Climate Systems India Ltd., New Delhi V. ACIT, New Delhi

ITA 2161/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2161 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 21-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Keywords: Depreciation; Opportunity of being heard; Royalty expenses; Revenue expenditure; Capital expenditure; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI C.L.SETHI AND SHRI K.D.RANJAN ITA NO. 1698/DEL/2009 ASSESSMENT YEAR : 2003-04 CLIMATE SYSTEMS INDIA LTD. PLOT NO.1, NELSON MANDELA ROAD, VASANT KUNJ, NEW DELHI110070 PAN AAACC1074D VS. ACIT, CIR.-3(1), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO. 1684/DEL/2009 ASSESSMENT YEAR : 2004-05 ACIT, CIR.-3(1), NEW DELHI. VS. CLIMATE SYSTEMS INDIA LTD. PLOT NO.1, NELSON MANDELA ROAD, VASANT KUNJ, NEW DELHI110070 PAN AAACC1074D (APPELLANT) (RESPONDENT) ITA NO. 2161/DEL/2009 ASSESSMENT YEAR : 2004-05 CLIMATE SYSTEMS INDIA LTD. PLOT NO.1, NELSON MANDELA ROAD, VASANT KUNJ, NEW DELHI110070 PAN AAACC1074D VS. ACIT, CIR.-3(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KANCHAN KAUSHAL, C.A. DEPARTMENT BY : SHRI MANISH GUPTA , D.R. 2 ORDER PER RANJAN, AM: THE APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 2003 -04 AND CROSS APPEALS BY THE REVENUE AND THE ASSESSEE FOR ASSESSM ENT YEAR 2004-05 ARISE OUT OF SEPARATE ORDERS OF LD. CIT(A)-VI, NEW DELHI. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE FIRST ISSUE FOR CONSIDERATION WHICH IS COMMO N IN ASSESSEES APPEALS IN BOTH THE YEARS RELATES TO UPHOLDING THE DISALLOWANCE OF ROYALTY EXPENSES BY TREATING THE SAME AS CAPITAL EXPENDITUR E. FACTS OF THE CASE, STATED IN BRIEF, ARE THAT THE ASSESSEE IN ASSESSMEN T YEAR 2003-04 DEBITED RS.15,68,666/- AS ROYALTY IN PROFIT AND LOSS ACCOUN T. IN ASSESSMENT YEAR 2004-05, THE NET AMOUNT DEBITED ON ACCOUNT OF ROYAL TY IS AT RS.20,73,720/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ROYA LTY PAID WAS TOWARDS ACQUIRING TECHNOLOGY WHICH WAS IN THE NATURE OF TEC HNICAL KNOW-HOW FEE. HE, THEREFORE, TREATED THE EXPENDITURE OF RS.15,68, 666/- IN ASSESSMENT YEAR 2003-04 AND RS.20,73,720/- IN Y 2004-05. HOWEVER, H E ALLOWED DEPRECIATION @25% IN BOTH THE YEARS. 3. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWANC E ON THE GROUND THAT I.T.A.T. IN ASSESSMENT YEAR 2002-03 HAD UPHELD THE STAND TAKEN BY THE ASSESSING OFFICER. 