ACIT, Jamshepur V. M/s. Tata Cummins Ltd., Jamshepur

ITA 100/RAN/2012

• Counselvise Citation: 10025114 RSA 2012
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK ROUSHAN SR S C
• Assessee Lawyers: DILIP S DAMLE F
• Keywords: Capital asset; Depreciation; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 80HHC; 32; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI CIRCUI T BENCH, RANCHI (BEFORE SHRI P.K.BANSAL, HONBLE A.M.& SHR I D.T. GARASIA, HONBLE J.M.) I.T.A.NOS.83 TO 88/RAN/2012 : ASSESSMENT Y EARS 2002-2003 TO 2007-2008 TATA CUMMINS LIMITED, JAMSHEDPUR -VS- ACIT , CIRCLE-3, JAMSHEDPUR (APPELLANT) (RESPONDENT) I.T.A. NOS.95 TO 100/RAN/2012 : ASSESSMENT YEARS 2002-2003 TO 2007-2008 ACIT, CIRCLE-3, JAMSHEDPUR -VS- TATA CU MMINS LIMITED, JAMSHEDPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DILIP S. DAMLE, F.C.A DEPARTMENT BY : SHRI DEEPAK ROUSHAN, SR.S.C. DATE OF CONCLUDING THE HEARING : 08.05.2013 DATE OF PRONOUNCING THE ORDER : 10 .05.2013 O R D E R PER BENCH : THE CROSS APPEALS IN THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 HAVE ARISEN OUT OF THE COMMON ORDER OF THE CIT(A), JAMSHEDPUR DATED 24.05.2012 WHILE THE CROSS APPEALS FOR THE ASSESSMENT YEARS 20 05-06, 2006-07 AND 2007-08 HAVE ARISEN OUT OF THE COMMON ORDER OF THE CIT(A) D ATED 23.05.2012. 2. IN THE ASSESSMENT YEARS 2002-03 AND 2003-04, THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL EXCEPT THE CH ANGE IN FIGURES IN THE ASSESSMENT YEAR 2003-04. 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(APPEALS) ERRED IN LAW IN WRONGLY APPLYING THE R ATIO LAID DOWN IN JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS SU N ENGINEERING WORKS (P) LTD (198 ITR 297) AND THEREBY RESTRICTING THE CLAIM OF DEPRECIATION U/S 32(1)(II) TO RS.183,92,060/- AS OPPOSED TO RS.27,58 8,090/- TO WHICH THE APPELLANT WAS ENTITLED IN LAW. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE THAT IN THE CASE DECIDED BY THE SUPREME COURT, THE CLAIM RAISED BY THE ASSESSEE IN THE COUR SE OF REASSESSMENT WAS NOT IN THE NATURE OF MANDATORY DEDUCTION BUT WAS RELATE D TO A CLAIM WHICH WAS 2 ALLOWABLE ONLY WHEN CLAIMED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT AND THEREFORE THE SAID DECISION WAS DISTINGUISHABLE ON FACTS. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(APPEALS) FAILED TO APPRECIATE THAT IN TERMS OF EXPLANATION 5 TO SECTION 32 OF THE ACT DEPRECIATION WAS A MANDATORY DEDUCTION W HICH THE AO WAS OBLIGED TO GRANT IN THE PRESCRIBED MANNER AT THE PRESCRIBED RATE EVEN IF DEDUCTION THEREOF WAS NOT CLAIMED BY THE ASSESSEE AND IN VIEW OF THE LEGAL POSITION THE CIT(APPEALS) SHOULD HAVE DIRECTED AO TO ALLOW FULL DEPRECIATION AT THE PRESCRIBED RATES WITHOUT RESTRICTING IT TO THE QUAN TUM OF DEDUCTION ALLOWED UNDER 35AB IN THE REGULAR ASSESSMENT. 4. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE AO BE DIRECTED TO ALLOW STATUTORY CLAIM OF DEPRECIATION @ 25% U/S 32 ON THE ACTUAL COST /WDV OF THE TECHNICAL KNOW-HOW ACQUIRED BY TH E ASSESSEE. 5. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NOS. 1 TO 4, THE CIT (APPEALS) FURTHER ERRED IN DIRECTING THE AO TO COMPUTE THE CLOSING WRITTEN DOWN VALUE OF THE TECHNICAL KNOWHOW AT RS.8,27,64,269/- AFTER REDUCING DEPRECIATION NO TIONALLY ALLOWED @ 25% INSTEAD OF REDUCING THE DEPRECIATION ACTUALLY ALLO WED BY THE CIT(APPEALS). 6. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NOS. 1 TO 4, THE CIT (APPEALS) FAILED TO APPRECIATE THAT IN TERMS OF SECTION 43(6)(B) OF THE INCOME-TAX ACT, 19 61 THE CLOSING WRITTEN DOWN VALUE OF TECHNICAL KNOWHOW WAS TO BE COMPUTED AFTER REDUCING THE DEPRECIATION ACTUALLY GRANTED. 7. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NOS. 1 TO 4, THE AO BE DIRECTED TO COMPUTE THE CLOSING WRITTEN DOWN VALUE OF THE TECHNICAL KNOW-HOW AFTER REDUCING THE DEPRECIATION ACTUALLY ALLOWED DURING THE YEAR UND ER CONSIDERATION AND THEN CARRY FORWARD THE WDV OF THE BLOCK OF INTANGIBLE AS SETS DETERMINED IN CONFORMITY WITH SECTION 43(6)(B) OF THE I.T. ACT, 1 961 FOR THE PURPOSES OF ALLOWING DEPRECIATION IN THE SUBSEQUENT YEAR 2.1 IN ASSESSMENT YEARS 2004-05, 2005-06, 2006-07 A ND 2007-08, THE ASSESSEE HAS TAKEN THE FOLLOWING COMMON GROUNDS OF APPEAL 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT (APPEALS) FAILED TO APPRECIATE THAT IN TERMS OF SEC TION 43(6)(B) OF THE INCOME- TAX ACT, 1961 THE WRITTEN DOWN VALUE OF TECHNICAL K NOWHOW WAS TO BE COMPUTED AFTER REDUCING THE DEPRECIATION ACTUALLY G RANTED AND THEREFORE THE CIT(APPEALS) OUGHT TO HAVE DIRECTED THE AC TO COMPU TE THE OPENING WRITTEN 3 DOWN VALUE AFTER REDUCING THE DEPRECIATION ACTUALLY ALLOWED IN THE PRECEDING YEARS. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE AC BE DIRECTED TO COMPUTE THE OPENING WRITTEN DOWN VALUE OF THE TECHNICAL KNOW- HOW AFTER REDUCING THE DEPRECIATION ACTUALLY ALLOW ED IN THE EARLIER YEARS AND THEN COMPUTE THE DEPRECIATION ALLOWABLE IN THE YEAR UNDER CONSIDERATION IN THE PRESCRIBED MANNER AND AT THE PRESCRIBED RATE S IN THE INCOME-TAX ACT, 1961 AND THEREAFTER CARRY FORWARD THE WRITTEN DOWN VALUE OF THE BLOCK OF INTANGIBLE ASSETS IN CONFORMITY WITH PROVISIONS OF SECTION 43(6)(B) FOR ALLOWING DEPRECIATION IN THE SUBSEQUENT YEARS . 