TMI Blog2000 (7) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... tor Car expenses and the depreciation claimed, as personal expenses and random relief given by the learned CIT(A), Central-V does not meet the ends of justice. Appellant prays that the firm owns number of cars which mainly are used by the staff for the bona fide business purpose as such disallowance of expenses and depreciation at 1/3rd as made by the learned A.C. is too high and same be reduced to reasonable quantum say 1/6th to meet the ends of justice." 2. Briefly stated the facts in respect of ground No. 1 are that the assessee is carrying on the business of manufacturing and sale of unrecorded (embedded) and pre-recorded (with recorded film music, i.e. sound track) audio cassettes and CDs. The pre-recorded cassettes and CDs are from motion pictures and musical softwares, i.e. non-film songs. These are sold under trade name and logo "Tips". In this type of business activity, the producers of films are owners of the sound track, i.e. sounds and music and are owners of the copyrights thereof. The assessee being manufacturer of pre-recorded cassettes as well purchase such sound tracks from producers and for consideration the copyrights owned by the film producers are assigned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as to why this expenditure should not be treated as capital in nature incurred for the acquisition of audio rights/copyrights as the same was treated as capital expenditure in earlier years. The assessee filed a written reply which is reproduced in the assessment order itself. The reply contained categorical explanation. To appreciate and consider the various technical terms, etc. it shall be worthwhile to reproduce the same to avoid repetition and over-lapping of facts: "The manufacture and market pre-recorded cassettes of films assessee firm has to purchase the master plate i.e. original sound track of film songs also commonly known as Audio Rights, which of course is acquired in perpetuity from different film producers for making several copies of Audio Cassettes of various films. It is only after acquiring the audio rights of various films the music and songs of the pictures whose audio rights are acquired are transmitted by reproducing such music and songs in audio cassettes which are also manufactured and/or purchased from the outside on job work basis. In other words assessee's business is to produce and market the audio cassette under its Logo 'TIPS' for which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm makes several copies of audio cassettes which are ultimately sold in the market. The master plate is similar to a formula or a mould used in the manufacturing. The firm produces several of these cassettes for different films every year and for the reproduction of such series of cassettes, it requires a different master plate. Further for each film that is being made, the producers require music cassettes and sound tracks, which the firm manufacturers with the help of this master plate and provides the cassettes prior to release of the film. No doubt this master plate is retained by the firm but its use and reuse would entirely depend upon the marketability of the cassettes manufactured by it. Further, as soon as the series of the cassettes relating to a film are manufactured and marketed the master plates becomes useless, though in rare cases they do get reused for manufacturing cassettes of additional copies. The life of the master plate is very short, though the assessee retains the right of the same in perpetuity. We further submit that the master plate is a formula of raw material from which copies are made since the master plate is only a raw material the cost of the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of audio rights under the heading 'Other cost of production' for closing stock. Similarly, export receipts of audio rights are also shown as export sales under heading sales in the trading account. Furthermore, interest as loan and finance brokerage paid on advance for audio rights and shown in the balance sheet have also been capitalised. All the above facts taken into consideration itself shows that the assessee treats its audio rights as its stock-in-trade as such the same be considered as a revenue expenses. We further submit that the master plate obtained from the product contains only that material that has been filled into it and the plate could be used to make exact copies of that plate only. From this point of view, it clearly indicates that for every producers from whom the copies are made from the plate the plate is different. In other words, the final product produced by the assessee is very different from one to another. For every series of items of music, sound etc. that is being made the basic material is different and is never uniform, as such it would be wrong to hold that the expenditure is in the nature of capital." 