4. AT THE OUTSET, IT HAS BEEN BROUGHT TO THE NOTICE OF THE BENCH THAT AGAINST THE ORDER OF I.T.A.T. ASSESSEE PREFERRED AP PEAL BEFORE THE HONBLE DELHI HIGH COURT. THE HONBLE DELHI HIGH COURT ON A PPRECIATION OF FACTS HAS HELD THAT THE EXPENDITURE INCURRED WAS IN THE N ATURE OF ROYALTY AND, 3 THEREFORE, THE ISSUE IS NOW COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT. ON THE OT HER HAND, LD. SR.D.R. SUPPORTED THE ORDER OF LD. CIT(A). HE SUBMITTED THA T IT WAS TO BE SEEN WHETHER THE HONBLE DELHI HIGH COURT HAS APPRECIATE D THE FACTS NOTED AND RELIED UPON BY THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES. WE HAVE GONE THR OUGH THE DECISION OF HONBLE DELHI HIGH COURT IN ITA NO.464 OF 2009 DATE D 9/10/2009. THE HONBLE DELHI HIGH COURT WHILE DECIDING THE ISSUE I N FAVOUR OF THE ASSESSEE HAS HELD AS UNDER: 6. WE HAVE GIVEN OUR DUE CONSIDERATION TO THE AFOR ESAID SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR BOTH TH E PARTIES. SINCE THE ANSWER TO THE QUESTION FORMULATED ABOVE DEPENDS ON THE CONSTRUCTION OF TECHNICAL COLLABORATION AGREEMENT D ATED 25.05.1999 ENTERED INTO BETWEEN THE ASSESSEE AND THE FOREIGN C OLLABORATORS, VIZ., FORD MOTORS COMPANY, WE HAVE SCANNED THE SAID AGREE MENT AS WELL, MINUTELY. AS PER ARTICLE 2 OF THE AGREEMENT, THE LI CENSOR HAS GRANTED TO THE ASSESSEE NON-EXCLUSIVE RIGHTS AND LICENSES D URING THE TERM OF THE AGREEMENT IN THE CONTRACT TERRITORY TO MANUFACT URE, SALE RETAIL AND SERVICE LICENSE PRODUCTS, USING TECHNICAL INFORMATI ON FURNISHED BY THE LICENSOR AND UNDER IDUSTRIAL PROPERTY RIGHTS. ARTIC LE 3 PROVIDS THAT THE LICENSOR SHALL SUPPLY THE ASSESSEE WITH TECHNICAL I NFORMATION PROMPTLY TO ASSIST THE ASSESSEE TO INTRODUCE MANUFACTURE OF LICENSED PRODUCTS. DURING THE TERM OF THE AGREEMENT, THE LICENSOR ALSO AGREED TO SUPPLY TECHNICAL IMPROVEMENT AND INFUSION IN USE IN MASS P RODUCTION BY THE ASSESSEE RELATING TO THE LICENSED PRODUCTS WITHOUT ADDITIONAL CHARGE. ARTICLE 4 DEALS WITH PAYMENTS TO BE MADE BY THE ASS ESSEE AS A CONSIDERATION FOR THE AFORESAID TRANSFER OF TECHNOL OGY, ETC. IT IS IN TWO PARTS. CLAUSE 1(A) OF ARTICLE 4 STIPULATES MAKING P AYMENTS OF LUMP SUM FEE AND READS AS UNDER: A) FOR TRANSFER OF CAB TECHNOLOGY BY LICENSOR TO LICENSEEE, LICENSEE SHALL PAY THE LICENSOR A LUMP S UM OF USS ONE MILLION (1,000,000) IN THREE EQUAL INSTALMENTS. 4 CLAUSE 1(B) OF ARTICLE 4 DEALS WITH ROYALTY PAYMENT (WITH WHICH WE ARE CONCERNED) READS AS UNDER: B) IN CONSIDERATION OF THE OBLIGATIONS OF PROVIDING TECHNOLOGY SERVICES, LICENSE SHALL PAY A ROYALTY OF 3% ON DOME STIC AND 5% ON EXPORT SALES, SUBJECT TO TAX, CALCULATED ON T HE BASIS OF THE NET EX-FACTORY SALE PRICE AS STATED IN THE LICE NSEES INVOICE OF ALL LICENSED PRODUCT PRODUCED BY OR FOR LICENSEE, EXCLUSIVE OF EXCISE DUTIES MINUS THE COST OF STANDA RD BROUGHT OUT COMPONENTS AND THE LANDED COST OF IMPOR TED COMPONENTS, IRRESPECTIVE OF THE SOURCE OR PROCUREME NT INCLUDING OCEAN FREIGHT, INSURANCE, CUSTOM DUTIES E TC. ROYALTY SHALL BE PAID FOR A PERIOD OF SEVEN YEARS F ROM THE DATE OF THE COMMENCEMENT OF COMMERCIAL PRODUCTION. 