2.2 IN THE ASSESSMENT YEAR 2005-06, THE ASSESSEE HA S TAKEN ONE MORE GROUND BEING GROUND NO.3 WHICH READS AS UNDER: 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(APPEALS) WAS GROSSLY UNJUSTIFIED IN UPHOLDING T HE ARBITRARY DISALLOWANCE OF CLUB EXPENDITURE OF RS.78,640/- BASED ON CONJECT URES AND SURMISES WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD. 3. THE REVENUE IN THEIR APPEALS FOR THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 HAS TAKEN THE FOLLOWING COMMON GROUNDS: WHETHER THE HONBLE CIT(A), JAMSHEDPUR IS RIGHT IN ALLOWING DEPRECIATION WHEN THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ON K NOW-HOW IN THE RETURN OF INCOME. DEDUCTION UNDER SECTION 35AB WAS CLAIMED BY THE ASSESSEE, WHICH WAS NOT APPLICABLE IN THIS YEAR. THE ASSESSEE HAS A LSO NOT CAPITALIZED, THE TECHNICAL KNOW-HOW, IN THE RETURN OF INCOME. 3.1 IN THE APPEAL FOR THE ASSESSMENT YEAR 2005-06, THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A), WAS JUSTIFIED IN LAW IN DELETING THE ADDITION OF RS .1,30,27,860/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(2)(B) OF THE I. T.ACT. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE HONBLE CIT(A) WAS JUSTIFIED IN IGNORING THE FINDINGS GIVEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SHATRUNJAY DIAMOND 261 ITR 258 (BORN), ACCORDING TO WHICH THE BURDEN IS UPON THE ASSESSEE TO ESTABLISH THAT THE PRICE PAID TO SISTER CONCERN IS EXCESSIVE OR UNREASONABLE . 4 3. WHETHER, THE CIT (A) HAS ERRED IN DELETING PAYM ENT MADE FOR CONSTRUCTION OF RAILWAY BRIDGE WHEN THE ASSESSEE IS NOT THE OWNE R OF THE BRIDGE. 4. WHETHER, THE CIT(A) HAS ERRED IN ALLOWING DEPR ECIATION ON KNOW-HOW WHEN THE ASSESSEE HAS NOT CLAIMED IT IN THE RETURN OF INCOME. 3.2 IN THE APPEAL FOR THE ASSESSMENT YEAR 2006-07, THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A), WAS JUSTIFIED IN LAW IN DELETING THE ADDITION OF RS .1,17,02,123/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(2)(B) OF THE I. T.ACT. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE HONBLE CIT(A) WAS JUSTIFIED IN IGNORING THE FINDINGS GIVEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SHATRUNJAY DIAMOND 261 ITR 258 (BORN), ACCORDING TO WHICH THE BURDEN IS UPON THE ASSESSEE TO ESTABLISH THAT THE PRICE PAID TO SISTER CONCERN IS EXCESSIVE OR UNREASONABLE . 3. WHETHER, THE CIT (A) HAS ERRED IN ALLOWING DEPR ECIATION ON KNOW-HOW WHEN THE ASSESSEE HAS NOT CLAIMED IT IN THE RETURN OF INCOME. 4. WHETHER, THE CIT(A) HAS ERRED IN ALLOWING CAPIT ALISATION OF FIRST INSTALLMENT OF FEES FOR TECHNICAL SERVICES AND CLAI M OF DEPRECIATION WHEN THE AGREEMENT WAS DONE IN A.YR. 2007-08. 5. WHETHER, THE CIT(A) HAS ERRED IN DELETING TES TING EXPENSES, PROVISION FOR PERFORMANCE AWARD MANAGERS WHEN THE PAYMENT MADE TO MANAGER FOR THEIR PERFORMANCE WAS IN THE A.YR. 2007-08. 6. WHETHER, THE CIT(A) HAS ERRED IN DELETING ADDITI ON ON FBT WHEN THE ASSESSEE HIMSELF ACCEPTED THAT IN FBT RETURN IT HAS NOT SHOWN THE AMOUNT. 3.3 IN THE APPEAL FOR THE ASSESSMENT YEAR 2007-08, THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A), WAS JUSTIFIED IN LAW IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(2)(B) OF THE I.T.ACT. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE HONBLE CIT(A) WAS JUSTIFIED IN IGNORING THE FINDINGS GIVEN BY THE HONBLE BOMBAY 5 HIGH COURT IN THE CASE OF CIT VS SHATRUNJAY DIAMOND 261 ITR 258 (BORN), ACCORDING TO WHICH THE BURDEN IS UPON THE ASSESSEE TO ESTABLISH THAT THE PRICE PAID TO SISTER CONCERN IS EXCESSIVE OR UNREASONABLE . 3. WHETHER, THE CIT (A) HAS ERRED IN DELETING ADDI TION UNDER THE HEAD REPAIR & MAINTENANCE OF PLANT & MACHINERY AND BUILDING.. 4. WHETHER, THE CIT(A) HAS ERRED IN ALLOWING DEPR ECIATION ON KNOW-HOW WHEN THE ASSESSEE HAS NOT CLAIMED IT IN THE RETURN OF INCOME. 4. FIRST, WE ARE TAKING UP THE GROUNDS TAKEN BY THE ASSESSEE AS WELL AS THE REVENUE FOR THE ASSESSMENT YEARS 2002-03 TO 2004-05 AS ALL THESE GROUNDS ARISE OUT OF THE COMMON ISSUE. BRIEF FACTS OF THE CASE ARE TH AT THE ASSESSEE CLAIMED DEDUCTION AMOUNTING TO RS.1,83,92,060/- UNDER SECTION 35AB OF THE INCOME TAX ACT, IN RESPECT OF LUMP-SUM CONSIDERATION AMOUNTING TO RS.11,03,52, 358 INCURRED BY THE ASSESSEE DURING THE ASSESSMENT YEAR 2002-03 FOR ACQUIRING TE CHNICAL KNOW-HOW FROM M/S. CUMMINS ENGINE COMPANY INC.500 JACKSON STREET, COLU MBUS, INDIANA, USA, BY VIRTUE OF THE LICENSE AGREEMENT DATED 04.09.2000 FO R MANUFACTURING OF THE CNG ENGINES. DURING THE COURSE OF ASSESSMENT PROCEEDING S FOR THE ASSESSMENT YEAR 2005- 06, THE ASSESSING OFFICER NOTED THAT THE DEDUCTION UNDER SECTION 35AB WAS AVAILABLE ONLY IN RESPECT OF LUMP-SUM CONSIDERATION FOR ACQUI RING TECHNICAL KNOW-HOW PAID ON OR BEFORE 1 ST DAY OF APRIL, 1998 AND THEREFORE, HE DISALLOWED TH E CLAIM OF THE ASSESSEE UNDER SECTION 35AB AND ACCORDINGLY REOPENED THE ASS ESSMENT UNDER SECTION 147 FOR THE ASSESSMENT YEAR 2002-03, 2003-04 AND 2004-05 AN D DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 35AB. DURING THE COURSE OF T HE ASSESSMENT PROCEEDINGS, THE ASSESSEE ADMITTED THAT THE DEDUCTION UNDER SECTION 35AB WRONGLY CLAIMED AND ALLOWED BUT THE ASSESSEE CLAIMED DEPRECIATION UNDER SECTION 32(1)(II) IN RESPECT OF SAID LUMP-SUM CONSIDERATION BY CONSIDERING THE TECH NICAL KNOW-HOW AS INTANGIBLE ASSET THE ASSESSING OFFICER DID NOT ALLOW THE DEPRE CIATION TO THE ASSESSEE. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 5. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE ASSESSING OFFICER, ALLOWED THE DEPRECIATION TO THE ASSESSEE ONLY 6 TO THE EXTENT OF THE WITHDRAWAL OF THE DEDUCTION UN DER SECTION 35AB DURING THE ASSESSMENT YEARS 2002-03 AND 2003-04 AND DURING ASS ESSMENT YEAR 2004-05 AT THE PRESCRIBED RATE WHILE ALLOWING THE DEPRECIATION TO THE ASSESSEE FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05, THE WRITTEN DOWN VALUE O F THE TECHNICAL KNOW-HOW HAD BEEN TAKEN ASSUMING THE DEPRECIATION TO THE EXTENT OF 25% DEEMED TO BE ALLOWED IN THE ASSESSMENT YEAR 2002-03. SIMILARLY, WHILE ALLOW ING THE DEPRECIATION FOR THE ASSESSMENT YEAR 2004-05, THE WRITTEN DOWN VALUE HAS BEEN TAKEN AFTER DEPRECIATION @25% DEEMED TO HAVE BEEN ALLOWED ON THE WRITTEN DOW N VALUE BEING BROUGHT FORWARD BY OBSERVING UNDER CONCLUDING PARA 3.24 AS UNDER. 3.24. HOWEVER, THE DEPRECIATION CLAIMED BY THE APPE LLANT IN ITS REVISED COMPUTATION FILED DURING THE REASSESSMENT PROCEEDIN GS FOR THIS ASSESSMENT YEAR IS RA.2,75,88,090/-. HOWEVER, AS HE LD THE APEX COURT IN THE CASE OF M/S. SUN ENGINEERING (SUPRA) THAT TH E ALLOWANCE FOR THE CLAIM / RELIEF I.E., DEPRECIATION IN THIS CASE SHOU LD NOT EXCEED THE ESCAPED INCOME. THE PROVISION OF EXPLANATION - 5 TO SECTION 32 WILL NOT ALTER THE LAW LAID DOWN BY THE APEX COURT IN SUN EN GINEERING THAT THE DEDUCTION WILL NOT EXCEED THE ESCAPED INCOME BROUGH T TO TAX. THEREFORE, IN VIEW OF THE ABOVE DECISION OF THE APEX COURT THE APPELLANT WOULD BE ENTITLED FOR DEPRECIATION AMOUNTING TO RS.1,83,93,0 60/- AND NOT RS.2,75,88,090/- AS CLAIMED BY THE APPELLANT. THE B ALANCE DEPRECIATION DISALLOWED AMOUNTING TO RS.91,96,030/- WOULD NOT BE ALLOWED FOR INCREASING THE WDV IN THE NEXT YEAR I.E., FINANCIAL YEAR 2002-03 OR ANY FUTURE FINANCIAL YEAR AS THE SAME WILL BE AGAINST T HE DECISION AS LAID DOWN BY THE APEX COURT IN THE CASE OF M/S. SUN ENGI NEERING (SUPRA) FOR THE CLAIM IN RESPECT OF ESCAPED INCOME DURING THE R EASSESSMENT PROCEEDINGS GETS FROZEN AT THE CONCLUSION OF THE SA ID REASSESSMENT PROCEEDINGS IN LIGHT OF THIS DECISION. FOR THE SAME REASONS THE WITHOUT PREJUDICE CONTENTION OF THE APPELLANT THAT DEPREDAT ION UNDER SECTION 32 MAY BE ALLOWED TO THE EXTENT OF INCOME ORIGINALLY A SSESSED AND THE CLOSING WDV OF THE BLOCK BE ACCORDINGLY COMPUTED AN D CARRIED FORWARD ACCORDINGLY IS ALSO NOT ACCEPTABLE AS THE SAME CANN OT OVERRIDE THE DECISION OF THE APEX COURT IN THE CASE OF SUN ENGIN EERING (SUPRA). GROUND NOS. 2 TO 5 OF THE APPEAL IS PARTLY ALLOWED. 5.1 SIMILARLY, THE DEPRECIATION WAS ALLOWED TO THE ASSESSEE IN THE ASSESSMENT YEARS 2003-04 AND 2004-05, AS PER THE OBSERVATIONS GIVEN UNDER PARA 6 AS UNDER: 6. GROUND NO. 2 TO 5 OF THE APPEAL OF BOTH THE Y EARS ARE IDENTICAL TO GROUND NO. 2. TO 5 OF APPEAL NO. 4L/JSR/2009-10 FOR ASSESSMENT YEAR 7 2002- 03. FOR THE REASONS DISCUSSED IN RESPECT OF G ROUND NO. 2 TO 5 IN ASSESSMENT YEAR 2002-03 PARA NO. 3.24 AND ABOVE, TH E AO IS DIRECTED TO ALLOW DEPRECIATION AMOUNTING TO RS. 1,83,92,060/- ( AS .AGAIN8T THE CLAIM OF RS.2,06,91,067/- FOR THE YEAR MADE BY THE APPELLANT) FOR ASSESSMENT YEAR 2003-04 AND RS.1,55,18,301/- FOR AS SESSMENT YEAR 2004-05. FURTHER FOR THE REASONS DISCUSSED IN. THE APPELLATE ORDER FOR AY 2002-0.3, AS REFERRED ABOVE, THE BALANCE DEPRECI ATION OF RS.22,99,007/- DISALLOWED IN ASSESSMENT YEAR 2003-0 4 WOULD NOT BE AVAILABLE FOR INCREASING THE WDV IN THE NEXT. FINAN CIAL YEAR I.E., 2003- 04 OR ANY FUTURE YEAR. GROUND NO. 2 TO 5 OF THE APP EAL NO, 42 AND 43 FOR ASSESSMENT YEAR 2003-04 AND 2004-05 ARE PARTLY ALLOWED. 5.2 THE ASSESSEE HAS COME IN APPEAL BEFORE US IN RE SPECT OF WRITTEN DOWN VALUE TO BE TAKEN IN EACH OF THE ASSESSMENT YEAR, AFTER DEDU CTING THE DEPRECIATION ACTUALLY ALLOWED BY THE CIT(A) FOR THE PURPOSE OF COMPUTATIO N OF THE DEPRECIATION IN THE SUCCEEDING ASSESSMENT YEAR WHILE THE REVENUE HAS CO ME IN APPEAL BEFORE US AGAINST THE ALLOWANCE OF THE DEPRECIATION BY THE CIT(A). AS THE ASSESSEE HAS NOT CLAIMED THE DEPRECIATION ON TECHNICAL KNOW-HOW IN THE RETURN OF INCOME AND THE ASSESSEE HAS NOT FILED ANY RETURN IN PURSUANCE TO THE NOTICE ISSUED UNDER SECTION 147 OF THE INCOME TAX ACT. THE LD. D.R. BEFORE US CONTENDED THAT THE PROCEEDINGS INITIATED UNDER SECTION 147 ARE FOR THE BENEFIT OF THE REVENUE. THE ASSESSEE CANNOT CLAIM ANY DEDUCTION WHICH THE ASSESSEE HAS NOT CLAIMED DURING THE COURSE OF THE ORIGINAL ASSESSMENT. THE CIT(A) HAS ACTED AGAINST THE LAW IN ALLOWING THE DEPRECIATION TO THE ASSESSEE. THE ASSESSEE WAS ALLOWED DEDUCTION UNDER SECTION 35AB ON TECHNICAL KNOW-HOW WHILE FRAMING THE ORIGINAL ASSESSMENT. IN FACT, THE ASSESSEE WAS NOT ENTITLED FOR SUCH DEDUCTION. THE ASSESSEE ALSO AGRE ED FOR THE SAME. THE ASSESSEE, WITHOUT FILING ANY RETURN IN PURSUANCE OF THE NOTIC E ISSUED UNDER SECTION 148, CLAIMED THE DEDUCTION FOR THE DEPRECIATION. NO SUCH DEDUCTI ON COULD HAVE BEEN ALLOWED TO THE ASSESSEE. IN THIS REGARD, RELIANCE WAS PLACED ON TH E DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT-VS- SANGEET HA GRANITES LTD. 326 ITR 324 (KAR) WHEREIN IT WAS HELD THAT WHERE REASSESSMENT P ROCEEDINGS WERE INITIATED IN RESPECT OF ESCAPED ASSESSMENT, I.E. CLAIM MADE TOWA RDS SALE PROCEEDS IN CONVERTIBLE FOREIGN EXCHANGE WHICH HAD NOT BEEN RECEIVED, DURIN G REASSESSMENT, ASSESSEE COULD 8 NOT BE ALLOWED TO CLAIM THAT ENTIRE DEDUCTION CLAIM ED UNDER SECTION 80HHC WAS EXEMPTED UNDER SECTION 10B. THE LD. A.R., ON THE OT HER HAND, RELIED ON THE DECISION OF CIT-VS- SUN ENGINEERING WORKS PVT. LTD. REPORTE D IN 198 ITR 297 (SC) ESPECIALLY AT PARA 39 OF THE ORDER IN WHICH THE HON BLE SUPREME COURT HAS HELD THAT THE MATTER HAS NOT AGITATED IN THE CONCLUDED ORIGIN AL ASSESSMENT PROCEEDINGS ALSO CANNOT BE PERMITTED TO BE AGITATED IN THE REASSESSM ENT PROCEEDINGS UNLESS RELATABLE TO THE ITEM SOUGHT TO BE TAXED AS ESCAPED INCOME. INDE ED, IN THE REASSESSMENT PROCEEDINGS FOR BRINGING TO TAX ITEMS WHICH HAD ESC APED ASSESSMENT, IT WOULD BE OPEN TO AN ASSESSEE TO PUT FORWARD CLAIMS FOR DEDUC TION OF ANY EXPENDITURE IN RESPECT OF THAT INCOME