2010 (8) TMI 1046

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....f law which is liable to be set aside. 2. On the facts and circumstances of the case and in law the CIT(A) has erred in treating the Royalty Payment of Rs. 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 techni....

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....l expenditure. 6. The facts are that the assessee company entered into 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 w....

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....reme Court in the case of Southern Switch Gear Ltd. (supra) has upheld the order of the 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, 1....