TaxTMI 
TaxTMI 
2015 (7) TMI 1293
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.... 3. After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that assessee has paid an amount of Rs. 17,97,858/- as royalty to Director Shri Taron Mohan. After some enquiries from assessee this amount was disallowed following the order for assessment year 2008-09. 4. On appeal following the earlier order disallowance was confirmed. 5. Before us Ld. Counsel for the assessee submitted that in earlier years this disallowance was deleted by the Tribunal in assessee's own case in ITA No. 684, 1206 & 1207/Chd/2011. 6. On the other hand Ld. DR strongly supported the impugned order. 7. After considering the rival submissions we find that identical issue was adjudicated by the Tribunal in assessee's own case for assessment year 2006-07, 2007-08, 2008-09 vide paras 10 to 13 which are as under:- "10 We have considered the rival submissions carefully in the light of material on record and paper book filed by the assessee. We find that Shri Tarun Mohan was running a proprietary concern known as Phoneytunes.com which was engaged in the business of providing value added telecom services to various mobile companies for ring tones....
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.... law and the company can deal on its behalf with any one. It can purchase or sell the property, register the property in its own name and carry on any business. Even u/s 2 (31) of the Income-tax Act, 1961 which defines a person the company is recognized as a separate person different from individual. In fact a particular person can have different capacities say as an individual or as a partner or as a Director in a company. In the case before us, Shri Tarun Mohan has clearly acted into two capacities namely as individual being proprietor of phoneytunes.com and at the same time his second capacity is on behalf of ITIDA Cad Services Pvt Ltd as an director of that company. There is nothing illegal about this. As per the copy of business agreement all the fixed assets and other assets were required to be taken over by the assessee-company from phoneytunes.com. Authorities below have observed that no asset has been taken over which is not correct. Copies of balance sheet have been filed for phoneytunes.com as well as ITIDA Cad Services Pvt Ltd before us. Balance sheet of phoneytunes.com clearly show that total assets were for Rs. 27,50,583/- as on 31.3.2003. Perusal of balance sheet of ....
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....y clear that the assessee-company has paid royalty for the particular invention which belonged to phoneytunes.com and therefore in our opinion, the claim for payment of royalty deserves to be allowed. Therefore we set aside the order of Ld. CIT(A) and direct the Assessing officer to allow claim for royalty." Following the above, we decide this issue in favour of the assessee. 8. Ground No.2: After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that assessee has debited a sum of Rs. 2,71,71,970/- on account of Copyright fees. The Assessing Officer was of the opinion that these expenses were of capital nature because copyright come within the purview of intangible assets. The assessee was asked to justify the claim. In response, it was stated as under:- "Master Copyrights" and "intellectual property rights" and "software" of the products like songs, images. Video Clips, Games, etc. are held by the owners like Music Companies, Film Producers, and Game developers, etc. Company takes rights- on payment basis- to use these "Master Copyrights" and "intellectual property rights" for development of value added services (VAS) for th....
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....rmat to make it compatible with the size and type of various mobile instruments in use and requirements of the telecos and so the services, for which the company takes "Copyrights" and "Intellectual Property Rights" as the music, images etc, are not usable on the mobile phones in the original format. This explanation of the appellant that since the material for which the copyrights is taken cannot be used in the original format and that the copyrights holders get the fee based on successful download hits and so the amount paid for copyrights should be allowed as revenue expenditure is not acceptable because once the appellant has taken the copyrights for the songs, images, video clips, games etc, no other person is entitled to use them. The appellant has acquired an asset, the benefit of which is available to the appellant for all times to come. Where the expenditure results in a benefit of enduring nature, the expenditure has to be treated as capital expenditure. The various decisions quoted by the Ld. Counsel pertain to the assessment years prior to insertion of new Appendix-1 according to which the copyrights are allowed depreciation @ 25%. In fact, by prescribing a particular r....
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....y perform excerpts and samples of the Licensed Works of duration not exceeding fifteen(15) seconds for monophonic format and thirty(30) seconds for polyphonic format, solely for promotional purposes on the Licensee's and the Sub-Licence's' website/IVR/WAP or such other method or sampling. 2.1.5 to use the track title/title of the Licensed Works, names of the Licensors' members represented on the Licensed Works and any other related material, for the purpose of identifying the Licensed Works on the Service. PROVIDED that:- 2.1.6.1 each Ring Tone can be created from only one Licensed Work; 2.1.6.2 each Ring Tone cannot exceed thirty(30) seconds in monophonic format and forty five (45) seconds in polyphonic format; 2.1.6.3 the Ring Tones shall not be copied or stored by any other third party onto whatever media except onto the a. Licensee's/Sub Licensee Computer Servers b. End Users Cellular phone, Hand held Devices or such wireless devices 2.1.6.4 the Licensee shall not itself or indirectly through any other person in respect of any copying pursuant to this Agreement segue, mix or re-mix or overlap, edit, change ....
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....td. (supra) has disallowed the expenditure. "Under an agreement entered into by the assessee with a foreign company the assessee was granted a licence to use its patents and designs exclusively in India. The agreement was for a duration of 10 years with the parties having the option to extend or renew the agreement. The foreign company undertook not to surrender its patents without the consent of the assessee and to make available to the assessee any improvements, modifications and additions to designs. It had also undertaken to enable the assessee to defend any counterfeit by others. The assessee was not to disclose to third parties any of the documents made available by the foreign company to the assessee without having received a written authorisation from the foreign company. The High Court held that these features of the agreement clearly established that what was obtained by the assessee was only a licence and what was paid by the assessee to the foreign company was only a licence fee and not the price for acquisition of any capital asset. On appeal by the Department to the Supreme Court: Held, affirming the decision of the High Court, that the High Court ha....
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....is basically a steel frame in which a personal computer is housed and, therefore, would fall in the category of furniture. Accordingly, depreciation on Kisoks portion was restricted to 10%. 23. On appeal, it was mainly submitted as under:- "The learned assessing officer in para 3 of the order, himself says that 60% depredation is allowed only on computer and computer software but has ignored definition given by assessee. The definition given is complete definition. Computer kiosk is assembly of personal computer with touch screen, blue tooth & other computer parts loaded with software, house in a steel frame making it secure and portable for down loading various value added services like ring tones, caller ring back tone, wall papers, video etc. The learned assessing officer has ignored the whole definition and just picked up the word steel frame to make the additions. If we look into detail the steel frame in which the system is fitted is just 5% of the total cost of the kiosk and is fitted just for safety and placement purposes. These kiosk are placed at public places like railway stations, cinema halls, malls and market places. The steel frame is ma....
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....n @ 60% and has allowed @1 5% by covering it in the head Plant & Machinery. IVR card is also fitted into the computer for voice replying to customer calls automatically and works with specific software. The Ld. Assessing Officer has referred in the first point of computer Kiosk that computer software is allowed depreciation @ 60% but here disallowed the same. The definition of computer in part A tangible assets sub clause 5 defines it " computer including computer software and computer software means any computer programme recorded on any disc, tape perforated media or other information storage device. IVR card is device fitted into computer with software to answer the customer with software to answer the customer's calls automatically. Hence, the Ld. Assessing Officer is not justified in disallowing the depreciation of@ 60% on IVR card. " 30. The Ld. CIT(A) in view of the above submissions allowed the depreciation @ 60%. 31. Before us, Ld. DR supported the order of Assessing Officer. 32. On the other hand Ld. counsel for the assessee reiterated the submissions made before CIT(A). 33. After examining the rival submissions we find that once....