5. The Assessing Officer, however, rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted matter, after fulfilling the conditions of the stay, this appeal has come up for hearing before us. 7. In the first appeal, the assessee re-iterated its stand and relied on the order of the CIT(A) for assessment year 1992-93 which was in assessee's favour. It was pleaded that since the CIT(A) in this year has thoroughly examined the issue and held the same as revenue expenditure, this subject appellate order should serve as a precedent to be followed. The CIT(A), however, dismissed this ground of the assessee by observing as under:-- "I have carefully considered the reasonings of the Assessing Officer, the written as well as oral submissions of the appellant and have carefully gone through the appellate order of CIT(A) XXIX for the assessment year 1992-93, because the facts for this year were identical to the facts for the assessment year 1992-93 and because the CIT(A) XXIX had thoroughly examined the issue. If the appellate order has to serve as a precedent to be followed, it has to stand the test of certain basic judicial norms. The Jurisdictional High Court of Bombay has very clearly laid down in 30 ITR 618 that though res judicata is not strictly speaking applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "As a matter of fact every thing depends upon the agreements in question and the agreements in the present case, sample of which has been reproduced by the Assessing Officer in the assessment order, clearly show that the expenses in question were capital in nature. The Hon'ble Madras High Court in 173 ITR 311 has held in a case of lease which were for more than five years, that the amount paid as salami or lease amount was capital in nature. Taking into account the peculiar facts of the case it is held by the court that the expenses in question were capital in nature. Since section 35A specifically deals with the type of expenses in question and no convincing reasons have been advanced applicability of section 35A, I hold that the action of the Assessing Officer was proper and accordingly ground No. 1 is rejected." 9. In assessment year 1991-92, the CIT(A) dismissed the claim of the assessee following his above order in assessment year 1990-91. Since the assessee's claim in assessment year 1992-93 was accepted by the CIT(A) as holding the same to be revenue in nature, distinguishing the above orders of the CIT(A), it should also be pertinent to consider the factors which led t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts' to improve its business and profitability the decision of SC in the case of Alembic Chemcial Works Co. Ltd. v. CIT [1989] 179 ITR shall apply. The applicability of section 35A will only arise when the expenditure is found to be capital in nature in case it is held that the same is not capital in nature then the provisions of section 35 do not apply and the expenditure has to be considered under section 37 of the Income-tax Act. (v) The Assessing Officer himself in para 11 of the assessment order has treated the 'audio rights' to the extent of Rs.16,77,272 as revenue expenses. This only shows that the appellant besides making use of the 'audio rights' (Master plates) in the manufacture of audio cassettes is also dealing in 'audio rights' which is evident from the export sales of Rs.41,41,413. Accordingly these rights have therefore, to be considered as revenue in nature in its entirely and, therefore, action of the AO in treating it as capital in nature and also revenue in character (for export sales) appears to be inconsistent. 3.19 In this regard I have also carefully gone through the decision of various ITATs cited supra which were not found applicable by my predecessor o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage of enduring benefit to the trade. There are specific circumstances leading to the conclusion of this case to show that the expenditure is revenue in nature particularly keeping in view the fact that the 'master plate' is nothing but a raw material in this line of business. Thus following the criteria laid down by the SC cited supra I am of the view that the expenditure claimed by the appellant is revenue in nature. The case of R.B. Seth Moolchand Suganchand v. CIT [1972] 86 ITR 647 (SC) was that of mining leases where minerals are part of the land and have to be won, extracted and brought to the surface, expenditure for acquiring the right over or in the land to win the minerals would be of a capital nature. It was also held that however, the mineral has already been gotten and is on the surface, expenditure incurred for obtaining the right to acquire the materials i.e., the mineral, would be revenue expenditure laid out for the acquisition of stock-in-trade. In the case of production of audio cassettes the master cassette represents the original sound music is like the mineral which has already been gotten on the surface. The assessee has incurred expenditure for obtaining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not owner of copyrights of film sound-tracks. It is an assignment of such rights by the producers. The recurring feature of the manufacturing activity of the assessee is to produce a variety of recorded music cassettes. For this purpose, the assessee had to purchase audio rights from producers which, in legal language, is called as assignment of copyrights. In addition, the assessee had own recording studio facilities where in-house music programmes and songs were recorded, the copyright whereof was possessed by the assessee. It is not the activity of the assessee to manufacture recorded cassettes of only one film but the same was to produce various film titles. Consequently, the quality and nature of songs and music has to vary. The assessee has installed machinery for reproducing the sound-track which is the fixed capital of the assessee. The assessee's recurring business is to procure assigned rights for reproduction of copyright films as well as to reproduce in-house programmes and songs and manufacture recorded audio cassettes and CDs as finished products. The master plate is a miniature input to be reproduced on a large number of blank cassettes and CDs. Conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. 