7. THUS, FOR TRANSFER OF TECHNOLOGY, THE ASSESSEE A GREED TO PAY LUMP SUM AMOUNT OF US $ 1 BILLION. THIS PAYMENT IS ADMITTEDLY TREATED AS CAPITAL EXPENDITURE BY THE AS SESSEE AND HAS BEEN SHOWN AS SUCH. HOWEVER, INSOFAR AS PAYMENT OF ROYALTY IS CONCERNED WHICH IS AN ISSUE BEFORE US, T HAT DEPENDS ON THE DOMESTIC AS WELL AS EXPORT SALES. QU ANTUM OF THE SAID SALES WOULD DETERMINE THE EXTENT OF ROYALT Y TO BE PAID AND IT WILL DECREASE OR INCREASE EVERY YEAR DE PENDING UPON THE DECREASE OR INCREASE IN THE SALES. SIGNIFI CANTLY, THIS PAYMENT IS NOT BECAUSE OF TRANSFER OF TECHNOLOGY, BUT FOR PROVIDING TECHNICAL SERVICES. IN SUCH CIRCUMSTANC ES, WE ARE OF THE OPINION THAT THIS PAYMENT OF ROYALTY, WH ICH IS A CONTINUOUS PROCESS, SHOULD HAVE BEEN TREATED AS REV ENUE EXPENDITURE. IN A RECENT JUDGMENT GIVEN BY THIS COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHARDA MOTOR INDUSTRIAL LTD. IN ITA NO.837/20096 DECIDED ON 03.0 9.2009, IDENTICAL ISSUE AROSE. IN THE AFORESAID CASE ALSO, LUMP SUM PAYMENT WAS MADE FOR PROVIDING TECHNICAL KNOW-HOW, WHICH WAS CONSIDERED AS CAPITAL EXPENDITURE. IN ADD ITION, ROYALTY WAS ALSO PAID BY THE ASSESSEE AT A PARTICUL AR PERCENTAGE OF THE SALES. HOLDING THAT, THE SAID PAY MENT WOULD BE IN THE NATURE OF REVENUE EXPENDITURE. THIS COURT DEALT WITH THE ISSUE IN THE FOLLOWING MANNER: 3. INSOFAR AS LUMP SUM PAYMENT AGAINST TRANSFER OF TECHNICAL KNOW-HOW PROVIDED BY THE KOREAN COMPANY I S 5 CONCERNED, THE ASSESSEE HAD ADMITTEDLY SHOWN THESE EXPENSES AS CAPITAL EXPENDITURE. IT WAS THE ROYALTY PAID DURING THE YEAR IN QUESTION WHICH WAS TREATED AS RE VENUE EXPENDITURE BY THE ASSESSEE. THE CIT(A) FOUND THAT AS PER THE AGREEMENT, THIS ROYALTY WAS RUNNING ROYALTY PAYABLE EVERY YEAR, WHICH DEPENDED UPON THE NUMBER OF PIECES PRODUCED OF THE AFORESAID PRODUCTS, NAMELY, CATALYTIC CONVERTER AND EXHAUST MUFFLER. 4. WE ARE OF THE OPINION THAT THIS FINDING OF THE CIT(A), AS APPROVED BY THE ITAT, IS A FINDING OF FACT WHICH IS RIGHTLY ARRIVED AT AS EXPENDITURE IN PURELY A REVENUE EXPENDITURE, WHICH IS ANNUAL EXPENDITURE DEPENDING UPON THE QUANTUM OF PRODUCTION IN THE RELEVANT YEAR. 5. IN CIT V. J.K.SYNTHETICX LTD., 309 ITR 371, AFTER ELABORATELY DISCUSSING THE ENTIRE CASE LAW ON THE SUBJECT, THE COURT CULLED OUT THE BROAD PRINCIPLES TO DETERMINE AS TO WHETHER EXPENDITURE IN A PARTICULAR CASE WOULD BE CAPITAL OR REVENUE EXPENDITURE. ONE OF THE PRINCIPLE