TaxTMI 
TaxTMI 
2010 (12) TMI 743
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....hese items and accordingly, Ld. Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer. 5. We have heard both the counsel and perused the records. We find that the issue involved is squarely covered in favour of the assessee through the several decisions of the Tribunal including that in ITA no. 2779/Del/2007 for A.Y. 2004-05 vide order dated 28.3.2008 and ITA No.3475/Del/2008 for A.Y. 2005-06 vide order dated 24.7.2009. Since there is not change in law and facts in the current year as the same in earlier years, we accordingly, direct the Assessing Officer to grant depreciation @ 40%. 6. The next issue raised is that Ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs.4,34,45,274/- made by the Assessing Officer u/s 40a(i) on account of expenses claimed in respect of application works fee. 7. On this issue Assessing Officer noted that assessee has claimed an amount of Rs.4,34,45,274/- on account of application work fee expenses in computing the income for A.Y. 2003-04. Explaining the nature of the expense, the assessee informed that the purpose of application fee was mainly towards application c....
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.... deduction in A.Y. 2003-04. 8. Upon assessee's appeal Ld. Commissioner of Income Tax (Appeals) elaborately adjudicated the issue and concluded as under:- "4.4 On careful perusal of the fact, it can be seen that the said expenditure has been incurred by the appellant company towards cost of air conditioners for car models manufactured or to be manufactured by its customers, MUL to Denso Corporation, who has rendered services to the company as per agreement executed between the appellant company and the said corporation. In other words, the payment has been made by the appellant as per agreement executed on 5.9.02 for technical services rendered/undertaken by Denso Corporation for completion of works already assigned to it under the earlier Technical Assistance Agreement. Accordingly the company has claimed the said balance expenditure of Rs.4,34,45,274/- as allowable revenue expenditure in terms of section 40A(i) of the IT Act after payment of TDS. 4.5 In case of Devidas Vithaldas and Co. vs. C.I.T. 84 ITR 277, the Apex Court has held that the expression "enduring benefit" and "right of a permanent nature" are only descriptive and not definite and are r....
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.... expenditure. In my view, the present issue have been squarely covered by the aforesaid judicial pronouncements/decisions. In view of the above decisions it can be held that if the expenditure is a part of the working expenses in ordinary commercial trading, it is not capital but revenue expenditure. Furthermore, if the expenditure is incurred for running the business or laid out as part of the process of profit making, it is revenue in character. Ultimately, the question of whether a particular expenditure is revenue or capital will have to depend on the facts and circumstances of each case, namely, quality and quantum of the amount, the position of the parties, the object of the transactions which has impact on the business, the nature of trade for which the expenditure is incurred and the purpose thereof etc. On careful perusal of the nature of the said expenditure it can been seen that such expenditure has been incurred by the appellant company for carrying on its business in a more effective and profitable manner and, therefore, such expenditure has to be treated as being an expenditure to felicitate the trading/business operations and, therefore, an integral part of the profi....
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....ly paid Rs.9,93,29,876/- and after deduction of tax thereon of Rs.1,97,21,630/-, it remitted the balance sum as are declared at page 129 of the paper book. It may be stated here that in fact out of total sum of Rs.10,42,16,284/- remitted Rs.6,08,15,010/- was recovered by the assessee from M/s Maruti Udyog Ltd. There is no dispute that the expenditure incurred related to the creation of prototypes as was required for the successful implementation/productionisation of product. That in fact the assessee has claimed a deduction only of Rs.3,85,14,766/- and not of Rs.4,34,45,274/- on application work expenses. That the respondent submits that the Assessing Officer had erred in assuming that the assessee had not deducted the tax on the said sum of Rs.4,34,45,274/-, nor had paid the tax. The fact of the matter, however, is, that the assessee had remitted the said sum on 11.12.2002, 10.3.2003 and 23.5.2003, on which it had deducted the tax in the period in which provision of TDS was made and also paid the same on 11.12.2002, 10.3.2003 and 23.5.2003 (within sixty days in respect of amount provided in the year ending 31.3.2003 but provided in the instant assessment year), as provid....
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....h depreciation was claimed. In fact the amount of Rs.4,34,45,274/- had been paid under a application work assignment agreement for completion of task undertaken by the Denso Corporation under the Technical Assistance Agreement. A lump sum payment has been made for completion of task assigned to them and for supporting the work for completion of work of transfer of technical know how was covered under the Technical Assistance Agreement and not for the work undertaken by it for application work. In this regard para 4.2 of the Ld. Commissioner of Income Tax (Appeals) is highly relevant." 13. Ld. counsel of the assessee heavily relied upon among others the decision of the Hon'ble Apex Court in the case of Empire Jute Co. Ltd. vs. C.I.T. 124 ITR 1. 14. Ld. Departmental Representative on the other hand relied upon the orders of the Assessing Officer. 15. We have carefully considered the submissions. We find that as per the agreement between the parties application works have been defined as under:- "Application works" shall mean the modification or development and design engineering works regarding the Products or works for planning manufacturing p....