Little Kingdom World Ltd., New Delhi V. ITO, New Delhi

ITA 3000/DEL/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7427 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Keywords: Depreciation; Difference of opinion; Revenue expenditure
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI I.C. SUDHIR : JUDICIAL MEMBER ITA NO. 3219/DEL/2008 & 3000/DEL/2011 ASSTT. YRS: 2002-03 & 2005-06 M/S LITTLE KINGDOM WORLD LTD., VS. DCIT CIR. 4(1) , AP-9, SHALIMAR BAGH, DELHI. NEW DELHI. PAN: AAACL 7626 E AND ITA NO. 1881/DEL/2011 ASSTT. YR: 2002-03 DCIT CIR. 4(1), VS. M/S LITTLE KINGDOM WORLD LTD. , NEW DELHI. AP-9, SHALIMAR BAGH, DELHI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI RAJ KUMAR GUPTA CA REVENUE BY : SHRI S.N. BHATIA DR DATE OF HEARING : 14-08-2014 DATE OF ORDER : 28-08-2014. O R D E R PER S.V. MEHROTRA, A.M: : THE ASSESSEE IS IN APPEAL AGAINST THE ORDERS OF LD. CIT(A) IN QUANTUM FOR A.Y. 2002-03 AND 2005-06 WHEREAS THE REVENUE IS IN APPEAL AGAINST CIT(A)S ORDER, DELETING THE PENALTY LEVIED U/S 271 (1)(C) FOR A.Y. 2002-03. ITA NO. 3219/DEL/2008 ( QUANTUM APPEAL A.Y. 2002-0 3): 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE, IN TH E RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF RUNNING PREPAR ATORY SCHOOLS ON ITS OWN 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 2 AND THROUGH FRANCHISEES. THE ASSESSEE COMPANY HAD F ILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 97,49,680/-. THE ASSES SING OFFICER NOTICED THAT DURING THE YEAR THE ASSESSEE HAD ACQUIRED RUNNING B USINESS OF LITTLE KINGDOM EDUTECH LTD. HE NOTICED THAT ASSESSEE HAD A CQUIRED TOTAL ASSETS WORTH RS. 5 CRORES AGAINST WHICH 50 LACS SHARES WER E ALLOTTED TO LITTLE KINGDOM EDUTECH LTD. FROM THE DETAILS OF ASSETS ACQ UIRED, ASSESSING OFFICER NOTICED THAT THERE WAS AN ASSET OF RS. 4,75,00,000/ - UNDER THE HEAD TECHNICAL KNOW-HOW, ON WHICH THE ASSESSEE HAD CLA IMED DEPRECIATION @ 25% AMOUNTING TO RS. 1,18,75,000/-. HE REQUIRED THE ASSESSEE TO FURNISH FOLLOWING DETAILS: (I) BREAK-UP OF TECHNICAL KNOW-HOW; (II) WHEN IT WAS ACQUIRED; AND (III) WHAT WAS THE BUSINESS USE OF THAT ASSET. 2.1. THE ASSESSEES REPLY HAS BEEN REPRODUCED AT PA GE 2 OF ASSESSMENT ORDER IN WHICH ASSESSEE PRIMARILY SUBMITTED AS UNDE R: (I) THE COMPANY HAD ACQUIRED RUNNING BUSINESS OF LITTLE KINGDOM EDUTECH LTD.. THE ASSESSEE COMPANY HAD ACQUIRED ALO NG WITH OTHER ASSETS TECHNICAL KNOW-HOW AMOUNTING TO RS. 4,75,00, 000/- WHICH ALSO INCLUDED SOFTWARE/ ACADEMIC/ TECHNICAL GADGETS . THE ASSESSEE COMPANY USED VARIOUS ACCOUNTS OF ACADEMIC/ TECHNICA L GADGETS TO EQUIP AND GROOM THE CHILD TO TAKE UP THE CHALLENGES OF ADMISSION TO REPUTED SCHOOLS ALONG THIS A PROPER EMPHASIS WAS BEING PUT ON CHILDS MENTAL AND PHYSICAL GROWTH. (II) IN ORDER TO MEET THE REQUIREMENTS OF SUCH DEVELOPME NT, THE