ENUMERATED THEREIN READS AS UNDER:- (V) EXPENDITURE INCURRED FOR GRANT OF LICENCE WHICH ACCORDS ACCESS TO TECHNICAL KNOWLEDGE, AS AGAINST, ABSOLUTE TRANSFER OF TECHNICAL KNOWLEDGE AND INFORMATION WOULD ORDINARILY BE TREATED AS REVENUE EXPENDITURE. IN ORDER TO SIFT, IN A MANNER OF SPEAKING, THE GRAIN FROM THE CHAFF, ONE WOULD HAVE TO CLOSELY LOOK AT THE ATTENDANT CIRCUMSTANCES, SUCH AS: A) THE TENURE OF LICENCE, 6 B) THE RIGHT, IF ANY, IN THE LICENSEE TO CREATE FURTHER RIGHTS IN FAVOUR OF THIRD PARTIES. C) THE PROHIBITIO, IF ANY, IN PARTING WITH A CONFIDENTIAL INFORMATION RECEIVED UNDER THE LICENCE TO THIRD PARTIES WITHOUT THE CONSENT OF THE LICENSOR, D) WHETHER THE LICENCE TRANSFER THE FRUITS OF RESEARCH OF THE LICENSOR, ONCE FOR ALL, E) WHETHER ON EXPIRY OF LICENCE THE LICENSEE IS REQUIRED TO RETURN BACK THE PLANS AND DESIGNS OBTAINED UNDER THE LICENCE TO THE LICENSOR EVEN THOUGH THE LICENSEE MAY CONTINUE TO MANUFACTURE THE PRODUCT, IN RESPECT OF WHICH ACCESS TO KNOWLEDGE WAS OBTAINED DURING THE SUBSISTENCE OF THE LICENCE. 8. IN THESE CIRCUMSTANCES, WE ANSWER THE QUESTION I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. AS A RESULT, ORDER OF THE AUTHORITIES BELOW IS SET ASIDE . NO COSTS. SINCE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF THE CASE FOR ASSESSMENT YEAR 2002-03, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH COURT. RESPECTFULLY, FOLLOWIN G THE DECISION OF HONBLE DELHI HIGH COURT, IT IS HELD THAT PAYMENTS MADE BY ASSESSEE ARE IN THE NATURE OF REVENUE EXPENDITURE. THE ASSESSING OF FICER IS DIRECTED TO ALLOW THE RELIEF TO THE ASSESSEE IN BOTH THE YEARS. 6. THE NEXT ISSUE FOR CONSIDERATION RELATES TO UPHO LDING THE ACTION OF ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF ISO CERTIFICATION CHARGES OF 7 RS.95,254/- IN ASSESSMENT YEAR 2003-04. FACTS OF TH E CASE, STATED IN BRIEF, ARE THAT THE ASSESSEE DEBITED AN AMOUNT OF RS.95,25 4/- ON ACCOUNT OF ISO 14001 CHARGES. THE ASSESSING OFFICER WAS OF THE VIE W THAT CERTIFICATE OF ISO 14001 WAS OF ENDURING BENEFIT AND, THEREFORE, HE DI SALLOWED THE AMOUNT AS CAPITAL EXPENDITURE. 7. BEFORE LD. CIT(A), IT WAS SUBMITTED THAT ISO CER TIFICATION CHARGES WERE INCURRED AS AN ENVIRONMENT MANAGEMENT SYSTEM ( EMS) STANDARD WHICH PROVIDES A HIGHLY EFFECTIVE GLOBALLY ACCEPTED FRAMEWORK FOR ESTABLISHING AN CONTINUALLY IMPROVING THE EFFECTIVE NESS OF ENVIRONMENTAL MANAGEMENT. IMPLEMENTATION OF ISO 14001 MAY BRING B OTH REDUCTION IN ENVIRONMENTAL RISK AND ENVIRONMENTAL COSTS. THE EX PENDITURE WAS INCURRED WITH THE OBJECT OF RATIONALIZING ITS ADMINISTRATION AND IMPROVING THE EFFECTIVENESS OF ENVIRONMENTAL MANAGEMENT. THEREFOR E, THE EXPENDITURE WAS REVENUE IN NATURE. HOWEVER, THE LD. CIT(A) WAS OF T HE VIEW THAT SINCE THE ASSESSEE HAD NOT PROVIDED COMPLETE DETAILS, THE CLA IM OF THE ASSESSEE COULD NOT BE SUBSTANTIATED. SHE ACCORDINGLY UPHELD THE OR DER OF ASSESSING OFFICER. 