OR THE NON-TAXABILITY OF THE ITEMS A T ALL. THUS, IT WAS CONTENDED THAT THE CLAIM OF THE DEPRECIATION RELATES TO THE TECHNI CAL KNOW-HOW I.E. THE ESCAPED INCOME FOR WHICH THE ASSESSMENT HAS BEEN REOPENED. IT WAS ALSO POINTED OUT BY REFERRING TO THE SAME PARAGRAPH OF THE JUDGMENT THA T THE HONBLE SUPREME COURT OBSERVED EVEN IN CASES WHERE THE CLAIMS OF THE ASSE SSEE DURING THE COURSE OF THE REASSESSMENT PROCEEDINGS RELATED TO THE ESCAPED ASS ESSMENT ARE ACCEPTED, STILL THE ALLOWANCE OF SUCH CLAIMS HAS TO BE LIMITED TO THE E XTENT TO WHICH THEY REDUCE THE INCOME TO THAT ORIGINALLY ASSESSED. THE INCOME FOR THE PURPOSE OF REASSESSMENT CANNOT BE REDUCED DURING THE INCOME ORIGINALLY ASSE SSED. IN RESPECT OF THE GROUND OF APPEAL TAKEN BY THE LD. A.R., IT WAS SUBMITTED THAT THE DEPRECIATION HAS TO BE ALLOWED ON THE COST IN THE FIRST YEAR AND IN THE SUCCEEDING YEAR ON THE WRITTEN DOWN VALUE. THE WRITTEN DOWN VALUE HAS BEEN DEFINED UNDER SECTI ON 43(6)(C) IN RESPECT OF BLOCK OF ASSETS. THIS PROVISO CLEARLY STATES THAT THE WRI TTEN DOWN VALUE OF THE BLOCK OF ASSETS IN THE IMMEDIATELY PREVIOUS YEAR HAS TO BE R EDUCED BY THE DEPRECIATION ACTUALLY ALLOWED. IN RESPECT OF BLOCK OF ASSETS IN RELATION TO THE SAID PRECEDING PREVIOUS YEAR AND FURTHER ADJUSTED BY THE INCREASE OR THE REDUCTION HAS GIVEN UNDER SUB-CLAUSE (I). THUS, HE CONTENDED THAT THE WORD US ED IS ACTUALLY ALLOWED NOT THE DEPRECIATION AS IS ALLOWABLE. THE WORD ACTUALLY A LLOWED HAS BEEN INTERPRETED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT-VS- DO OM DOOMA INDIA LTD. 310 ITA 392 TO MEET AS THAT LIMITED TO DEPRECIATION ACTUALL Y TAKEN INTO ACCOUNT OR 9 ACCUMULATED AND GIVEN EFFECT TO I.E. ALLOWED BY THE ASSESSING OFFICER AGAINST THE INCOME OF THE BUSINESS, WHILE COMPUTING THE TAXABLE INCOME OF THE ASSESSEE. THUS, IT IS CONTENDED THAT THE CIT(A) WAS NOT CORRECT IN LAW IN TAKING THE WRITTEN DOWN VALUE, AFTER TAKING THE DEPRECIATION ALLOWABLE, NOT THE DE PRECIATION ACTUALLY ALLOWED TO THE ASSESSEE. THE CIT(A), ON THE OTHER HAND, ALLOWED TH E DEPRECIATION. IN RESPECT OF KARNATAKA HIGH COURTS DECISION ON WHICH THE LD. DR HAS RELIED, IT WAS STATED THAT IN THAT CASE IT IS ONLY A PART OF THE DEDUCTION UNDER SECTION 80HHC WAS WITHDRAWN AND FOR THAT PART, THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10B. THIS IS NOT PERMISSIBLE EVEN IN THE NORMAL PROVISION OF THE INC OME TAX ACT. THUS, THIS DECISION IS NOT APPLICABLE. THE LD. A.R. FURTHER SUBMITTED T HE FOLLOWING CHART TO SHOW THE DEPRECIATION AS CLAIMED BEFORE THE ASSESSING OFFICE R. TATA CUMMINS LIMITED DEPRECIATION AS PER ASSESSEES CLAIM BEFORE THE ASS ESSING OFFICER FINANCIAL YEAR ORIGINAL COST/ DEP @ 25% CLOSING WDV WDV 2001-02 110,352,360 27,588,090 82,764,270 2002-03 82,764,270 20,691,068 62,073,203 2003-04 62,073,203 15,518,301 46,554, 902 2004-05 46,554,902 11,638,725 34,916,176 2005-06 34,916,176 8,729,044 26,187,132 2006-07 26,187,132 6,546,783 19,640,349 THE LD. A.R. ALSO SUBMITTED ANOTHER STATEMENT SHOWI NG THE DEPRECIATION AND WRITTEN DOWN VALUE, AFTER GIVING EFFECT TO THE ORDERS OF THE SUP REME COURT IN THE CASE OF SUN ENGINEERING (SUPRA) AND DOOM DOOMA (SUPRA) AS UNDER: FINANCIAL YEAR ORIGINAL COST/ DEP @ 25% DEP. TO BE CLOSING WDV WDV ACTUALLY ALLOWED 2001-02 110,352,360 27,588,090 18,392,060 91,960,3 00 2002-03 91,960,300 22,990,075 18,392,060 73,5 68,240 2003-04 73,568,240 18,392,060 18,392,060 55,176, 180 2004-05 55,176,180 13,794,045 13,794,045 41,382, 135 2005-06 41,382,135 10,345,534 10,345,534 31,036, 601 2006-07 31,036,601 7,759,150 7,759,150 23,27 7,451 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIALS ON RECORD. THE ISSUE BEFORE US WHICH ARISES FROM TH E APPEAL OF THE REVENUE RELATES TO 10 WHETHER THE ASSESSEE IS ENTITLED TO CLAIM THE DEPRE CIATION, DURING THE COURSE OF COMPUTATION OF THE INCOME IN THE ASSESSMENT FRAMED UNDER SECTION 143(3) READ WITH SECTION 147. WE HAVE GONE THROUGH THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF CIT-VS- SUN ENGINEERING WORKS PVT. LTD. ( SUPRA ). IN THIS CASE, WE NOTED THAT UNDER PARA 39 OF ITS ORDER, THE HONBLE SUPREME COU RT HAS HELD AS UNDER : . A MATTER NOT AGITATED IN THE CONCLUDED ORIGINAL AS SESSMENT PROCEEDINGS ALSO CANNOT BE PERMITTED TO BE AGITATED IN THE REASSESSMENT PROCEEDINGS UNLESS RELATABIE TO THE ITEM SOUGHT TO BE TAXED AS ESCAPED INCOME. INDEED, IN THE REASSESSMENT PROCEEDINGS FO R BRINGING TO TAX ITEMS WHICH HAD ESCAPED ASSESSMENT, IT WOULD BE OPE N TO AN ASSESSEE TO PUT FORWARD CLAIMS FOR DEDUCTION OF ANY EXPENDITURE IN RESPECT OF THAT INCOME THE NON-TAXABILITY OF THE ITEMS AT ALL. KEEP ING IN VIEW THE OBJECT AND PURPOSE OF THE PROCEEDINGS UNDER SECTION 147 WH ICH ARE FOR THE BENEFIT OF THE REVENUE AND NOT AN ASSESSEE, AN ASSE SSEE CANNOT BE PERMITTED TO CONVERT THE REASSESSMENT PROCEEDINGS A S HIS APPEAL OR REVISION, IN DISGUISE, AND SEEK RELIEF IN RESPECT O F ITEMS EARLIER REJECTED OR CLAIM RELIEF IN RESPECT OF ITEMS NOT CLAIMED IN THE ORIGINAL ASSESSMENT PROCEEDINGS, UNLESS RELATABLE ESCAPED I NCOME, AND REAGITATE THE CONCLUDED MATTERS. EVEN IN CASES WHER E THE CLAIMS OF THE ASSESSEE DURING THE COURSE OF REASSESSMENT PROCEEDI NGS RELATED TO THE ESCAPED ASSESSMENT ARE ACCEPTED, STILL THE ALLOWANC E OF SUCH CLAIMS HA TO BE LIMITED TO THE EXTENT TO WHICH THEY REDUCE TH E INCOME TO THAT ORIGINALLY ASSESSED. THE INCOME FOR PURPOSES OF REA SSESSMENT CANNOT BE REDUCED BEYOND THE INCOME ORIGINALLY ASSESSED. 6.1 FROM THE PERUSAL OF THE AFORESAID FINDING OF TH E HONBLE SUPREME COURT, WHICH IS APPARENTLY CLEAR, THE ASSESSEE CAN CLAIM T HE DEDUCTION OF AN ITEM DURING THE COURSE OF THE REASSESSMENT PROCEEDINGS WHICH THE AS SESSEE HAS NOT CLAIMED IN THE ORIGINAL ASSESSMENT, IF THE DEDUCTION IS RELATED TO THE ESCAPED INCOME. THE QUANTUM OF SUCH DEDUCTION IN ANY CASE CANNOT EXCEED THE ESC APED INCOME. THIS IS AN ADMITTED FACT THAT PROVISION OF SECTION 35AB WAS NOT APPLICA BLE IN THE CASE OF THE ASSESSEE DURING THE ASSESSMENT YEAR 2002-2003 ONWARDS BUT TH E ASSESSEE WAS ALLOWED DEDUCTION OF 1/6 TH ON THE LUMP-SUM CONSIDERATION OF THE TECHNICAL KNO W-HOW. SECTION 32(1)(II) WAS BROUGHT INTO THE STATUTE FOR ALLOWING THE DEPRECIATION ON INTANGIBLE ASSET ACQUIRED ON AFTER THE 1 ST DAY OF APRIL, 1998 BY THE FINANCE ACT 1998. IN VIE W OF THIS PROVISION, THE ASSESSEE HAS BECOME ENTITLED TO CLAIM DEPRECIATION ON THE 11 TECHNICAL KNOW-HOW BEING THE INTANGIBLE ASSET. NOW THE QUESTION BEFORE US IS WHETHER THE DEPRECIATION IS AN ALLOWANCE WHICH IS D IRECTLY RELATED WITH THE ESCAPED INCOME OR NOT. THE ESCAPED INCOME FOR WHICH THE ASS ESSMENT HAS BEEN REOPENED BY THE ASSESSING OFFICER IS THE ALLOWANCE OF THE TECHN ICAL KNOW-HOW UNDER SECTION 35AB. THE DEPRECIATION HAS BEEN CLAIMED BY THE ASSE SSEE RELATES TO THE TECHNICAL KNOW-HOW. IN OUR OPINION, BOTH THE ESCAPED INCOME A S WELL AS ALLOWING OF THE DEPRECIATION ARE RELATED TO EACH OTHER AND BY NO ST RETCH OF IMAGINATION IT CANNOT BE SAID THAT DEPRECIATION IS NOT RELATED TO THE ESCAPE D INCOME IN THE CASE OF THE ASSESSEE. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T, IN OUR OPINION, THE CIT(A) HAS RIGHTLY ALLOWED THE DEPRECIATION TO THE ASSESSE E TO THE EXTENT ESCAPED INCOME BECOMES ZERO OR REDUCES IT TO THE ORIGINALLY ASSESS ED INCOME. 6.2 WE HAVE ALSO GONE THROUGH THE DECISION OF THE K ARNATAKA HIGH COURT IN THE CASE OF SANGEETA GRANITES LTD. ( SUPRA ) ON WHICH THE LD. D.R. HAS HEAVILY RELIED. THIS DECISION, IN OUR OPINION, IS NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. IN THIS CASE, THE ISSUE BEFORE THE ASSESSING OFFICER F OR THE ESCAPED INCOME WAS ONLY IN RESPECT OF NON-RECEIPT OF THE FOREIGN EXCHANGE WITH IN THE STIPULATED TIME DUE TO WHICH HE REDUCES THE DEDUCTION AVAILABLE TO THE ASS ESSEE UNDER SECTION 80HHC. DURING THE COURSE OF THE REASSESSMENT PROCEEDINGS, THE ASSESSEE MADE A CLAIM UNDER SECTION 10B. TO THIS CLAIM, THE HONBLE HIGH COURT HAS HELD THAT THIS CLAIM IS ENTIRELY A NEW CLAIM. THIS FACT IS EXTENSIVELY CLEA R FROM PARA 8 OF THE ORDER OF THE HONBLE KARNATAKA HIGH COURT, WHICH IS REPRODUCED A S UNDER: 8. IN UNEQUIVOCAL TERMS THEIR LORDSHIPS HAVE HELD T HAT IN THE REASSESSMENT PROCEEDINGS THE ASSESSEE CANNOT BE PER MITTED TO CONVERT THE SAME AS HIS APPEAL OR REVISION IN DISGUISE AND SEEK RELIEF IN RESPECT OF ITEMS EARLIER REJECTED BE ACCEPTED. IN THE INSTA NT CASE, WE FIND THAT REASSESSMENT PROCEEDINGS WERE INITIATED IN RESPECT OF ESCAPED ASSESSMENT, I.E., THE CLAIM MADE TOWARDS SALE PROCE EDS CONVERTIBLE FOREIGN EXCHANGE WHICH HAD NOT BEEN RECEIVED. NOW, THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE DEDUCTION CLAIMED UNDE R SECTION 8OHHC WAS EXEMPTED UNDER SECTION LOB. EVEN IF IT WERE BE SO, WE ARE NOT INCLINED TO ACCEPT SUCH SUBMISSION IN VIEW OF THE J UDGMENT OF CIT V. SUN 12 ENGIEERING WORKS (P.) LTD. [19921 198 ITR 297 AS EN UMERATED IN PARAGRAPH 27 HEREINABOVE. 6.3 IN VIEW OF THE AFORESAID DISCUSSION, WE CONFIRM THE FINDING OF THE CIT(A) ALLOWING THE DEPRECIATION TO THE ASSESSEE AGAINST T HE DISALLOWANCE OF THE TECHNICAL KNOW-HOW TO THE EXTENT ESCAPED INCOME IS FOUND BY T HE ASSESSING OFFICER. THUS, THE GROUND TAKEN BY THE REVENUE IN THEIR APPEALS ON THI S ISSUE STAND DISMISSED. 7. NOW COMING TO THE QUESTION IN ASSESSEES APPEAL WHAT SHOULD BE THE WRITTEN DOWN VALUE FOR THE PURPOSE OF CLAIMING THE DEPRECIA TION IN THE ASSESSMENT YEARS 2003-04 AND 2004-05. THE ACTUAL DEPRECIATION ALLOWA BLE TO THE ASSESSEE IN THE ASSESSMENT YEAR 2002-03 WAS RS.27,588,090/- AND IN ASSESSMENT YEAR 2003-04 WAS RS.2,06,91,068/- BUT DUE TO DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SUN ENGINEERING ( SUPRA ), DEPRECIATION ACTUALLY ALLOWED BY THE CIT(A) AS C ONFIRMED BY US IS ONLY RS.1,83,92,060/- IN BOTH THESE ASSESS MENT YEARS. WHILE CALCULATING THE ELIGIBLE DEPRECIATION @25% IN THE ASSESSMENT YEAR 2 002-03, THERE IS NO DISPUTE AS IT HAS BEEN COMPUTED ON THE ORIGINAL COST. THIS DISPUT E ARISES ONLY IN THE ASSESSMENT YEARS 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-0 8. THE CIT(A) DIRECTED THE ASSESSING OFFICER OR WORKING OUT THE WRITTEN DOWN V ALUE IN EACH OF THE ASSESSMENT YEAR. THE DEPRECIATION WHICH WAS ALLOWABLE @25% HAS TO BE REDUCED, WHILE THE ASSESSEE CLAIMED THAT THIS SECTION 43(6)(C) USED TH E WORD DEPRECIATION ACTUALLY ALLOWED. THIS ISSUE, IN OUR OPINION, IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT-VS- DO OM DOOMA 310 ITR 392 WHERE THE HONBLE SUPREME COURT HAS INTERPRETED THE WORDS ACTUALLY ALLOWED TO MEET AS LIMITED TO DEPRECIATION ACTUALLY TAKEN INTO ACCOU NT OR GRANTED OR GIVEN EFFECT TO. IT IS NOT DISPUTED THAT THE ACTUAL DEPRECIATION ALLOWE D BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2002-03, 2003-04 AND 2004-05 IS LES S, AS COMPARED TO THE DEPRECIATION AS WAS ALLOWABLE AND DUE TO THIS CONSE QUENCE, THE WRITTEN DOWN VALUE HAS BEEN CHANGED. IN VIEW OF THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF DOOM DOOMA INDIA LTD. ( SUPRA ), WE DIRECT THE ASSESSING OFFICER TO WORK OUT THE WRITTEN DOWN VALUE FOR THE PURPOSE OF COMPUTATION O F THE DEPRECIATION AFTER REDUCING 13 THE DEPRECIATION WHICH HAS ACTUALLY BEEN ALLOWED TO THE ASSESSEE. IN THE RESULT, ALL THE COMMON GROUNDS TAKEN BY THE ASSESSEE FOR THE ASSESS MENT YEAR 2002-03 AND GROUND NOS. 1 AND 2 FOR THE ASSESSMENT YEARS 2004-05, 2005 -06, 2006-07 AND 2007-08 ARE ALLOWED. SINCE, THERE IS NO OTHER GROUND IN THE APP EALS FILED BY THE ASSESSEE AS WELL AS IN THE APPEALS FILED BY THE REVENUE IN THE ASSESSME NT YEARS 2002-03, 2003-04 AND 2004-05 EXCEPT THE ONE DECIDED BY US IN THE PRECEDI NG PARAGRAPHS, THE APPEALS FILED BY THE ASSESSEE IS ALLOWED, WHILE THE APPEALS FILED BY THE REVENUE STAND DISMISSED. 