11. According to the learned counsel what is assigned is user of the copyrights on worldwide basis as per agreement. What in effect is given is a master plate containing the original sound-track and which is nothing but the raw material of the assessee as the assessee's business is to sell recorded cassettes of several films, occasions and albums. The recurring and regular feature is to manufacture new songs and music and sell the same. Since the finished products are varied, the source thereof is nothing but the raw material which cannot be obtained without obtaining assignment of rights by way of agreement. The agreement form may use the words "perpetuity" but the same, if looked in the context of foregoing becomes merely a word of form for the user/licence of raw material. Since there is no potential life thereafter, the right assigned are termed in a formative manner as perpetual in nature. 12. The learned counsel argued that there is inconsistency in the views of the lower authorities about capital and revenue. The in-house programmes, sound-tracks development by the assessee using its own studio facilities and the copyrights whereof are owned by it and the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the finished product is made. Because of the existence of words assignment of copyrights and perpetuity" the lower authorities held the same to be capital asset without bothering to examine the vital issue that the same constitute as raw material and any payment made for procurement of raw material will not amount to capital expenditure. The ingredent being raw material any wording in the agreements, cannot bring the same into the net of section 35A which deals with the incurring of capital expenditure in this behalf. The action of the lower authorities in accepting the expenditure on in-house music production as revenue in nature itself evidences that where the lower authorities considered the issue on broad basis, the same has been held as raw material of the assessee, and the expenditure thereof has been allowed as revenue expenditures Merely because the amount was large and the rights were governed by agreements with the user of words "assignment of copyrights and perpetuity" the same has been held as capital in nature without analysing that it is the same activity which has been held to be revenue in nature on in-house music development. 14. According to the learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account even though the advantage may endure for indefinite future. The test of enduring benefit is, therefore, not a conclusive test to be applied blindly and mechanically without referring to the particular facts and circumstances of given case. According to him, this principle laid down by Their Lordships of Supreme Court is clearly takes applicable to the facts emerging from the assessee's case. Here, the capital field of the assessee is the sound recording studio equipments, etc. The advantage of assignment of rights of master plate facilitates the assessee starting operations or enables the conduct and management of assessee's business more efficiently and more profitably in the sense that without master plate, the assessee cannot run its business because the same is nothing but reproduction of the sound-track contained therein. Consequently, the master plate being nothing but the tool to facilitate the assessee's operations control and management more efficiently and more profitably the same is of revenue nature. Here also, seemingly, the word "perpetuity" is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s something akin to the statutory conditions. Capital and revenue expenditure treatment needs to be flexible so as to respond to the changing economic realities of business. According to him, the Supreme Court has cautioned repeatedly that judicial metaphors should be watched nar rowly and enduring benefit and once for all payment should not ipso facto be treated as statutory conditions to hold the expenditure as capital in nature. A progressive and pragmatic approach is to be adopted to respond to the changing economic realities of business. It has been pertinently held that what is relevant is the purpose of the outlay and its identity object and effect is to be considered in a commonsense way having regard to the business realities. In a given case, the test of enduring benefit might break down. According to him, in the assessee's case, the relevant object was to sell consistently changing new titles and songs for which new master plates were necessitated and they could not be procured without entering into agreements, i.e., to enter into judicial metaphors. Nevertheless, the basic effect remains that the assessee wanted a raw material to manufacture fast changing finished produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred on the acquisition of patent rights or copyrights used for the purposes of business and when all these three conditions are satisfied, then the question of deduction under section 35A arise. In the instant case, since the expenditure is revenue in nature, the same cannot be covered under section 35A. Having dealt with the principles differentiating between revenue and capital expenditure in the lights of above Supreme Court judgments, the learned counsel further argued that the issue in question is covered in favour of the assessee by following Tribunal judgments which deal with the aspects of amounts paid for assignments of right for re-recording cassettes, CDs and gramophone records, etc.: (1) Super Cassettes Industries (P.) Ltd. v. CIT [1992] 41 ITD 530 (Delhi) (2) M. Subramaniam v. Dy. CIT [1992] 42 ITD 676 (Mad.) only licence (3) Gramophone Co. of India Ltd v. Dy. CIT [1994] 48 ITD 145 (Cal.) Royalty (4) Venus Records Tape Mfg. Co. (Mum.) (copy placed on record). 