditure. The same was confirmed by the ld. CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras High Court wherein 25% technical know-how fees was considered as capital expenditure. She also relied upon the decision of the Hon ble Supreme Court in the case of Scientific Engineering House P. Ltd. Vs. CIT 157 ITR 86. 9. In reply, the ld. Counsel for the assessee submitted that the decision of Hon ble Supreme Court in the case of Scientific Engineering House P. Ltd. (supra) was in reference to a controversy as to whether the depreciation is allowable on the drawings and designs to be treated as plant and machinery or not. This fact has been considered by the Hon ble Delhi High Court in the case of Sriram Pistons Rings Ltd. Vs. CIT, 171 Taxman 81. 10. We have considered the rival submissions. We find that the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same. Even after the expiry of the agreement, the assessee could use the method of production which had been made available to it in pursuance of the agreement. In terms of the said facts Hon ble Madras High Court treated part of the expenditure namely 25% as capital expenditure which was upheld by the Hon ble Supreme Court. However, the facts in the present case are different. Similarly, in the case of Scientific Engineering House P. Ltd. (supra), the dispute was not with regard to capital or revenue nature of the expenditure but was whether the assessee is entitled to depreciation on the technical know-how obtained. Thus, the case laws relied upon by the ld. CIT(A) and the ld. DR are distinguishable on facts. We, therefore, delete the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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