8. BEFORE US, LD. A.R. OF THE ASSESSEE SUBMITTED TH AT ISO CERTIFICATION CHARGES ARE ANNUAL EXPENSES PAID BY THE ASSESSEE AN D ARE IN THE NATURE OF REVENUE EXPENSES. HE PLACED RELIANCE ON THE DECISIO N OF I.T.A.T. JODHPUR BENCH IN THE CASE OF ACIT V. TIRUPATI MIRCROTECH (P ) LTD. 111 TTJ 149 (JB) FOR THE PROPOSITION THAT ISO CERTIFICATE WAS BASICA LLY ISSUED AND RENEWED FROM TIME TO TIME TO BRING FORTH THE FACT, THE SYST EM AND PROCEDURE OF OPERATION IMPLEMENTED IN THE ORGANIZATION IN ACCORD ANCE WITH THE STANDARD LAID DOWN AND, THEREFORE, THE SAME WERE REVENUE IN NATURE. ON THE OTHER HAND, THE LD. SR. D.R. SUPPORTED THE ORDER OF LD. C IT(A). 8 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ISO CERTIFICATION CHARGES ARE ANNUAL PAYMENT AS PLEADED BY THE ASSESSEE. IN THE CASE OF TIRUPATI MI CROTECH (P) LTD. (SUPRA), IT HAS BEEN HELD THAT BY MAKING PAYMENTS FOR OBTAINING ISO 9002 CERTIFICATION, THE FIXED CAPITAL OF THE ASSESSEE HAD NOT ENHANCED IN ANY MANNER. RATHER IT CREATED A POSITIVE IMAGE OF THE PRODUCT OF THE ASSE SSEE FOR THE SMOOTH CONDUCT OF THE BUSINESS, THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE WAS IN THE NATURE OF REVENUE EXPENDITURE. THE BENCH WHILE ARRIVING AT THIS CONCLUSION PLACED RELIANCE ON THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF EMPIRE JUTE MANUFACTURING CO. LTD. V. CIT 1 24 ITR 1 WHEREIN THE TEST FOR DETERMINATION OF THE NATURE OF EXPENDITURE INCURRED HAS BEEN PRESCRIBED. IT HAS BEEN HELD THAT IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEES TRADING OPERATIONS OR E NABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEES BUSINESS TO BE CARRIE D ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNT OUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT EVEN THOUGH THE ADVANTA GE MAY ENDURE FOR AN INDEFINITE FUTURE. SINCE THE ISSUE IS COVERED BY TH E DECISION OF I.T.A.T. JODHPUR BENCH IN THE CASE OF TIRUPATI MICROTECH. (P ) LTD. (SUPRA), WE HOLD THAT THE AMOUNT OF RS.95,254/- IS ALLOWABLE AS REVE NUE EXPENDITURE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) AN D DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE ON ACCOU NT OF ISO CERTIFICATION CHARGES. 