21. In Super Cassettes Industries (P.) Ltd.'s case, the assessee was engaged in business of manufacturing pre-recorded audio and video cassettes as also blank audio and video cassettes, akin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the actual production and, therefore, a proper input of the income-earning operations. It was finally held that the amounts paid by the assessee were in the nature of revenue expenditure and application of section 35A was not justified. 23. In Gramophone Co. of India Ltd.'s case the activity of manufacturing is akin to the case of the assessee with an added feature of gramophone records. The Hon'ble Members of Calcutta Benches held that in the normal course of business, the assessee required music as its raw material which was obtained from various sources. One source was EMI from whom the rights were obtained over the materials for the purpose of reproducing the music contained in them. For music cassettes and gramophone records. The other sources were artistes, film producers and authors of songs meaning thereby in-house productions. It was held that the royalty payment was directly relatable to the raw material irrespective of the fact of the agreement being for 3-5 years. The agreement was held to be to ensure continuous supply of the raw material for a payment which was made as and when sales took place. The agreement in this case was for 5 years. Still, it was held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case. The terms and conditions of the agreements were considered which are contended to be similar to that of assessee's agreements. Reliance was placed on (1) Super Cassettes Industries (P.) Ltd's case. (2) M. Subramaniam's case, (3) Gramophone Co. of India Ltd.'s case. The Hon'ble Members followed these decisions of the Tribunal and held that the expenditure incurred by the assessee in acquisition of re-recording rights was on revenue account and allowable deduction. The learned counsel summed up his reliance on these four Tribunal judgments of Delhi, Madras, Calcutta and Mumbai Benches on the note that all the cases deal in activities similar to the assessee, i.e. reproduction of music sound and songs on blank and embedded cassettes by acquiring copyrights by assignments from film producers. The terms of payment are either based on sales over a period of time or lump sum in part and balance based on sales or periodicity and finally only lump sum payments. The variation in terms of payment of consideration which may be called as royalty or fee or licence or any other juristic name has been held to be not of much consequence while deciding the issue of capital or revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of depreciation was upheld. The learned counsel submitted that the firm owns number of cars which are used by the staff for the benefit of assessee's business. Merely non-maintenance of day-to-day log book cannot justify such huge disallowance on account of personal use when it has not been established that there is, in fact, a corresponding personal use. It was urged that the disallowance being on presumption is highly excessive and a reasonable view be adopted. 26. The learned departmental representative on the other hand took us through the chequered history of assessee's case in which the issue has been held in favour of the assessee by CIT(A) in assessment years 1992-93 and 1994-95 and has been held against the assessee in assessment years 1990-91, 1991-92, 1993-94 and 1995-96. The learned departmental representative argued that the order of the CIT(A) for assessment year 1995-96 is elaborate discussing the cases of Empire Jute Co. Ltd. Alembic Chemical Works Co. Ltd. and ITAT judgments relied on by the assessee. The facts of the assessee's case have been thoroughly distinguished by the CIT(A) in this order and it was urged that the findings of the CIT(A) may be treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised in the assessee's case are irrelevant to decide the issue of capital and revenue because the entries are self-serving and the issue is to be decided in exclusion and on principle. It was argued that the facts of various ITAT judgments are different from the assessee's case and the same has been highlighted in details in the CIT(A)'s order for assessment year 1995-96. Strong reliance was placed by the departmental representative in the case of Hiralal Phoolchand v. CIT [1947] 15 ITR 205 (All.) which has dealt at length in the said order by the CIT(A). 28. The learned departmental representative further argued that master plate and audio rights are different. The master plate cannot become synonymous to audio rights. The assessee in perpetuity acquires audio rights and not the master plate. The same is given to the assessee by producers in consideration of assignment of copyrights in perpetuity. Therefore, the issue being raised that the master plate is raw material, therefore, the expenditure is revenue in nature does not decide the issue completely as what we are concerned is the nature of audio rights being capital and not the master plate. 