TaxTMI 
TaxTMI 
2012 (7) TMI 74
X X X X Extracts X X X X
X X X X Extracts X X X X
....n not allowing depreciation in respect of the aforesaid expenditure incurred on account of royalty disallowed as capital expenditure. 3. That the Assessing Officer erred on facts and in law in disallowing the amount of Rs,3,43,10,141/- being provision for warranty and sales service debited to the P&L A/c alleging the same to be an unascertained liability. 3.1. Without prejudice the Assessing Officer erred on facts and in law in not reducing the amount being the provision for warranty made in the earlier years and written back during the relevant previous year. 4. That the Assessing Officer erred on facts and in law in disallowing an amount of Rs.1,71,80,600/- being the cost of air tickets booked by the appellant for technicians and forming part of technical guidance fee, alleging the same to be capital expenditure. 4.1. That the Assessing Officer erred on facts and in law in observing that the expenses on travel of technicians was the liability of the Honda. 4.2. Without prejudice the Assessing Officer erred on facts and in law in not allowing depreciation in respect of the aforementioned expenses treat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in the following paragraphs. 5. The first ground of appeal is general in nature and do not require adjudication. Royalty of Rs.136,98,96,97/-: This issue has been raised by the assessee in his second ground of appeal. The relevant portion of Ld CIT, LTU is reproduced below. "On perusal of the P& L Account, it is seen that assessee had paid an amount of Rs.136,98,96,997/- as royalty to M/s Honda Co. Ltd., Japan for providing technical know how and providing assistance in production of its products. Since this amount has been paid with respect to Collaboration agreement dated April, 2005, the payment appeared to be of capital expenditure as against revenue expenditure claimed by the assessee. In the earlier year, this payment has been treated as capital expenditure in view of the facts mentioned in details in the orders for earlier assessment years. Accordingly, the assessee was asked to explain as to why expenditure claimed under the head be not treated as capital expenditure. In response the assessee submitted a note on it and contended that it is a revenue expense. Thereafter the assessee filed an order of Hon'ble ITAT dated 16.5.2008 for assessment year 2003-04 in its own c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....2008 against the order of the Tribunal and also before Hon'ble Delhi High Court in subsequent years. The assessee has in his reply also submitted that incremental provision for the relevant assessment year works out at only Rs.25,09,345/-. The submission of the assessee has been examined in detail and it is found that the assessee has debited a sum of Rs.3,43,10,141/- in the P&L Account and the claim of working of incremental warranty provision is a deferment of tax liability to next year. Hence, the submission of the assessee is not acceptable. The addition of Rs.3,43,10,141/- was proposed in the draft assessment order u/s 144C of the Act and the DRP vide its order dated 14.9.2011 has declined to interfere in this matter. As such a sum of Rs.3,43,10,141/- debited to the P&L Account is added to the total income of the assessee. The Ld AR argued before us that this point is covered by the Hon'ble Tribunal order for assessment year 2006-07. In this respect, he took us to page 168 of the paper book wherein relevant paragraphs of Tribunal orders were placed. The Ld AR brought to our notice that the facts of the present case are same as in the preceding year and therefore earlier order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....est and provisional Is immaterial because it has been paid on the basis of rules and regulations under the relevant statute. Accordingly, it was held that the assessee was entitled to deduct this amount in computing income. The findings of the Tribunal are placed at page 175 of the paper book. Respectfully following the order of the Tribunal, we also hold that payment is deductible expenditure and therefore ground No.5 of the appeal is allowed. Disallowance of deduction on account of software expenses" 17. This ground of appeal has been taken by the assessee as ground No.6 of appeal. The Assessing Officer had disallowed a sum of Rs.33,61,502/- being expenses incurred on software alleging the same to be capital nature. The addition was made after disallowing expenditure of Rs.84,03,756/- and treating it as capital expenditure and then allowing deduction @ 60%, thus making a net disallowance of Rs.33,61,502/-. The addition was made for the following reasons:- a) The software is an asset defined in appendix-I of Income Tax Rules wherein rates of depreciation are provided. b) The software once purchased is used for a long time i.e. ....