7A. IN THE ASSESSMENT YEAR 2005-06 OF THE ASSESSEE S APPEAL, THE ONLY GROUND REMAINS FOR OUR ADJUDICATION IS THE DISALLOWANCE OF CLUB EXPENDITURE TO THE EXTENT OF RS.78,640/-. THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAS DEBITED A SUM OF RS.3,14,551/- IN RESPECT OF PAYMENT MADE TO THE CLU B. HE DISALLOWED 25% OF SUCH EXPENDITURE ON THE GROUND THAT ELEMENT OF PERSONAL USE OF SUCH FACILITY BY SR. OFFICERS OF THE COMPANY COULD NOT BE RULED OUT WHIC H WAS CONFIRMED BY THE CIT(A). 8. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CON SIDERED THE SAME. WE NOTED THAT IN THE EARLIER YEARS AND SUBSEQUENT YEAR, NO S UCH DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER. EVEN DISALLOWANCE HAD BEEN MADE MERELY ON ADHOC BASIS. THESE EXPENSES, IN OUR OPINION, CANNOT BE REGARDED TO BE THE PERSONAL EXPENSES OF THE COMPANY AS THE COMPANY IS NOT A HUMAN BEING. AT THE MOST, THE ASSESSING OFFICER CAN TAKE THESE EXPENSES AS PERQUISITE. IF THE EXPEN SES PERSONALLY RELATED TO THE OFFICERS OF THE COMPANY, OUR AFORESAID VIEW IS DULY SUPPORTED BY THE DECISION OF THE HONBLE HIGH COURT IN 239 ITR 237 AND MADRAS HIGH C OURT 240 ITR 335(MAD.). THUS, THIS GROUND STANDS ALLOWED. THIS DISPOSES OFF ALL THE APPEALS TAKEN BY THE ASSESSEE. 8.1 NOW COMING TO THE APPEAL OF THE REVENUE, THE GR OUND NOS. 1 AND 2 IN ASSESSMENTS YEARS 2005-06, 2006-07 AND 2007-08 SINC E INVOLVED TO THE COMMON ISSUES BEING DISPOSED OF COMMONLY ON THE BASIS OF F ACTS RELATING TO THE ASSESSMENT YEAR 2005-06 AS HAS BEEN AGREED BY BOTH THE PARTIES . THIS GROUND IS RELATING TO THE DISALLOWANCE BEING MADE UNDER SECTION 48(2), DELETE D BY THE CIT(A). THE ASSESSING OFFICER NOTED THAT THE ASSESSEE MADE THE PAYMENT TO ITS M/S. TATA MOTORS INDIA LTD. 14 UNDER VARIOUS HEADS AS STATED IN THE ASSESSMENT ORD ER. THE ASSESSEE EXPLAINS THAT THE PAYMENT FOR MEDICAL EXPENDITURE WAS ALMOST LEADING ON TOTAL EXPENDITURE ON THE BASIS OF NUMBER OF EMPLOYEES AND IT ORALLY STATED B EFORE THE ASSESSING OFFICER THAT THE COMPANY HAD PAID OTHER EXPENSES TOWARDS POWER S UPPLY, WATER SUPPLY AT THE MARKET RATE. THE ASSESSING OFFICER WAS NOT SATISFIE D AND THEREFORE, HE DISALLOWED 25% OF THE TOTAL PAYMENT AMOUNTING TO RS.1,30,27,86 0/-. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) NOTED THAT UNDER SIMI LAR CIRCUMSTANCES, THE ASSESSING OFFICER HAD DISALLOWED 20% OF THE PAYMENT MADE TO T ML. ON THESE THREE ITEMS IN THE ASSESSMENT YEARS 2003-04 AND 2004-05, WHICH WER E DELETED BY THE CIT(A) IN THE ASSESSMENT YEAR 2003-04. THE REVENUE HAS NOT FILED ANY APPEAL BEFORE THE TRIBUNAL BUT FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05, T HE APPEAL WAS FILED BEFORE THE TRIBUNAL AND THE TRIBUNAL IN ITA NO.341/PAT/2007, U PHELD THE ORDER OF THE CIT(A) ALLOWING THE RELIEF. THE LD. A.R. RELIED ON THE ORD ER OF THIS BENCH IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 WHILE THE LD. D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER. SINCE THE ISSUE IS DULY COVERED BY THE ORDER OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE IN THE PRECEDING YEAR AND THER E BEING NO DIFFERENT FACTS BROUGHT ON RECORD BY THE REVENUE, WE DISMISS THIS GROUND TA KEN BY THE REVENUE IN EACH OF THE ASSESSMENT YEAR. ACCORDINGLY, GROUND NOS.1 AND 2 FOR THE ASSESSMENT YEARS 2005- 06, 2006-07 AND 2007-08 STAND DISMISSED. 9. GROUND NO.3 IN THE ASSESSMENT YEAR 2005-06 RELAT ES TO THE DELETION OF THE PAYMENT MADE FOR THE CONSTRUCTION OF THE RAILWAY BR IDGE. THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE. BRIEF FACTS ARE TH AT THE ASSESSEE HAD PAID A SUM OF RS.15 LAKHS FOR THE CONSTRUCTION OF RAILWAY OVER-BR IDGE AS ITS CONTRIBUTION TOWARDS THE CHARGES OF CORPORATE SOCIAL RESPONSIBILITY FOR THE BENEFIT OF THE COMMUNITY DEVELOPMENT. WHEN THE MATTER WENT BEFORE THE CIT(A) , THE ASSESSEE SUBMITTED THAT BRIDGE WAS TO BE CONSTRUCTED AS OLD BRIDGE TO BE RE PLACED TO FACILITATE BOTH SIDES OF RAILWAY TRACKS AT JAMSHEDPUR ON WHICH VARIOUS COMPA NIES OF TATA AND ITS SUPPLIERS HAVE SET UP THEIR FACTORIES. THE ASSESSEE ACCORDING LY CONTRIBUTED A SUM OF RS.15 LAKHS. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE DISALLOWANCE 15 FOLLOWING THE DECISION OF THIS TRIBUNAL CIRCUIT BEN CH, RANCHI IN THE CASE OF M/S. TATA YODOGAWA IN ITA NO.260/PAT/2002, THE RELEVANT PARAG RAPH HAS BEEN REPRODUCED IN THE ORDER OF THE CIT(A) AT PAGE 6 AND 7. 10. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CO NSIDERED THE SAME. IN OUR OPINION, THE ISSUE IS COVERED BY THE DECISION OF TH E RANCHI CIRCUIT BENCH, RANCHI AS HAS BEEN POINTED OUT BY THE LD. A.R. AND CITED HERE INABOVE. EVEN OTHERWISE, THE ISSUE IS COVERED. WE ACCORDINGLY DISMISS THE GROUND TAKEN BY THE REVENUE. 11. THE GROUND NO.3 TAKEN BY THE REVENUE IN ASSESSM ENT YEAR 2006-07 RELATES TO THE ALLOWANCE OF DEPRECIATION ON TECHNICAL KNOW-HOW . THIS GROUND HAS ALREADY BEEN DISPOSED OF BY US, WHILE DISPOSING OF THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04. WE ACCORDINGLY DISMISS T HIS GROUND. 12. GROUND NO.4 RELATES TO THE DEPRECIATION ON TECH NICAL KNOWHOW FEES FIRST INSTALMENT PAYABLE TO CUMMINS ENGINE COMPANY, WHEN THE AGREEMENT WAS DONE IN 2007-08. THE FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED DEPRECIATION @25% OF FEES FOR TECHNICAL KNOW-HOW AMOUNTING TO RS.157,57,000/- @25% AS WELL AS IN RESPECT OF SA LE CONSIDERATION AMOUNTING TO RS.12,00,53,000/- FOR TECHNICAL KNOWHOW TRANSPORT B Y CUMMINS INC., USA. THE ASSESSING OFFICER NOTED FROM THE AGREEMENT ENTERED INTO BY THE ASSESSEE THAT CUMMINS INC. USA FOR PROVIDING THE TECHNICAL KNOW-H OW FOR MANUFACTURING BS-III CARS AND THE AGREEMENT WAS SIGNED ON 7 TH DECEMBER, 2006., WHILE THE ASSESSEE CLAIMED FIRST INSTALMENT AGREED IN MARCH, 2006. THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAD MANUFACTURED 10 B.S. ENGINE IN THE FIN ANCIAL YEAR 2005-06 USING THE SAID TECHNOLOGY AND ACCORDINGLY DEPRECIATION UNDER SECTION 32 WAS CLAIMED ON THE FIRST INSTALMENT OF TECHNICAL KNOW-HOW FEES PAID FO R THAT YEAR. HE ALSO SUBMITTED THAT TDS LIABILITY WAS ALSO DISCHARGED. THE ASSESSING OF FICER DID NOT AGREE WITH THE ASSESSEE. HE WAS OF THE VIEW THAT IT WAS MERELY A T RIAL RUN AND ALSO NOTED THAT EVEN TDS AND REMITTANCES WERE MADE IN MAY, 2007. THE ASS ESSING OFFICER, THEREFORE, 16 DISALLOWED THE DEPRECIATION AS CLAIMED @12.5% AMOUN TING TO RS.157,57,000/-. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE LIABILITY FOR FIRST INSTALMENT HAS ARISEN ON 24.03.2006 BUT THE ASSESSEE BY USING THE TECHNOLOGY, MANUFACTURED 285 BS-III DURING THE YEAR ON WHICH THE ROYALTY @2500/ - PER ENGINE WAS PROVIDED. THE SALE PROCEEDS WERE SHOWN AS AN INCOME. THE ADDITION AL EVIDENCES WERE FILED BEFORE THE CIT(A). IN THIS REGARD, THE REMAND REPORT WAS C ALLED FOR. THE ASSESSING OFFICER STATED THAT THE ASSESSEE HAD MADE ONLY 10 ENGINES A ND NOT 285 AND THE TECHNICAL KNOW-HOW WAS ACTUALLY TRANSFERRED ON 07.12.2006. TH E AGREEMENT ENTERED INTO WAS NOT RETROSPECTIVE AND FOR THIS PARA 2.1 OF THE AGRE EMENT WAS BROUGHT TO THE KNOWLEDGE OF THE CIT(A) WHICH READS AS UNDER: THE TERMS OF THIS LICENSE SHALL COMMENCE ON THE DAT E HEREOF AND THE DATE SHALL AUTOMATICALLY EXPIRE ON DECEMBER 31,2012 . THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS LIC ENSE WAS ACTUALLY GRANTED ON 07.12.2006 I.E. IN THE ASSESSMENT YEAR 2007-08 AND THEREFORE, NO DEPRECIATION COULD BE ALLOWED IN THE ASSESSMENT YEAR 2006-07. THE ASSE SSEE EVEN THOUGH CLAIMED THAT THE AGREEMENT WAS IN CONTINUATION OF AGREEMENT OF 1 994 BUT THE ASSESSING OFFICER SUBMITTED THAT THERE WAS NO NEED OF MAKING A FRESH AGREEMENT. THE ASSESSING OFFICER SUBMITTED HIS REMAND REPORT BEFORE THE CIT( A), WHICH IS REPRODUCED AT PAGE 12 AND 13 OF THE CIT(A)S ORDER UNDER PARA 14.5. TH E CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ALLOWED THE GROUND TAK EN BY THE ASSESSEE BY ALLOWING THE DEPRECIATION TO THE ASSESSEE AS PER THE FINDING GIVEN UNDER PARA 14.9 OF ITS ORDER. THE LD. D.R. DREW OUR ATTENTION TOWARDS THE REMAND REPORT AS WELL AS CLAUSE 2.1 OF THE AGREEMENT AND RELIED ON THE ORDER OF THE ASSESS ING OFFICER, WHILE THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). 13. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CO NSIDERED THE SAME. WE HAD ASKED LD. A.R WHETHER THERE IS MEMORANDUM OF UNDERS TANDING, ETC. HAS BEEN ENTERED INTO BY THE ASSESSEE WITH M/S.CUMMINS COMPANY, PRIO R TO THE EXECUTION OF THE AGREEMENT. THE AGREEMENT WAS IN FACT EXECUTED ON 7 TH DECEMBER, 2006 AND THE 17 AGREEMENT WAS NOT RETROSPECTIVE. EVEN PARA 2.1 OF T HE AGREEMENT CLEARLY STATES THAT THIS LICENSE HAS COMMENCED ON THE DATE THEREOF AND SHALL AUTOMATICALLY EXPIRE THEREOF ON 31.12.2012. THE AGREEMENT WAS SIGNED ON 07.12.20 06. THEREFORE, THE AGREEMENT IN FACT WAS APPLICABLE WITH EFFECT FROM 7 TH DECEMBER, 2006 AND IN OUR OPINION, THE LICENSE WAS GRANTED TO THE ASSESSEE FROM 7 TH DECEMBER, 2006 I.E. IN THE ASSESSMENT YEAR 2007-08. IT IS NOT DENIED THAT THE ASSESSEE BE ING A PUBLIC LIMITED COMPANY IS BEING ASSISTED BY A NUMBER OF LEGAL EXPERTS. IF TH E LICENSE WAS GRANTED TO THE ASSESSEE PRIOR TO 06.12.2006, ONE CAN NOT BELIEVE THAT WHAT THE ASSESSEE IS BEING ASSISTED BY THE LEGAL EXPERTS, THE ASSESSEE COULD H AVE NOT PROVIDED THIS IN THE AGREEMENT ENTERED INTO. THERE IS A CLEAR-CUT FINDIN G GIVEN BY THE ASSESSING OFFICER THAT THE ASSESSEE IN FACT HAS MANUFACTURED ONLY 10 ENGINES, WHICH, IN OUR OPINION, CAN REPRESENT THE TEST RUN. IT IS AN ESTABLISHED BU SINESS PRACTICE WHENEVER A NEW AGREEMENT IS ENTERED INTO IN RESPECT OF A NEW TECHN OLOGY, THE PARTY, WHO IS TAKING OVER THE TECHNICAL KNOW-HOW WOULD LIKE TO CARRY OUT THE TEST RUN, WHETHER THE TECHNICAL KNOW-HOW SO TAKEN IS ACCORDING TO STANDAR DS AND BUSINESS NEEDS. WE DO NOT AGREE WITH THE LD. A.R. THAT THE DECISION OF TH E MYSORE INDIA LTD. VS- CIT AS REPORTED IN 239 ITR 775 (SC) AND THAT OF CIT-VS- PO DDAR CEMENT PVT. LTD. 226 ITR 625 ARE APPLICABLE IN THE CASE OF THE ASSESSEE. WHE N THE AGREEMENT FOR TAKING THE TECHNICAL KNOW-HOW WAS MADE EFFECTIVE FROM 07.12.20 06, NO QUESTION OF TRANSFERRING OF THAT TECHNICAL KNOW-HOW PRIOR TO TH AT DATE ARISES. IT IS NOT A CASE OF TRANSFER OF ANY IMMOVABLE PROPERTY WHERE THERE ARE CERTAIN FORMALITIES SUCH AS REGISTRATION, ETC. REQUIRED TO BE CARRIED OUT. IN F ACT, FROM THE AGREEMENT, IT IS APPARENT THAT M/S. CUMMINS ENGINE COMPANY INC. USA HAS TRANS FERRED TECHNICAL KNOW-HOW TO THE ASSESSEE ON 07.12.2006. THEREFORE, NO QUESTI ON OF POSSESSION OF THE CAPITAL ASSETS AND TAKING OF THE RIGHT TO USE AT HIS OWN RI GHT BY THE ASSESSEE IN RESPECT OF THIS TECHNICAL KNOW-HOW ARISES PRIOR TO THAT DATE. IN VI EW OF THIS FACT, IN OUR OPINION, THE CIT(A) WAS NOT CORRECT IN LAW IN ALLOWING THE DEPRE CIATION TO THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND 18 RESTORE THE ORDER OF THE ASSESSING OFFICER. THIS GR OUND NO.4 TAKEN BY THE REVENUE STANDS ALLOWED. 14. GROUND NO.5 RELATES TO THE DELETION OF DISALLOW ANCE OF TESTING EXPENSES AS WELL AS PROVISION FOR PERFORMANCE AWARD. THE ASSESSING O FFICER DISALLOWED THE TESTING EXPENSES AS WELL AS THE PERFORMANCE AWARD. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE SAME BY OBSERVING AS UNDER IN PARA 15.10 AND 16.3: 15.10. I HAVE CONSIDERED THE ARGUMENTS OF THE AR AND HAVE PERUSED THE REASONING OF THE AO. I HAVE ALSO CONSIDERED THE REM AND REPORT AND COUNTER COMMENTS OF THE APPELLANT. THE AO DISALLOWED THE EX PENDITURE OF RS.2,19,00,290/- AND RS.88,03,743/- TOTALLING TO RS .3,07,04,033/- ON THE GROUND THAT THE SAME RELATES TO EXPENDITURE ON PROD UCTION OF BS III ENGINE AND AS DISCUSSED BY HIM IN PARA 3 OF THE ASSESSMENT ORD ER THAT THE TRANSFER OF TECHNICAL KNOWHOW FOR PRODUCTION OF BS III ENGINE H AD NOT TAKEN PLACE WITHIN THE FINANCIAL YEAR UNDER CONSIDERATION AND, THEREFO RE, EXPENDITURE ON TESTING OF THESE ENGINES WAS NOT A REVENUE EXPENDITURE. THE SAME FACTS WERE REITERATED BY THE AO M HIS REMAND REPORT DATED 07/0 2/20 12 IN PARA NO 14 10 OF THIS ORDER IT HAS BEEN HELD T THE TRANSFER OF TECHNICAL KNOWHOW OR PRODUCTION OF 13S III ENGINE HAD TAKEN PLACE DURING THE YEAR UNDER CONSIDERATION AND, THEREFORE, THE REASON FOR THE DI SALLOWANCE BY THE AO DOES NOT SURVIVE. THE CONTENTION OF THE APPELLANT THAT T HE EXPENDITURE ON INSPECTION AND TESTING INCURRED BY THE APPELLANT WAS TO IMPROV E THE ALREADY EXISTING PRODUCT LINE OF ITS EXISTING BUSINESS AND, THEREFOR E, THE EXPENDITURE WAS REVENUE EXPENDITURE IS ACCEPTABLE. THIS VIEW IS SUP PORTED BY THE CASE LAWS RELIED BY THE APPELLANT. THEREFORE, THE EXPENDITURE OF RS.3,07,04,033/- IS TREATED AS REVENUE EXPENDITURE AND AO IS DIRECTED T O DELETE THE SAME. GROUND NO. 10 AND 11 OF THE APPEAL IS ALLOWED 16.3.1 HAVE CONSIDERED THE ARGUMENTS OF THE AR AND HAVE PERUSED THE ASSESSMENT ORDER. THE AO DISALLOWED THE AMOUNT OF R S.4,58,407/- ON THE GROUND THAT THE SAME WAS PAID AFTER 31/03/2006 AND, THEREFORE, IT WAS A CONTINGENT LIABILITY. MERELY BECAUSE THE PAYMENT HA BEEN MADE AFTER THE END OF THE FINANCIAL YEAR WILL NOT MAKE A LIABILITY CONTIN GENT IN NATURE. THE APPELLANT SUBMITTED THAT THE LIABILITY WAS DETERMINED ON THE REASONABLE ESTIMATE OF THE EXPECTED PERFORMANCE OF THE MANAGER AND IN THIS CAS E, THE UNPAID LIABILITY OF RS.4,58,407/- WAS PAID IN MAY, JUNE AND SEPTEMBER 2 006. THEREFORE, THE UNPAID LIABILITY OF RS.4.58.407/- CANNOT BE TREATED AS CONTINGENT LIABILITY AND, THEREFORE, THE DISALLOWANCE OF RS.4,58,407/- MADE B Y THE AO IS NOT SUSTAINABLE AND SAME IS DELETED. GROUND NOS. 12 AND 13 OF THE A PPEAL ARE ALLOWED. 19 15. AFTER HEARING THE RIVAL SUBMISSIONS, IN OUR OPI NION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). THE CIT(A) HAS RIGH TLY DELETED THE DISALLOWANCE. NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOW LEDGE BY THE LD. D.R. WHICH MAY COMPEL US TO TAKE DIFFERENT VIEW FROM THAT HAS BEEN TAKEN BY THE CIT(A). AS A RESULT, THE APPEAL FILED BY THE REVENUE FOR THE ASS ESSMENT YEAR 2006-07 IS PARTLY ALLOWED. 16. THE 3 RD GROUND IN THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007-08 RELATES TO THE DELETION OF ADDITION UNDER H EAD REPAIRS AND MAINTENANCE OF PLANT & MACHINERY AND BUILDING. THE ASSESSING OFFI CER NOTED THAT THE ASSESSEE HAS INCURRED EXPENDITURE IN RESPECT OF REPAIR AND MAINT ENANCE. THE ASSESSING OFFICER DISALLOWED 20% OF ABOVE EXPENSES RS.7431617/- . WHE N THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) CALLED FOR THE REMAND REPORT OF THE ASSESSING OFFICER. THE ASSESSING OFFICER FROM THE DETAILS OF REPAIR AND MA INTENANCE FILED BY THE ASSESSEE, TOOK THE VIEW IN RESPECT OF A SUM OF RS.108,45,424/ - TO BE THE CAPITAL EXPENDITURE AND THE ASSESSING OFFICER HAS ONLY DISALLOWED RS.74 ,31,617/-. TO COUNTER THE REMAND REPORT, THE ASSESSEE SUBMITTED THAT THE SUM OF RS.108,45,424/- IS DIVIDED INTO FOLLOWING SUB-HEADS: ANNUAL MAINTENANCE /RATE CONTRACT RS.19,73,062/- REPLACEMENT OF PLANT & MACHINERY RS.47,71,415/- SOFTWARE SUPPORT/UPGRADED LICENSE CHARGES RS.33,3 0,247/- OTHER EXPENSES RS. 7,70,700/- 16.1 THE ASSESSEE SUBMITTED THE BREAK-UP OF THE EXP ENSES AND RELIED ON THE VARIOUS CASE LAWS AS NOTED BY THE CIT(A) UNDER PARA 20.8. T HE CIT(A) DELETED THE DISALLOWANCE, AS PER THE OBSERVATIONS GIVEN UNDER P ARA 20.9 AND 20.10 OF HIS ORDER. 17. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERING THE SAME, IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). WE ACCORDINGLY 20 CONFIRM THE ORDER OF THE CIT(A) ON THIS GROUND. AS A RESULT, THIS GROUND OF THE REVENUE STANDS DISMISSED. 18. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED WHEREAS ALL THE APPEALS FILED BY THE REVENUE EXCEPT THE APPEAL OF T HE REVENUE IN ITA NO.99/RAN/2012 FOR THE ASSESSMENT YEAR 2006-07 ARE DISMISSED. THE APPEAL IN ITA NO.99/RAN/2012 FOR THE ASSESSMENT YEAR 2006-07 FILE D BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 10 MAY, 2013. SD/- SD/- [D.T.GARASIA] [P.K.BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10 MAY, 2013 COPY OF ORDER FORWARDED TO : 1. TATA CUMMINS LIMITED, JAMSHEDPUR 2. ACIT, CIRCLE-3, JAMSHEDPUR 3. C.I.T.(A), 4. THE .C.I.T., 5. THE D.R., I.T.A.T., TRUE COPY, BY ORDER, [MST, SR.PS] SR. PRIVATE SECRETARY (ON T OUR) ITAT, RANCHI 21