10. THE NEXT ISSUE FOR CONSIDERATION RELATES TO CON FIRMING THE ADDITION ON ACCOUNT OF DEVELOPMENT CHARGES. WE HAVE HEARD BOTH THE PARTIES. WE HAVE ALSO GONE THROUGH THE DETAILS OF DEVELOPMENT CHARGE S. FROM THE RECEIPTS ISSUED BY BHIWADI INDUSTRIAL DEVELOPMENT AUTHORITY; THE RAJASTHAN STATE INDUSTRIAL DEVELOPMENT; AND INVESTMENT CORPORATION LTD. IT IS SEEN THAT THE 9 ASSESSEE HAS MADE PAYMENT ON ACCOUNT OF SC, GROUND RENT, FSC, DC AND ER. FROM THE RECEIPTS AND DETAILS GIVEN, IT IS NOT CLEAR WHETHER THE EXPENDITURE WAS INCURRED IN THE REVENUE FIELD OR IN THE CAPITAL FIELD. WE, THEREFORE, SET ASIDE THIS ISSUE TO THE FILE OF ASSE SSING OFFICER WITH THE DIRECTION TO EXAMINE THE NATURE AND CHARACTER OF TH E PAYMENTS OF DEVELOPMENT CHARGES AND DECIDE THE ISSUE AS PER PRO VISIONS OF LAW AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2003- 04 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. THE NEXT ISSUE FOR CONSIDERATION IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004-05 RELATES TO DISALLOWANCE OF RS.25,430/- IN RESPECT OF QS 9000 AND FTPM CERTIFICATION CHARGES. THE ASSESSING OFFIC ER DISALLOWED THE EXPENDITURE TREATING THE SAME AS CAPITAL EXPENDITUR E. 13. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWAN CE BY OBSERVING THAT LD. A.R. OF THE ASSESSEE HAD NOT FILED COMPLETE DET AILS AND DOCUMENTS WITH REGARD TO CERTIFICATION CHARGES. SINCE NOBODY ATTEN DED THE PROCEEDINGS ON THE DATE OF HEARING, THE LD. CIT(A) CONFIRMED THE ADDIT ION AS TRUE NATURE OF EXPENSES COULD NOT BE DETERMINED. 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER OF LD. CIT(A) W E FIND THAT THE ASSESSEE HAS NOT GIVEN COMPLETE DETAILS IN RESPECT OF CLAIM ON ACCOUNT OF ISO CERTIFICATION CHARGES IN BOTH THE YEARS. WE, THEREF ORE, FEEL IT NECESSARY TO SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER WI TH THE DIRECTION TO EXAMINE THE NATURE AND CHARACTER OF THE EXPENDITURE AND DEC IDE THE SAME ACCORDINGLY. 10 THE ASSESSEE IS ALSO DIRECTED TO PROVIDE THE ENTIRE INFORMATION RELATING TO HIS CLAIM FOR CERTIFICATION CHARGES. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2004- 05 IS ALLOWED FOR STATISTICAL PURPOSES. 16. NOW, COMING TO THE CROSS APPEAL FILED BY THE RE VENUE, THE ONLY ISSUE FOR CONSIDERATION RELATES TO DIRECTING THE ASSESSIN G OFFICER TO ALLOW DEPRECIATION @60% ON COMPUTER PERIPHERALS AND ACCES SORIES AMOUNTING TO RS.8,90,529/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PURCHASED COMPUTER ACCESSORIES I.E. UPS, SCANNER, PRINTERS, C AMERA, MEMORY CARD ETC. OF RS. 16,54,600/-. THE ASSESSING OFFICER AFTER EXA MINING THE DETAILS FOUND THAT AMOUNT OF RS. 1,11,250/- WAS INCURRED ON COMPU TERS AND BALANCE AMOUNT OF RS.50,350/- WAS INCURRED ON COMPUTER ACCE SSORIES/PERIPHERALS. THE ASSESSING OFFICER WAS OF THE VIEW THAT 60% DEPR ECIATION IS ALLOWABLE ON COMPUTER HARDWARE AND, THEREFORE, THE SAME CANNOT B E EXTENDED TO COMPUTER ACCESSORIES AND PERIPHERALS LIKE UPS, SCANNER, PRIN TERS, CAMERA, MEMORY CARD ETC. HE, THEREFORE, DISALLOWED 60% OF DEPRECIA TION CLAIMED ON THESE ITEMS. 