29. Besides these argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the Legislature has cautiously retained the treatment of acquisition of copyright in one form or the other. The CIT(A) negatived the plea of the assessee that there was no expenditure in the capital field for the acquisition of audio rights was held to be against the very object of the legislation as equated in para 1.4.8. To this effect, the CIT(A) relied on Hiralal Phoolchand's case. In fact, the thrust of the CIT(A)'s finding is that in this case it was held that once it is found that the transaction was a purchase of copyright then it inevitably follows that it must be a capital expenditure in the circumstances of this case. The issue of assessee's acquisition of rights is held as capital in nature by putting strong emphasis on this case. It shall be pertinent to mention the facts of the case as recorded by the CIT(A) in his order: "...The assessee in this case was a joint Hindu family. It carried on a family business of publishing and selling books. It was a practice of this family to make agreements with the authors to produce books (mostly dealt in school and college) for them which the assessee, in due course, would publish. There was a dispute between the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable only if an expenditure of capital nature is incurred on the acquisition of copyright. It has already been brought on record that the money spent by the appellant for acquisition of audio rights from various producers, as per the sample agreement produced above, was capital in nature in terms of the clear ruling of the Allahabad High Court in the case of Hiralal Phoolchand (15 ITR 205). No more discussion is necessary on this issue." 30. The learned CIT(A) distinguished all the ITAT judgments by holding that the nature of expenditure in ITAT judgments was royalty unlike the assessee's case therefore, they are not applicable. The orders of CIT(A) favourable to the assessee (assessment years quoted above) as they are based on aforesaid orders of the ITAT which are distinguished by the CIT(A) in assessment year 1995-96. The CIT(A) further held that M. Subramaniam's case supports the view taken by the CIT(A). In fine, the CIT(A) has endeavoured to establish that the introduction of section 35A and its subsequent amendment merging up with section 32 by way of depreciation makes legislative intend very clear that all the copyrights acquisition cases are to be covered by secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Alembic Chemical Works Co. Ltd.'s case cited by the assessee and dealt by the CIT(A) in assessment year 1995-96 becomes two cases of importance for both the sides. The general principles which emerge from these two Supreme Court judgments are-- '(i) There may be cases where expenditure; even if incurred for obtaining an advantage of enduring benefit, may, nevertheless, beyond revenue account and the test of enduring benefit may break down; (ii) It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in the enduring benefit test; (iii) If the advantage consists of merely in facilitating the assessee's trading operations or enabling the management or conduct of assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite period; (iv) The test of enduring benefit is not conclusive test and cannot be applied blindly and mechanically without regard to particular facts and circumstances of a given case. (v) Outgoings on account of capital or revenue depends on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in some cases is based on sales; periodical payments; partly lump sum and partly periodic; and lump sum payment. We consider that mode of regulation of payment is merely utilising the consideration in manner suitable to both the parties and may have a very little effect on the substantive terms of contract or agreement which, in effect, decide the nature of transaction. In Super Cassettes Industries (P.) Ltd.'s case, the payment is termed as royalty. The master plate was treated as basic raw material. The royalty was paid partly in shape of fixed sum initially and partly by way of percentage of the sale value of the tapes and gramophone records. It was held that for every producer from whom master plate was acquired, the plate was different. The product of the assessee was not the master plate but a recorded version of that and was different from the master plate. For every series of item of music sound that was being made, the basic raw material was different and was never uniform. In view of these facts it was held that the contents of master plate was a design, the formula, the raw material all embedded into one and in these circumstances, the plate could not be termed to be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Venus Records which has relied on Empire Jute Co. Ltd.'s case and Alembic Chemical Works Co. Ltd's case, the ITAT has considered various terms and conditions of the agreement. The word used for payment is royalty here and the same is made in lump sum. The ITAT following the judgments on Super Cassettes Industries (P.) Ltd.'s case, M. Subramaniam's case and Gramophone Co. of India Ltd's case has held that expenditure incurred by the assessee in acquisition of re-recording rights was on revenue account and allowable as a deduction. We see that in all these three judgments, the principles laid down by Empire Jute Co. Ltd.'s case and Alembic Chemical Works Co. Ltd.'s case as enumerated above have been followed and these judgments have been given accordingly. By and large, the assessee's business activity, modus operandi are similar to these three cases. Regarding use of royalty instead of payment and some other minor changes, we shall comment later. 37. Turning to M. Subramaniam's case, which the CIT(A) claims that it supports the view of the revenue, we find that in this case, the ITAT held that the songs which were permitted to be recorded in the cassettes was in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business. The master plate is obtained on the basis of assignment of copyrights by way of agreement. Consequently, the payment towards assignment of copyrights is nothing but payments for procuring raw material and to ensure its uninterpreted and smooth supply as per the provisions of law business conventions and the trade and practices of the market. The term of "payment" may differ from royalty to payment and its mode may change from lump sum to periodical or partly lump sum or partly periodical, but we are reminded by the observations of their Lordships of the Supreme Court in above Judgments that the matter is to be viewed from commercial sense and not to be fettered by picking judicial metaphors. The matter is to be viewed not from the juristic classification of legal rights, but in the larger context of business necessity and expediency. The nature of advantage is to be considered in commercial sense. The matter is to be flexible so as to respond to the changing economies of business. Therefore, the finding of the CIT(A) is that because the nature of payment is referred to in three Tribunal judgments distinguishes the assessee's case from these decisions is not well founded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the situational diversities, economic realities, commercial sense, liberal and flexible approach while deciding the matter and at the same time have cautioned to take a practical and business point of view rather than based on juristic classification of legal rights secured, employed or exhausted in the process. A further caution that judicial metaphors are narrowly to be watched because they may appear to liberate thoughts, but they end in enslaving them. The facts of the Hiralal Phoolchand's case are narrated above at page 34. The judgment was rendered on payment consequent to a dispute between the assessee and two authors of school books. The dispute was resolved in the accounting year and the character of this agreement gave rise to the dispute before the High Court. The assessee's claim was that the agreement was product of a settlement of dispute for payment of authors of a compromised sum of three years' royalties already approved with a further estimated sum by way of Compromised to clear up their liability finally for royalties for remaining period. The assessee changes its argument before the High Court that it was not as a commutation of royalties as pleaded in earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement of a dispute and not by an agreement in normal circumstances. The case pertains to payments in the year 1937 and the case was decided in 1947. In commercial parlance, the treatment of copyrights of a book more so, a school text-book cannot be equated with the facts of a case which pertains to musical industries and assignment of copyrights in the year 1992-93 where in commercial parlance it is seen that the life of the master plate in market is very short-lived and the observation of the above Tribunal judgments that the master plate is nothing but raw material makes all the difference. Consequently we hold that the facts of this case are different from the assessee's controversy and the heavy reliance placed by the CIT(A) on this case is not well founded. 40. In view of the foregoings we view this case in the guidelines and cautions enunciated by Their Lordships of the Supreme Court in above judgments which are very pertinent to the issue. Based on these judgments, the above four ITAT judgments have been delivered. The facts of the assessee's case are similar in nature. We have discussed the facts and issues extensively above. Respectfully following these four ITAT judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowed. The orders of the ITAT as available before them and Empire Jute Co. Ltd's case and Alembic Chemical Works Co. Ltd.'s case also have been followed. Since we have held that the CIT(A) has not properly distinguished the ITAT orders, this finding also cannot be upheld. By point No. 9, the CIT(A) has made a feeble attempt to distinguish M. Subramaniam's case decided by Madras Benches. We have already held that the case is applicable to assessee's case and the distinction as being sought to be made out by CIT(A) is not on proper reasonings. In fine, since the expenditure is not capital in nature, the same cannot be covered in the scope of provisions of section 35A irrespective of the words "copyrights". In Cochin Refineries Ltd.'s case, Their Lordships of Kerala High Court has held that in order to be covered by section 35A, all the three conditions should be satisfied, viz. (i) the expenditure should be capital in nature; (ii) should be incurred on the acquisition of patent rights; and (iii) or copyrights. We have held that the expenditure is not capital in nature. Consequently, the same cannot be covered under section 35A. Therefore, the amortisation of expenses as made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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