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TMI Blog2010 (2) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... de a disallowance of Rs.1,12,12,352/-, which was added back to the income of the assessee – CIT(A) deleted the addition – ITAT confirmed the order of CIT(A) – HC refused to frame the questions – held that - Keeping in mind the fact that none of the above-mentioned aspects has been considered by the High Court, we are of the view that the High Court should have framed, on the facts and circumstances of these cases, the following question of law for determination: "Whether allowance of royalty expenses, as claimed by the assessee, are to be allowed in its entirety under Section 37 of the Income Tax Act, 1961, or only one-sixth thereof, as mandated by Section 35AB(1) of the Income Tax Act, 1961, are allowable during the relevant Assessment Ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in view of Section 35AB of the Act and, accordingly, after allowing the benefit under Section 35AB of the Act, the Assessing Officer made a disallowance of Rs.1,12,12,352/-, which was added back to the income of the assessee. On appeal filed by the assessee, the Commissioner of Income Tax (Appeals) deleted the additions made by the Assessing Officer, which view was confirmed by the Income Tax Appellate Tribunal [`Tribunal', for short] following it's earlier decision in the assessee's own case in I.T.A. No.4968/1995 and others dated 25th November, 1999. Being aggrieved by the decision of the Tribunal, the Department instituted Tax Appeal No.606 of 2008 in the High Court which, as stated hereinabove, refused to formulate the above proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, in the former case, the payment would constitute capital expenditure whereas, in the latter case, it would constitute an expenditure under Section 37 of the Act. At the outset, we may reiterate what we have stated earlier in so many judgements, namely, that the Department has to analyse the process undertaken by the assessee(s), analyse the contracts and the price structure to ascertain the nature of payment Depending upon the analysis of the process of "duplication" in the context of the contracts signed by the assessee with the American Corporation, one has to find out whether the expense incurred is a Revenue expenditure or a capital expenditure. Moreover, one cannot proceed to decide such cases merely on the basis of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of software programmes designed to manage and maintain a collection of records [Database] by providing facilities for storing, organizing and retrieving related information, as and when required. According to the same Dictionary, `Duplicating' is a process of copying from a source data medium to a destination data medium, which has the same physical form: for example, to copy a file from one magnetic tape to another magnetic tape is "duplication". According to Microsoft's Computer Dictionary, a "Back-end processor" is a processor that manipulates data sent to it from another processor: for example, a high speed graphic processor dedicated to painting images of a video display operates in response to commands passed "back" to it by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the actual process undertaken by the assessee to be examined in the light of the contract/arrangement with the American Corporation [including the purchase order and the position of the royalty shared by the assessee and the said Corporation]. Therefore, we have not examined the case on merits. Our reasons given herein are only to support this Order remanding the case to the High Court. We leave contentions on both sides expressly open. If the High Court comes to the conclusion that further foundational facts are required to be examined, it may remit the case to the Authorities below, if it deems fit. Subject to what is stated above, civil appeals filed by the Department are allowed and the matter stands remitted to the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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