17. ON APPEAL BEFORE CIT(A), IT WAS SUBMITTED THAT COMPUTER PERIPHERALS WERE CONNECTED TO THE COMPUTER AND HAVE NO INDEPEND ENT USAGE AND AS SUCH THEY WERE INTEGRAL PART OF COMPUTER ONLY. THEREFORE , THE COMPUTER PERIPHERALS WERE ENTITLED FOR DEPRECIATION @60% AS IS APPLICABLE TO COMPUTERS. LD. CIT(A) RELYING ON DECISION OF I.T.A. T. IN THE CASE OF ITO V. SIMRAN MAJUMDAR 98 ITD 199 AND DECISION OF I.T.A.T . DELHI BENCH IN THE CASE OF EXPEDITORS INTERNATIONAL (INDIA) P. LTD. HE LD THAT COMPUTER 11 ACCESSORIES AND PERIPHERALS BEING INTEGRAL PART OF COMPUTER WAS ELIGIBLE FOR DEDUCTION OF DEPRECIATION ALLOWANCE @60%. 18. BEFORE US, LD. SR.D.R. SUBMITTED THAT ALL THE C OMPUTER PERIPHERALS ARE NOT ELIGIBLE FOR DEPRECIATION AS UPS CAN BE USED IN DEPENDENTLY FOR ANY OTHER PURPOSE. LIKEWISE CAMERA CAN ALSO BE USED FOR SOME OTHER PURPOSES, THEREFORE, DEPRECIATION WILL NOT BE ALLOWABLE ON AL L THE ITEMS @60%. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAD NOT E XAMINED THE MATTER IN THE LIGHT OF DECISIONS OF I.T.A.T. ON THE OTHER HAND, L D. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD.CIT(A). 19. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ORDER PASSED BY THE A SSESSING OFFICER, IT IS CLEAR THAT HE HAS NOT EXAMINED THE NATURE AND CHARA CTER OF COMPUTER PERIPHERALS WHETHER THEY COULD BE USED INDEPENDENTL Y. WE, THEREFORE, SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER WITH THE DIRECTION TO EXAMINE THE NATURE OF EACH AND EVERY ITEM. IF THEY ARE INDEPENDENT OF FUNCTIONING, THE DEPRECIATION WILL BE ALLOWABLE AS IN THE CASE OF ANY OTHER PLANT AND MACHINERY. HOWEVER, IF THEY ARE INTEGRAL PART OF THE COMPUTER, THE DEPRECIATION WILL BE ALLOWABLE @60%. THE ASSESSING OFFICER WILL KEEP IN MIND THE DECISION OF THE I.T.A.T. IN THE CASE OF SI MARAN MAJUMDAR (SUPRA) AND EXPEDITORS INTERNATIONAL (SUPRA). NEEDLESS TO S AY THAT THE ASSESSING OFFICER WILL PROVIDE THE ASSESSEE OF BEING HEARD BE FORE DECIDING THE ISSUE. 20. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 12 21. TO SUM UP, THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2003-04 AND 2004-05 AND BY REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 17TH D ECEMBER, 2009. SD/- SD/- (C.L.SETHI) (K.D.RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17.12.2009. PSP COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR