2010 (2) TMI 799 - AT - Income Tax

Lump sum fee for technical guidance is revenue expenditure or capital expenditure. - Royalty is revenue expenditure or capital expenditure. - R & D Expense is revenue expenditure or capital expenditure. - The provision for warranty is allowable Expenditure or not. - addition made on account of export commission - all these matters have been decided by the Tribunal against the revenue in earlier years. - counsel for the assessee submitted at the outset that the appeal may be dismissed by following the earlier order - Held that - the Hon ble Supreme Court in the case of Raghubir Singh (1988 -TMI - 40109 - SUPREME Court) laid greater emphasis on the principle of consistency that it should not differ from its earlier decision merely because a contrary view appears to be preferable. However, if the previous decision is plainly erroneous there will be a duty on the court to say so and not to perpetuate the mistake. - the decision in the case of Raghubir Singh (1988 -TMI - 40109 - SUPREME Court) is not applicable to the facts of this case. - Decided in favor of assessee.

Issues Involved:
1. Treatment of lump-sum fee for technical guidance as capital or revenue expenditure.
2. Treatment of royalty as capital or revenue expenditure.
3. Treatment of research and development expenses as capital or revenue expenditure.
4. Treatment of provision for warranty as ascertained liability.
5. Treatment of export commission.

Detailed Analysis:

1. Treatment of Lump-Sum Fee for Technical Guidance:
The primary issue was whether the lump-sum fee for technical guidance should be treated as capital expenditure or revenue expenditure. The CIT(A) allowed the relief by treating the fee as revenue expenditure, relying on the ITAT's decision for the assessment year 2003-04. The revenue argued that this decision should be reconsidered in light of the Delhi High Court's ruling in CIT v. J.K. Synthetics Ltd., which laid down principles for determining whether such payments are capital or revenue in nature. However, the Tribunal found that the earlier decision was based on the same agreement and did not find any new considerations in the Delhi High Court's ruling that would warrant a different conclusion. The Tribunal emphasized the principle of consistency and found no compelling reason to deviate from the earlier decision. Therefore, the appeal on this ground was dismissed.

2. Treatment of Royalty:
The second issue was whether the royalty payment should be treated as capital expenditure or revenue expenditure. The CIT(A) had allowed the relief by treating the royalty as revenue expenditure, again relying on the ITAT's decision for the assessment year 2003-04. The Tribunal found that the earlier decision was consistent with the facts and principles applicable to the case and did not find any reason to differ from the earlier decision. Therefore, the appeal on this ground was also dismissed.

3. Treatment of Research and Development Expenses:
The third issue was whether the research and development expenses should be treated as capital expenditure or revenue expenditure. The CIT(A) allowed the relief by treating the expenses as revenue expenditure, based on the ITAT's decisions for the assessment years 2001-02, 2002-03, and 2003-04. The Tribunal found that the earlier decisions were consistent and based on a thorough analysis of the facts and applicable principles. Therefore, the appeal on this ground was dismissed.

4. Treatment of Provision for Warranty:
The fourth issue was whether the provision for warranty should be treated as an ascertained liability. The CIT(A) allowed the relief by treating the provision as an ascertained liability, relying on the ITAT's decisions for the assessment years 2002-03 and 2003-04. The Tribunal found that the earlier decisions were based on a thorough analysis of the facts and principles and did not find any reason to differ from the earlier decisions. Therefore, the appeal on this ground was dismissed.

5. Treatment of Export Commission:
The fifth issue was whether the export commission should be added back to the income. The CIT(A) allowed the relief by deleting the addition, relying on the ITAT's decisions for the assessment years 2001-02, 2002-03, and 2003-04. The Tribunal found that the earlier decisions were consistent and based on a thorough analysis of the facts and applicable principles. Therefore, the appeal on this ground was dismissed.

Conclusion:
The Tribunal dismissed the revenue's appeal on all grounds, finding no merit in the arguments presented and upholding the CIT(A)'s decisions. The Tribunal emphasized the principle of consistency and found that the earlier decisions were based on a thorough analysis of the facts and applicable principles. Therefore, the appeal was dismissed in its entirety.

← Previous Next →