ASSESSEE COMPANY HAD DEVELOPED VERY INNOVATIVE AND TECHNICAL 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 3 ACADEMIC GADGETS AND OTHER TECHNIQUES WHEREBY THE C HILD CAN EASILY LEARN ALL THESE DIFFICULT THINGS IN A PLAYFU L MANNER. (III) IN SUM AND SUBSTANCE THE CONTENTION WAS THAT TECHNI CAL KNOW-HOW CONSISTED OF ACADEMIC GADGETS AS WELL AS TECHNIQUES DEVELOPED OVER A PERIOD OF TIME FOR IMPARTING EDUCATION THROU GH INNOVATION AND TO LAY THE RIGHT FOUNDATION FOR THE LITTLE KIDS BY THE FOUNDER OF NURSERY SCHOOL. 2.3. THE ASSESSING OFFICER, AFTER CONSIDERING ASSES SEES EXPLANATION POINTED OUT THAT A PARTNERSHIP FIRM, LITTLE KINGDOM NURSERY SCHOOL, CONSISTING OF TWO PARTNERS, NAMELY, MS. NEERU KUKREJA AND RAJESH KUKREJA (HUF), HAVING SHARING RATIO 90% AND 10% RESPECTIVELY, WAS RUNNING A PREPARATORY SCHOOL UNDER THE NAME AND STYLE OF THE LITTLE KING DOM NURSERY SCHOOL IN THE YEAR 1999-2000. THE FIRM HAD SHOWN AN AMOUNT OF RS. 2,50,00,000/- AS GOODWILL AND RS. 2,25,00,000/- ON ACCOUNT OF SOF TWARE DEVELOPED IN THE BALANCE SHEET FOR THE YEAR ENDING 31-3-2000. 2.4. M/S LITTLE KINGDOM EDUTECH LTD., A ACCOMPANY I N WHICH MS. NEERU KUKREJA AND RAJESH KUKREJA (HUF), HOLDING 100% SHAR E EQUITY OF THE COMPANY, HAD TAKEN OVER ALL ASSETS OF THE PARTNERSH IP FIRM W.E.F. 1-4-2000. ALL THE ACTIVITIES OF THIS SCHOOL WERE CONTROLLED B Y MS. NEERU KUKREJA, BEING M.D. OF THE COMPANY. IN THE SCHEDULE OF FIXED ASSET S, M/S LITTLE KINGDOM EDUTECH LTD. HAD SHOWN THE AMOUNT OF RS. 2,50,00,00 0/- AS GOODWILL & TECHNICAL KNOW-HOW AND RS. 2,25,00,000/- ON ACCOUN T OF SOFTWARE. THIS 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 4 COMPANY DID NOT CLAIM ANY DEPRECIATION EITHER ON TH E SOFTWARE OR THE AMOUNT OF GOODWILL DURING THE PREVIOUS YEAR RELEVANT TO A. Y. 2001-02. 2.5. M/S LITTLE KINGDOM WORLD LTD., THE ASSESSEE CO MPANY, DURING THE YEAR HAD TAKEN OVER ALL THE ASSETS WORTH RS. 5 CROR ES OF THE LITTLE KINGDOM EDUTECH LTD. AGAINST WHICH 50 LACS SHARES OF THE CO MPANY WERE ALLOTTED TO THIS COMPANY FOR A CONSIDERATION OF THE BUSINESS AS SETS. IN THE SCHEDULE OF FIXED ASSETS, THE ASSESSEE HAD MENTIONED A SUM OF R S. 475 LACS AS TECHNICAL KNOW-HOW. MS. NEERU KUKREJA MANAGING DIRECTOR, WAS CONTROLLING THE ENTIRE ACTIVITIES OF THE SCHOOL. THE OTHER DIRECTOR WAS SHRI RAJESH KUKREJA. 2.6. AFTER CONSIDERING THE ABOVE MODE OF ACQUISITIO N OF TECHNICAL KNOW- HOW BY THE ASSESSEE COMPANY, THE ASSESSING OFFICER POINTED OUT THAT ASSESSEE FAILED TO EXPLAIN HOW THE AMOUNT OF RS. 2.50 CRORES ON ACCOUNT OF GOODWILL HAD BECOME TECHNICAL KNOW-HOW IN THE HANDS OF THE A SSESSEE COMPANY. CONSIDERING THE ASSESSEES REPLY THAT TECHNICAL KNO W-HOW WAS NOTHING BUT A COLLECTION OF INNOVATIVE IDEAS & TECHNIQUES AND ACA DEMIC GADGETS DEVELOPED AND CONCEIVED BY THE FOUNDER OF THE NURSERY SCHOOL, THE ASSESSING OFFICER POINTED OUT THAT THE ASSESSEE HAD ADMITTED THAT THE RE WAS NO SOFTWARE FOR TECHNICAL KNOW-HOW. HE CONCLUDED THAT THE AMOUNT ME NTIONED IN THE SCHEDULE OF FIXED ASSET WAS NOTHING BUT A NOTIONAL ONE ON WHICH DEPRECIATION HAD BEEN CLAIMED BY THE ASSESSEE COMPANY. HE FURTHE R POINTED OUT THAT THERE 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 5 WAS NO EVIDENCE ON RECORD TO INDICATE THAT ANY SOFT WARE WAS EARLIER PURCHASED BY THE FIRM OR DEVELOPED BY THE FOUNDER I N EARLIER YEARS. HE FURTHER POINTED OUT THAT GOOD-WILL AND SOFTWARE WE RE TWO SEPARATE ASSETS AND COULD NOT BE MATCHED IN ANY WAY WITH THE TECHNI CAL KNOW-HOW. FURTHER, HE POINTED OUT THAT EVIDENTLY ASSETS ON WHICH DEPRE CIATION @ 25% IS ADMISSIBLE ON INTANGIBLE ASSETS AS PER RULE 5, DOES NOT INCLUDE GOODWILL AND SOFTWARE. THE ASSESSING OFFICER POINTED OUT THAT DU RING THE YEAR ASSESSEE HAD PURCHASED SOFTWARE WORTH RS. 35,100/- ON WHICH DEPR ECIATION HAD BEEN CLAIMED AND ALLOWED SEPARATELY. FURTHER, ASSESSEE H AD CLAIMED DEPRECIATION ON COMPUTERS, GADGETS AND TOYS, EDUCATION AID, MUSI C SYSTEM ETC., WHICH WERE USED BY THE SCHOOL. HE, THEREFORE, DISALLOWED THE ASSESSEES CLAIM OF DEPRECIATION OF RS. 1,18,75,000/-. THE ASSESSING OF FICER DETERMINED THE INCOME AT RS. 21,37,110/-. 2.7. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL FOR THE FOLLOWING REASONS: (I) CHANGING THE STATUS OF THE SAME BUSINESS UNDER THE SAME MANAGEMENT APPEARED TO BE A DECISION WITH ULTERIOR MOTIVES. (II) THE GOODWILL AND SOFTWARE DEVELOPED SHOWN AS AN INTANGIBLE ASSETS ON WHICH NO DEPRECIATION WAS CLAIMED BY THE EARLIER BUSINESS ENTITIES INSPITE OF THEIR ACCOUNTING POLIC Y OF CLAIMING THE DEPRECIATION HAD CLEARLY PROVED THAT THESE INTANGIB LE ASSETS WERE NOT ELIGIBLE FOR DEPRECIATION. 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 6 (III) THE SUBMISSION OF THE ASSESSEE THAT THESE ASSETS WE RE NOTHING BUT COLLECTION OF INNOVATIVE IDEAS AND TECHNIQUES AND A CADEMIC GADGETS DEVELOPED AND CONCEIVED BY THE FOUNDER OF T HIS NURSERY SCHOOL FOR THE PURPOSE OF PHYSICAL AND MENTAL GROWT H OF ITS SCHOOL STUDENTS, SUGGESTS THAT IN THE NAME OF TECHNICAL K NOW-HOW THE ASSESSEE WANTS TO IMPRESS THAT THE FOUNDER OF THIS SCHOOL HAD ADOPTED A PARTICULAR TEACHING METHOD USING VARIOUS ACADEMIC AND TECHNICAL GADGETS FOR GROOMING A CHILD FOR ADMISSIO N IN A MOST SOUGHT AFTER SCHOOLS. THIS COULD NOT BE CONSIDERED A S A TECHNICAL KNOW-HOW BECAUSE TECHNICAL KNOW-HOW IS A TECHNIQUE WHICH GIVES 100% RESULTS. HOWEVER, IN THE CASE OF THE ASSESSEE IT COULD NOT BE VISUALIZED THAT TEACHING IN A PARTICULAR WAY WILL C ERTAINLY ENSURE ALL OF ITS STUDENTS ADMISSION IN A SOUGHT AFTER SCHOOLS . (IV) KNOW-HOW HAS BEEN DEFINED IN EXPLANATION 4 OF SECTI ON 32, WHEREIN IT HAS BEEN STATED THAT KNOW-HOW MEANS ANY INDUSTRIAL INFORMATION OR TECHNIQUE LIKELY TO ASSIST IN THE MA NUFACTURE OR PROCESSING OF GOODS OR IN THE WORKING OF A MINE, OI L-WELL OR OTHER SOURCES OF MINERAL DEPOSITS, INCLUDING SEARCHING FO R DISCOVERY OR TESTING OF DEPOSITS FOR THE WINNING OF ACCESS TO SE CTION 32. (V) HOWEVER, SINCE TECHNICAL KNOW-HOW WAS ONLY A COLLEC TION OF INNOVATIVE IDEAS AND TECHNIQUES AND ACADEMIC GADGET S DEVELOPED AND CONCEIVED BY THE FOUNDER OF NURSERY SCHOOL WAS NEITHER AN INDUSTRIAL INFORMATION NOR A TECHNIQUE WHICH COULD ASSIST IN THE MANUFACTURE OR PROCESSING OF GOODS OR IN THE MINING , WAS NOT ELIGIBLE FOR DEPRECIATION AS PER EXPLANATION 4 OF S ECTION 32 OF THE ACT. 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 7 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THER E IS NO DISPUTE THAT ASSESSEE ACQUIRED THESE ASSETS FOR RS. 4.75 CRORES FROM M/S LITTLE KINGDOM EDUTECH LTD. AT BOOK VALUE. THE ASSESSEE HAD DULY E XPLAINED THE NATURE AS TO HOW THESE WERE IN THE NATURE OF TECHNICAL KNOW-HOW. LD. COUNSEL RELIED ON THE DECISION IN THE CASE OF CIT VS. AHMAD HUSSAIN DILDAR HUSSAIN 229 ITR 169. LD. COUNSEL FURTHER SUBMITTED THAT SOFTWARE IS ELIGIBLE FOR DEPRECIATION @ 25% FOR WHICH RELIED ON FOLLOWING DECISIONS: - AMWAY INDIA ENTPP. VS. DCIT 301 ITR (AT) 1 (DEL.)(S B); - AREVA T & D INDIA LTD. VS. DCIT 345 ITR 421 (DEL.); - CIT VS. SMIFS SECURITIES LTD. 348 ITR 302 (SC); 3.1. AS REGARDS GOODWILL, LD. COUNSEL SUBMITTED T HAT THIS IS AN INTANGIBLE ASSETS AND ACCORDINGLY ELIGIBLE FOR DEPRECIATION @ 25% FOR WHICH RELIED ON FOLLOWING DECISIONS: - B. RAVEENDRAN PILLAI VS. CIT 237 CTR (KER) 80; - HINDUSTAN COCA COLA BEVERAGES (P) LTD. VS. DCIT 132 TTJ (DEL) 602; - THE A.P. PAPER MILLS LTD. VS. ACIT 128 TTJ (HYD.) 5 96. - KOTAK FOREX BROKERAGE LTD. VS. ACIT (2009) 33 SOT 2 37 (MUM.); - CIT VS. HINDUSTAN COCA COLA BEVERAGES (P) LTD. VS. 331 ITR 192 (DEL.); - CIT VS. AHMED HUSSAIN DILDAR HUSSAIN 229 ITR 169 ( ALL.); 3.2. LD. COUNSEL ALSO RELIED ON FOLLOWING DECISIONS FOR THE MEANING OF TECHNICAL KNOW-HOW: 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 8 - CIT VS. ELECON ENGG. CO. LTD. 96 ITR 672 (GUJ.); - CIT VS. FESTO ELGI (P) LTD. 129 ITR 499 (MAD.); - CIT VS. KAR VALVES LTD. 204 ITR 490 (KER.); - CIT VS. HINDUSTAN INSECTICIDES LTD. 253 ITR 520 (DE L.); - SKYLINE CATERERS (P) LTD. VS. ITO 116 ITD 348 (MUM) . 3.3. IN THE ALTERNATIVE, LD. COUNSEL SUBMITTED THAT THE WHOLE AMOUNT SHOULD BE ALLOWED AS REVENUE EXPENDITURE. IN THIS REGARD H E RELIED ON THE DECISION IN THE CASE OF PREMIER AUTOMOBILE LTD. VS. CIT 150 ITR 28. 4. LD. DR RELIED ON THE ORDER OF CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE RECORD OF THE CASE. THE FACTS ARE NOT DISPUTED. THE ASSESS EE HAD ACQUIRED THE BUSINESS OF M/S LITTLE KINGDOM EDUTECH LTD., WHICH IN TURN HAD ACQUIRED THE BUSINESS OF PARTNERSHIP FIRM OF LITTLE KINGDOM NURS ERY SCHOOL. MS. NEERU KUKREJA AND RAJESH KUKREJA (HUF) MANAGED ALL THESE THREE ENTITIES SINCE BEGINNING. THERE ARE TWO ISSUES INVOLVED IN THE PRE SENT APPEAL FIRSTLY, WHETHER THERE WAS ANY ASSET WHICH COULD BE TERMED A S TECHNICAL KNOW-HOW; AND SECONDLY, WHETHER DEPRECIATION IS ADMISSIBLE ON THE ALLEGED TECHNICAL KNOW-HOW UNDER RULE 5. THE ASSESSEES BASIC CONTEN TION IS THAT TECHNICAL KNOW-HOW WAS A COLLECTION OF INNOVATIVE IDEAS AND T ECHNIQUES AND ACADEMIC GADGETS DEVELOPED AND CONCEIVED BY THE FOUNDER OF T HE NURSERY SCHOOL. 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 9 5.1. BEFORE CONSIDERING THE IMPORT OF THIS TERM, WE REFER TO THE STATUTORY PROVISION DEALING WITH DEPRECIATION ON INTANGIBLE A SSETS. SECTION 32(1)(II) READS AS UNDER: 32. (1) [IN RESPECT OF DEPRECIATION OF ( I ) .. . ( II ) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICEN CES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USE D FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCT IONS SHALL BE ALLOWED] [( I ) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED I N GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAGE ON THE ACTUAL COST THEREOF TO THE ASSESS EE AS MAY BE PRESCRIBED;] ( II ) [IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCEN TAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED:] . . [ EXPLANATION 3. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSIO NS ASSETS AND BLOCK OF ASSETS SHALL MEAN ( A ) TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, PLAN T OR FURNITURE; ( B ) INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, COPYR IGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS O R COMMERCIAL RIGHTS OF SIMILAR NATURE. EXPLANATION 4. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSIO N KNOW-HOW MEANS ANY INDUSTRIAL INFORMATION OR TECH NIQUE LIKELY TO ASSIST IN THE MANUFACTURE OR PROCESSING OF GOODS OR IN THE WORKING OF A MINE, OIL- WELL OR OTHER SOURCES OF MINERAL DEPOSITS (INCLUDIN G SEARCHING FOR DISCOVERY OR TESTING OF DEPOSITS FOR THE WINNING OF ACCESS THERETO). 5.2. IN VIEW OF ABOVE STATUTORY PROVISION, WE HAVE TO EXAMINE WHETHER THE ASSESSEES CLAIM COME WITHIN THE AMBIT OF THE EXPR ESSION KNOW-HOW OR NOT 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 10 BECAUSE IN RESPECT OF OTHER INTANGIBLE ASSETS THE A SSESSEE HAS TO SPECIFICALLY ACQUIRE THEM. THEREFORE, WE HAVE TO CONFINE ONLY TO THE DEFINITION OF KNOW- HOW. THE DEFINITION OF KNOW-HOW CLEARLY CONTEMPLATE S THAT SOME SPECIFIC TECHNIQUE IS TO BE DEVELOPED WHICH CAN ASSIST IN THE MANUFACTURE OR PROCESSING OF GOODS OR IN THE WORKING OF A MINE, OI L-WELL OR OTHER SOURCES OF MINERAL DEPOSITS. 5.3. HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ELECON ENGG. CO. LTD. 96 ITR 672 HAS OBSERVED AS UNDER: KNOW-HOW IS A PECULIAR KIND OF ASSETS. IT IS THE A CCUMULATED FUND OF KNOWLEDGE ACQUIRED BY YEARS OF OBSERVATION, RESEARCH, EXPERIMENTATION AND EXPERIENCE. THE WHOLE OF IT IS NOT IN AN INTANGIBLE FORM EVEN WHILE IT IS IN THE PROCESS OF BEING ACQUIRED AND VERY OFTEN IT TAKES A PHYSICAL FORM AS IT GROWS IN THE SHAPE OF FORMULAE, DRAWINGS, PATTERNS, BLUE PRINTS, SPECI FICATIONS AND SO ON. THE MATERIAL FORM IT TAKES NOT ONLY FACILITA TES PRESERVATION, COLLATION AND READY REFERENCE BUT ALS O MAKES IT PERCEPTIBLE AND VISIBLE AND EASILY CAPABLE OF BEING TRANSMITTED TO OTHERS. .4. THUS, THERE SHOULD BE SOMETHING CONCRETE AVAILA BLE WITH THE ASSESSEE IN THE FORM OF FORMULAE, DRAWINGS, PATTERNS, BLUE P RINTS, SPECIFICATIONS ETC. TO COME WITHIN THE AMBIT OF KNOW-HOW. FURTHER, THE KNO W-HOW IS MAINLY WITH REFERENCE TO INDUSTRIAL MANUFACTURING PROCESS AND N OT WITH REFERENCE TO ANY INNOVATIVE TECHNIQUE ALLEGEDLY DEVELOPED BY THE MAN AGING DIRECTOR OF ASSESSEE COMPANY FOR BETTER IMPARTING OF EDUCATION TO CHILDREN. THE 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 11 ASSESSEES CLAIM, INTER ALIA, IS THAT ACADEMIC GADG ETS DEVELOPED BY IT CONSTITUTE KNOW-HOW. HOWEVER, NO SUCH ACADEMIC GA DGETS HAVE BEEN SPELT OUT IN THE ORDERS OF LOWER REVENUE AUTHORITIES. BE THAT AS IT MAY, SINCE IMPARTING OF EDUCATION IN SCHOOL CANNOT BE EQUATED WITH THE INFORMATION OR TECHNIQUE HELPING IN INDUSTRIAL MANUFACTURING, WE A RE OF THE OPINION THAT TECHNICAL KNOW-HOW IN THE BOOKS OF ASSESSEE ACQUIRE D FROM M/S LITTLE KINGDOM EDUTECH LTD. CANNOT BE HELD TO BE ENTITLED FOR DEPRECIATION IN VIEW OF STATUTORY PROVISIONS OF SECTION 32. ACCORDINGLY, ASSESSEES APPEAL IS DISMISSED. 5.5. AS FAR AS THE ASSESSEES PLEA OF ALLOWING THE ENTIRE AMOUNT AS REVENUE EXPENDITURE IS CONCERNED, WE ARE OF THE OPINION THA T SINCE IT IS ONLY NOTIONAL ASSET IT CANNOT BE ALLOWED AS DEDUCTION. IN VIEW OF ABOVE, WE SEE NO REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THE ISSUE IN QUESTION. 6. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ITA NO. 3000/DEL/2011 ( QUANTUM APPEAL A.Y. 2005-0 6): 7. THE ONLY GROUND RAISED IS AS UNDER: THAT THE LEARNED CIT(APPEALS)-VII, HAS ERRED IN LA W AND FACT BY NOT GIVING RELIEF ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. 8. WE FIND THAT FOR THE ASSESSMENT YEAR IN QUESTION THE LD. CIT(A) FOLLOWING HIS PREDECESSORS ORDER IN ASSESSEES OWN CASE FOR A.Y. 2002-03 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 12 REJECTED THE ASSESSEES CLAIM FOR DEPRECIATION OF R S. 50,09,765/- ON THE TECHNICAL KNOW- HOW. WHILE DEALING WITH ASSESSEES APPEAL FOR A.Y. 2002- 03 WE HAVE UPHELD THE ORDER OF LD. CIT(A) ON THE IS SUE IN QUESTION. FOR THE VERY SAME REASONS HEREIN ALSO WE UPHOLD THE ORDER O F LD. CIT(A), REJECTING THE ASSESSEES CLAIM FOR DEPRECIATION ON TECHNICAL KNOW HOW. 9. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. 1881/DEL/2011 ( PENALTY APPEAL U/S 271(1)(C) - A.Y . 2002-03): 10. BEFORE ASSESSING OFFICER THE ASSESSEE HAD SUBMI TTED THAT PENALTY WAS NOT IMPOSABLE AS THERE WAS NO CONCEALMENT ON THE PA RT OF THE ASSESSEE AS ALL THE FACTS WERE DISCLOSED IN THE RETURN OF INCOME. H OWEVER, ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND H ELD THAT ASSESSEE HAD FILED INACCURATE PARTICULARS OF INCOME. 11. IN FIRST APPEAL, LD. CIT(A) DELETED THE PENALTY FOR THE FOLLOWING REASONS: (I) THE ASSESSEES CONDUCT AND THE EXPLANATION OFFERED SHOWED THAT THERE WAS NO CONSCIOUS OR INTENTIONAL ACT OF ASSESS EE TO CONCEAL OR FURNISH INACCURATE PARTICULARS OF INCOME. (II) IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT CO NCEALMENT OF INCOME OR INACCURATE FURNISHING OF INCOME WAS DETEC TED BY HIM DURING THE ASSESSMENT PROCEEDINGS. THIS CLEARLY IMP LIED THAT THERE WAS ONLY DIFFERENCE OF OPINION ON THE RELEVANT ISSU E AND THEREFORE 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 13 PENALTY WAS NOT LEVIABLE. HE FURTHER POINTED OUT TH AT IN VIEW OF CONTROVERSY SURROUNDING ELIGIBILITY OF CLAIM OF DE PRECIATION ON INTANGIBLE ASSETS, SPECIAL BENCH OF ITAT HAS BEEN C ONSTITUTED IN THE CASE OF M/S CLC & SONS PVT. LTD. IN ITA NO. 197 6/DEL/2006. THE ASSESSEES CLAIM WAS BONA FIDE AND ALL THE FACT S RELATING TO THE SAME HAD BEEN DISCLOSED. HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETR O PRODUCTS 322 ITR 158. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE RECORD OF THE CASE. FROM THE ASSESSMENT ORDER IT IS EVIDEN T THAT ALL THE FACTS WERE ACCURATELY DISCLOSED BY ASSESSEE AND THE DEPRECIATI ON HAD BEEN CLAIMED TREATING THE SAME AS TECHNICAL KNOW-HOW. IT IS ONLY BECAUSE OF DIFFERENCE OF OPINION ON THE SCOPE OF TERM KNOW-HOW AS PER EXPL ANATION 4 TO SECTION 32 THAT THE ASSESSEES CLAIM WAS NOT ACCEPTED. HOWEVER , THAT DOES NOT LEAD TO THE CONCLUSION THAT ASSESSEE HAD FURNISHED INACCURA TE PARTICULARS OF INCOME OR HAD CONCEALED THE PARTICULARS OF INCOME. THE ASS ESSEES CLAIM WAS BONA FIDE INASMUCH AS IN THE CASE OF M/S LITTLE KINGDOM EDUTECH LTD. ASSESSMENT HAD BEEN COMPLETED U/S 143(3) FOR A.Y. 2001-02 WHER EIN IN THE BALANCE- SHEET STOOD ACCEPTED SHOWING SOFTWARE AT RS. 2.25 C RORES AND GOOD-WILL AT RS. 2.50 CRORES. THEREFORE, THE BONA FIDES OF THE A SSESSEES CLAIM CANNOT BE DOUBTED. BUT, WHETHER THE SAME IS ADMISSIBLE OR NOT , IS A QUESTION OF INTERPRETATION OF THE SECTION. THEREFORE, THE DECIS ION IN THE CASE OF RELIANCE 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 14 PETRO PRODUCTS (SUPRA) IS CLEARLY APPLICABLE, WHERE IN IT HAS BEEN HELD AS UNDER: 7. A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN ORDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF T HE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. PRESENT IS NOT THE CASE OF CONCEALMENT OF T HE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. HOWEVER, THE LEARNED CO UNSEL FOR REVENUE SUGGESTED THAT BY MAKING INCORRECT CLAIM FOR THE EX PENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF TH E INCOME. AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM, OR THE SEPARATE ITE MS OF AN ACCOUNT. THEREFORE, THE WORD 'PARTICULARS' USED IN THE SECTION 271(1)(C ) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFORMATION GIVEN IN THE RETUR N WAS FOUND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE O R ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, P RIMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. THE LEARNED COUNSEL ARGUED THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTI CULARS OF SUCH INCOME'. WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, M AKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE P ARTICULARS. IN COMMISSIONER OF INCOME TAX, DELHI VS. ATUL MOHAN BI NDAL [2009(9) SCC 589], WHERE THIS COURT WAS CONSIDERING THE SAME PRO VISION, THE COURT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATIS FIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. THIS COURT REFERRED TO ANOTHER DECISIO N OF THIS COURT IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS [2008(13) SCC 369], AS ALSO, THE DECISION IN UNION OF INDIA VS.RAJASTHAN SPG. & WVG. MILLS [2009(13) SCC 448] AND REITERATED IN PARA 13 THAT:- '13. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(1)(C), CONDITIONS STATED THEREIN MUST EXIST.' .. . 9. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH TH E MENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A M ATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTER'S DICTIONA RY, THE WORD 'INACCURATE' HAS BEEN DEFINED AS:- 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRAN SCRIPT'. 3219/D/08; 1881 &3000/D/2011 M/S LITTLE KINGDOM WORLD LTD. 15 WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTI CULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNC TION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT A CCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR F ALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PE NALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, W HICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 13. CONSIDERING THE DETAILED DISCUSSION MADE BY LD. CIT(A) WITH REFERENCE TO SECTION 271(1)(C) AND THE VARIOUS CASE LAWS REFERRED TO IN THE SAID DECISION, WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDER OF LD. CIT(A). 14. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28-08-2014. SD/- SD/- ( I.C. SUDHIR ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28-08-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR