DCIT, CHENNAI v. M/s. I P Rings Ltd., CHENNAI

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI B BENCH CHENNAI. BEFORE SHRI.U.B.S. BEDI J.M. & SHRI.ABRAHAM P. GEORGE A. M. I.T.A. NOS.1716 1717 1718 AND 1719/MDS/2010 ASSESSMENT YEARS: 1999-2000 2003-04 04-05 AND 05-06 M/S. IP RINGS LTD. ARJAY APEX CENTRE 24 COLLEGE ROAD CHENNAI 600 006. [PAN:AAACI0908C] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE II (3) CHENNAI 600 034. I.T.A. NOS. 1687 1688 1689 AND 1690 /MDS/2010 ASSESSMENT YEARS: 1999-2000 2003-04 04-05 AND 05-06 THE DEPUTY COMMISSIONER OF INCOME TAX COMPANY CIRCLE II (3) CHENNAI 600 034. M/S. IP RINGS LTD. ARJAY APEX CENTRE 24 COLLEGE ROAD CHENNAI 600 006. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R. VIJAYARAGHAVAN REVENUE BY : SHRI P.B. SEKARAN ORDER PER BENCH THESE EIGHT CROSS APPEALS FOUR BY THE ASSESSEE AND FOUR BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS PA SSED BY THE LD. CIT(A) III CHENNAI ALL DATED 14.07.2010 RELEVANT TO THE ASSE SSMENT YEARS 1999- 2000 2003-04 04-05 AND 05-06 RESPECTIVELY. 2. THESE APPEALS HAVE BEEN HEAR D TOGETHER AND INVOLVE SOME COMMON ISSUES THEREFORE BEING DISPOSED OF BY THIS SINGLE ORDER FOR THE SAKE OF CONVENIENCE. 3. IN THE APPEALS OF THE ASSESSEE BESI DES RESTRICTING PART DISALLOWANCE WITH RESPECT TO ROYALTY PAYMENT FOR ALL THE FOUR YEARS THE ASSESSEE HAS ALSO CHALLENGED CONFIRMATION OF DISALLOWANCE ON ACCOUNT OF SALE PROMOT ION EXPENSES AT 100% FOR I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 2 THE ASSESSMENT YEAR 1999-2000 50% FOR THE ASSESSMENT YEARS 04-05 AND 05-06 WHEREAS THE DEPARTMENT IN ALL ITS FOUR APPEALS THR OUGH IDENTICAL COMMON GROUNDS HAS CHALLENGED THE DIRECTION OF LD. CIT(A) TO TREAT 25% OF ROYALTY PAYMENT AS CAPITAL EXPENDITURE AND BALANC E 75% AS REVENUE EXPENDITURE. 4. WE SHALL FIRST DEAL WITH COMMON GROUND OF BOTH THE SI DES WITH REGARD TO RESTRICTING PART DISALLOWANCE OF ROYALTY PAY MENT OF 25% AS CAPITAL EXPENDITURE AND BALANCE 75% AS REVENUE EXPENDITURE AS AGI TATED BY THE ASSESSEE IN RELATION TO UPHOLDING PART DISALLOWANCE AN D DEPARTMENT ABOUT GIVING RELI EF BY DELETING PART DISALLOWANCE IN THIS REGARD. 4.1 SINCE ALMOST IDENTICAL FACTS WITH DI FFERENCE IN AMOUNT OF ROYALTY PAYMENT DISALLOWANCE IS THERE IN ALL THE YEARS THEREFORE WE SHALL DISCUSS THE FACTS IN RELATION TO THE ASSESSMENT YEAR 1999-2000 WHICH INDICATE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF M ANUFACTURING AND SALE OF PI STONS AND RINGS. IT FILED RETURN OF INCOME ON 30.12.1999 DECLARING TOTAL INCOME OF ` .95 42 800/-. NOTICE UNDER SECTION 148 WAS ISS UED ON 14.03.2006 AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 ON 18. 10.2006 DETERMINING TOTAL INCOME AT ` .1 81 64 690/-. IN THE SAID ASSESSMENT ORDER THE ASSESSING OFFICER MADE VARIOUS ADDITIONS AND DISALLOWANCES. AGGRIEVED BY THE ADDITION OF DISALLOWANCE THE ASSESSEE FILED APPEAL BEFORE T HE LD. CIT(A) AND FIRST ISSUE PERTAINS TO TREATING OF ROYALTY EXPENSES AS CAPITAL EXPENDITURE AND DISALLOWED EXPENDI TURE AMOUNTING TO ` .36 34 751/- WHICH WAS A FTER ALLOWING A DEPRECIATION OF 25%. THE ASSESSING OFFICER HAS MADE THE ABOVE DISALLOW ANCE AFTER DISCUSSING AS UNDER: AS PER THE TERMS OF AGREEMENT M/S. NIPPON PISTON RING CO. LTD GRANTS ASSESSEE EXCLUSIVE RIGHT TO MANUFACTURE THE PRODUCTS IN INDIA AND A NON- I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 3 EXCLUSIVE LICENSE TO SELL THE PRODUCTS IN INDIA. NIPPON PI STON RING CO(NPR) SHALL PROVIDE THE ASSESSEE WITH TECHNICA L ASSISTANCE BY WAY OF THE FOLLOWING: (I) PROVISION OF NPRS TECHNICAL INFORMATION TO IPR (II) TRAINING OF IPR EN GINEERS BY NPR AT OITS PLANT OR PLANTS IN JAPAN; AND (III) DISPATCH OF NPR ENGI NEERS TO !PRS PLANT IN INDIA TO INSTRUCT AND ADVISE IPRS TECHNICA L PERSONNEL FOR THE INSTALLATION AND OPERATION OF THE MACHINER Y AND OTHER FACILITIES FO R THE MANUFACTURE OF PRODUCTS TOOLS AND PROCESS CONTRO L REQUIRED FOR THE MANUFACTURE OF PRODUCT. FURTHER THE TECHNICAL A SSISTANCE SHALL BE PROVIDED IN THE FOLLOWING WAY IN RETURN THE ASSESSEE SHA LL PAY 3% FOR THE FIRST 3 YEA RS AND 2.5% FOR THE NEXT THREE YEARS OF THE NET SALES PRICE OF EA CH PRODUCT SOLD. THUS IT WOULD APPEAR THAT THE AGREEMENT IS FOR PROVID ING TECHNICAL KNOW-HOW AND THE COMPENSATION IS PAID FOR ACQUIRING TH E TECHNICAL KNOW-HOW. THE TECHNICAL INFORMATION PROVIDED FOR MANUFACTURING THE PRODUCTS AND LICENSE GRANTED TO THE ASSESSEE TO MANUFACTUR E THE PRODUCTS IN INDIA AND NON-EXCLUSIVE LICENSE GRANTED TO THE ASSESSEE TO SELL TH E PRODUCTS HAS RESULTED IN ENDURING ADVANTAGE TO THE ASSESSEES BUSINESS. ACCORDINGLY THE ROYALTY PAYMENT TOWARDS ACQUIRING TECHNICAL KNOW-HOW AND LICENSE TO MANU FACTURE/SELL THE PRODUCTS IS IN THE NATURE OF CAPITAL EXPENDITURE WHICH COME S WITHIN THE BLOCK OF INTANGIBLE ASSETS CARRYING 25% DEPRECI ATION. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF SOUTHERN SWITCH CASE LTD (VS) CIT REPORTED IN 232 ITR 359. LN VIEW OF THIS THE AMOUNT OF ` .48 46 334/- IS DISALLOWED AND 25% DE PRECIATION IS ALLOWED. ADDITION BEING ` . 36 34 751/-. 4.2 DURING THE COURSE OF HEARING BEFORE THE FIRST APPELLATE AUTHORITY THE ID. AR HAD MADE ELABORATE WRI TTEN SUBMISSION AND HAS FILED CO PIES OF THE AGREEMENT. HE ARGUED BEFORE THE LD. CIT(A) THAT THE PAYMENT WAS FOR THE USE OF THE KNOW-HOW AND NOT FOR ACQUIRING ANY KNOW-HOW. SINC E THE ROYALTY IS CALCULATED AS A PERCENTAGE OF SALES AND SINCE SALES AR E TAKEN AS REVENUE RECEIPTS THE EXPENDITURE IN EARNI NG THE SALES INCLUDING THE ROYALTY SHOULD BE ALLOWED AS EXPENDITURE. THE ASSESS EE HAS MADE FURTHER SUBMISSION AND THE LD. CIT(A) INCORPORATED SUCH SUBMISSION IN PARA 3.2 WHICH READS AS UNDER: I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 4 THE ASSESSEE COMPANY ENTERED INTO A COLLABORATION AGREEMENT WITH M/S NIPPON PISTON RINGS LIMITED UNDER THE TERMS OF WHICH THE FOREIGN COMPANY AGREED TO PROVIDE THE ASSE SSEE COMPANY TECHNICAL AID AND INFORMATION IN THE MANUFACTURE OF STEEL RINGS GN RI NGS CHROME PLATED RINGS NIFFLEX-S RINGS. THE IUMPSUM AMOUNT PAID TOWA RDS THE TECHNICAL KNOW-HOW WERE CAPITALIZED DURING THE YEARS IN WHICH THEY WERE ACQUIRED AND DEDUCTION U/S.35AB WAS CLAIMED. THE CONTINUING ROYALTY WHICH IS PAID BASED ON THE ACTUAL USAGE OF THE LICENSE IS CALCULATED AT A FIXED PERCENTAGE ON NET SALES. THIS CONTINUING ROYALTY IS DIRECTLY RELATED TO REVENUE GENERATED DURING THE PERIOD AND HAS TO BE CLASSIFIE D AS REVENUE EXPENDITURE. THE DETAILS OF LUMPSUM PAID AND CONT INUING ROYALTY ARE EXPLAINED BELOW: SL. NO. PARTICULARS DATE OF AGREEMENT LUMP SUM PAYMENT NET SALES % ON SALES RUNNING ROYALTY 1. STEEL RINGS 15.11.1986 58 55 460 105763744 3% 3172914 2. GN RINGS 11.06.1993 63 52 800 12425099 5% 621255 3. CHROME PLATED RINGS 11.06.1993 INCLUDED IN GN 43530856 2% 870617 4. NIFFLDEX S RINGS 30.08.1994 90 74 920 3630964 5% 181548 TOTAL 165350663 4846334 THE RELEVANT CLAUSES OF THE AGREEMEN T DT.21-02-1997 AR E EXTRACTED BELOW: ARTICLE 2. LICENSE. 2.1 NPR HEREBY GRANTS TO IPR AN EXCLUSIVE LICEN SE TO MANUFACTURE THE PRODUCTS IN INDIA A ND A NON-EXCLUSIVE LICENSE TO SELL THE PRODUCTS. 2.2 NPR MAY GRANT TO IPR THE RIGHT TO SUB-LICENSE GRANTE D PURSUANT TO THE PRECEDING PARAGRAPH TO ANOTHER I NDIAN PARTY WITH THE PRIOR WRITTEN CONSENT OF NPR; PROVIDED THE TERM S OF SUCH SUB-LICENCE WILL HOWEVER BE AS MUTUALLY AGREED TO BY A LL THE PARTIES CONCERNE D INCLUDING NPR AND THIS IS SUBJECT TO THE APPROVAL OF THE GOVERNMENT OF INDIA. ARTICLE 7- ROYALTY: 7.1 IN CONSIDERATION OF THE LICENSE GRANTED TO LPRPURSUANTTO ARTICLE 2 HEREOF IPR AGREES TO PAY NPR THE FO LLOWING ROYALTY IN JAPANESE YEN: ROYALTY 3%(THREE PERCENT) - FOR FIRST THREE YEARS I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 5 2.5%(TWO AND HALF PERCENT) - FOR NEXT THREE YEARS OF THE NET SALES PRICES OF EACH OF THE PRODUCTS SOLD BY IPR RESPECTIVELY. 7.2 ALL PAYMENTS BY IPR TO NPR TO BE MADE UNDER ARTICLE 7.1 SHALL BE SUBJECT TO INDIAN TAXES AND SHALL BE DEDUCTIBLE AT SOURCE AND THE NET AMOUNT WILL BE REMITTED TO NPR. IPR SHALL PROVIDE NPR WITH OFFICIAL RECEIPTS EVIDENCING PAYMENT OF SUCH TAXES AS SO ON AS POSSIBLE AFTER PAYMENT THEREOF. ARTICLE 10 CONFIDENTIALITY 10.1 IPR AGREES AND SHA LL CAUSE ANY OF ITS PERMITTE D SUBLICENCEES TO AGREE IN WRITING TO NPR: (A) TO TREAT AS CONFIDEN TIAL ALL TECHNICAL INFORM ATION KNOW-HOW TRADE CUSTOMS AND ANY OTHER INFORMATION(THE CONFIDENTIAL INFO RMATION) THAT IT HAS ACQUIRED FROM NPR WHETHE R ORALLY OR IN WRITTEN FORM: (B) NOT TO DISCLOSE ANY CO NFIDENTIAL INFORMATION EXCEPT TO THOSE OF ITS AGENTS SUB CONTRACTORS OFFICERS DIRECTORS OR EMPLOYEES WHO HAVE A NEED TO KNOW: (C) TO ENSURE TO THE EXTE NT PERMITTED BY LAW OF IN DIA THAT ANY PERSON FALLING WITHIN ANY OF THE CATEGORIE S IN THE PRECEDING SUB PAR A GRAPHS SHALL ABIDE BY THE OBLIGATION OF CONFIDEN TIALITY IMPOSED BY THIS AR TICLE: AND NOT TO USE ANY TECHNICAL INFORMATION IT WILL ACQUIRE FR OM NPR UNDER THIS AGREEMENT OTHER THAN FOR THE PURPOSES ALLOWED HEREIN. 10.2 IPRS OBLIGATIONS UNDER THIS ARTIC LE SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT FOR ANY REASON ARTICLE 13 DURATION AND TERMINATION 13.1 UNLESS TERMINATED EARLIER AS HERE INAFTER PROVIDED THE TERM OF THIS AGREEMENT SHALL EXPIRE SIX (6) YEARS FROM THE EFFEC TIVE DATE OF THIS AGREEMENT I.E. THE TERMS OF THIS AGREEMENT SHALL EX PIRE WHEN THE LAST ROYALTY ACCRUES AS PROVIDED FOR IN ARTICLE 7.1 HEREOF. IT IS SUBMITTED THAT ROYALTY IS NOTHING BUT PAYMENTS MADE FOR THE USE OF THE TECHNICAL KNOW HOW AND IS PAID ON YEAR TO YEAR BASIS . NO ENDURING BENEFIT IS OBTAINED BY THE PAYMENT OF ROYALTY. IN FACT THE ROYALTY IS PAID ONLY ON THE ACTUAL USE OF THE TECHNICAL KNOW HOW AND THEREFORE THERE IS NO FUTURE RIGHT ACQUIRED BY PAYMENT OF ROYALTY. THE RIGH T TO USE HAS BEEN OB TAINED AS A PART OF THE LUMP SUM PAYMENT WHICH INCLUDES TRANSFER OF TECHNICAL KNOW HOW AND RIGHT TO USE. FURTHER ON CE THE AGREEMENT PERIOD IS OVER THE ROYALTY PAYMENT I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 6 IS NOT MADE THE AGREEMENT GETS TERMINAT ED THEREBY THE LICEN SE GRANTED TO THE APPELLANT STANDS TERMINATED AND HAVE TO DISCONTINUE THE USE OF TECHNICAL INFORMATION (INCLUDING ANY IMPROVEM ENT THEREOF) WHIC H IN OTHER WORDS WOULD MEAN DISCONTINUANCE OF MANUFACTUR ING. FURTHER THE APPELLANT HAVE TO RETURN THE TECHNICAL DATA DESIGNS SPECIFICATIONS CATALOGUES ETC. TO THE LICENSOR (NPR) IMMEDIATELY. THIS CLEARL Y INDICATES THAT THERE IS NO ENDURING BENEFIT TO THE APPELLANT ON THE EXPIRY OF THE AGREEMENT OR ON STOPPAGE OF PAYMENT OF THE ROYALTY. FURTHER THESE RUNNING ROYALTY PAYMENTS MADE FOR THE ACTUAL USAGE OF THE LICENSE HAS BEEN ALLOWED AS REVENUE EXPENDITURE FOR A LL ASSESSMENT YEARS FROM 1992-93 TILL 1998-99. THERE IS NO FIN DING THAT IT IS CAPITAL IN NATURE IN EARLIER YEARS. THE APPELLANT CLAIMED THIS ROYALTY PAY MENT AS REVENUE EXPENDITURE IN THE RETURN FOR THE FINANCIAL YEAR 2003-04. THE ASSESSING OFFICER HAS TREATED THIS ROYALTY PAYMENT AS CAPITAL EXPENDITU RE AND GRANTED DE PRECIATION AT 25% APPLYING THE RATIO OF THE DECISION OF THE MADRAS HIGH COURT / SUPREME COURT IN THE CASE OF SOUTHERN SWITCHGEAR LT D 232 ITR 359 (SC). IN THAT CASE THE ASSESSEE OBTAINED THROUGH THE AGREEMENT WITH THE FOREIGN COMPANY SECURED TO THE ASSESSEE AN ENDURING ADVANTAGE AND BENEFIT IN THAT THE SAME WAS AVAILABLE TO THE ASSESSEE FOR ITS MANU FACTURING AND INDUSTRIAL PROCESS EVEN AFTER THE TERMINATION OF THE AGREEMENT. IN THAT CASE IN THE FIRST YEAR OF AGREEMENT ITSELF THE TRIBUNAL AND HIGH COURT FOUND THAT 25 % OF THE PAYMENT REPRESENTS CAPITAL EXPEND ITURE ACCORDINGLY 25% OF THE ROYALTY PAYMENTS WERE CONSIDERED AS CAPITAL IN NATURE . IN ANY EVENT TH E ASSESSING OFFICER ERRED IN TREATING THE ENTIRE ROYALTY PAYMENT AS CAP ITAL IN NATURE. IT WAS HELD IN THE CASE OF CIT(VS) IAEC (PUMPS) L TD REPORTED IN 232 ITR 316 (SC) THAT THE AGREEMENT IS FOR A DURA TION OF 10 YEARS WITH THE OPTION TO EXTEND THE AGREEMENT OR RENEW THE SAME SUBJECT TO THE APPROVAL OF THE GOVERNMENT OF INDIA AND NOT TO DISCLO SE THE SAME TO THIRD PARTIES WOULD ESTABLISH THAT WHAT WAS OBTAINED BY TH E ASSESSEE IS ONLY A LICENCE AND WHAT WAS PAID BY ASSESSEE IS ONLY A LICENCE FEE AND NOT THE PRICE FOR ACQUISITION OF ANY CAPITAL ASSET. RECENTLY THE HONBLE INCOME TAX APPELL ATE TRIBUNAL CHEN NAI BENCH IN THE CASE OF M/S.PANASONIC CARBON LTD IN ITA NOS.1958 TO 1973/2008 FOR THE ASST YEARS 1999-00 TO 2004-05 DT.10-07-2009( COPY ENCLOSED) HAS UPHELD THE CLAIM OF THE ASSESSEE THAT THE PAYMEN T OF ROYALTY IS REVENUE IN NATURE. 1. CIT V. MRF LTD 149 ITR 405 (MAD) 2. CIT V. MRFLTD 212 (MAD) I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 7 3. CIT V. CHEMICALS AND PLASTIC S (I) LTD. 179 1TR269 (MAD) 4. CIT Y. AQUAPUMP INDUSTRIES LTD 218 ITR 67 (MAD) 5. CIT V. SOUTHERN PRESSING (P) LTD 242 ITR 67 (MAD) 6. KIRLOSKAR PNEUMATIC CO. LTD. 151 ITR 484 (BOM) 7. CIT V. SWARAJ ENGINES LTD. 203 CTR 310 (P&H) 4.3 THE LD. CIT(A) WHILE CONSIDERING AND ACCEPTING THE PLEA OF THE ASSESSEE CONCLUDED TO GIVE PART RELIEF TO THE A SSESSEE WITH RESPECT TO THIS GROUND AS PER PARA 3.3 OF HIS ORDER WH ICH IS REPRODUCED AS UNDER: 3.3 I HAVE CONSIDERED TH E FACTS OF THE CASE AND TH E SUBMISSIONS OF THE ID. AR. I HAVE ALSO GONE THROUGH THE VARI OUS CLAUSES IN THE AGREEMENT AND THE DECISION RELIED ON BY THE AO AND THE AR. THE HONBLE APEX COURT IN THE CASE OF SOUTHERN SWITCHGEAR (SUPR A) HAS AFFIRMED THE ORDE R OF THE MADRAS HIGH COURT (148 ITR 272(MAD). HENCE REFE RENCE TO THE DECISION OF THE HONBLE MADRAS HIGH COURT AT 23 2 !TR 359 MAY BE MADE HEREUNDER FOR CLARITY. THE ASSESSEE COMPANY ENTERED INTO A COLLABORATION AG REEMENT WITH A FOREIGN COMPANY UNDER THE TERMS OF WHICH THE FOREIGN COMPANY AGREED TO PROVIDE THE ASSESSEE COM PANY TECHNICAL AID AND INFORMATION IN THE MANUFACTURE OF SWITCHGEARS AND THE RIGHT TO SELL SUCH PRODUCTS. THE FOREIGN COMPANY ALSO AGREED TO KEEP THE INDIAN COMPANY POSTED WITH THE LATEST AND MODERN DEVELOPMEN TS IN THE FILED OF MANUFACTURE OF SWITCH GEARS AND TRANSFORMERS AND TO TRAIN THE NECESSARY PERSONNEL AT ITS U.K. FACTORY. UNDER THE TERM S OF THE AGREEMENT THE ASSESSEE COMPANY AGREED TO PAY TO THE FOREIGN COMP ANY AS CONSIDERATION FOR THE SERVICES RENDERED BY IT A ROYALTY ON SALES AND A LUMP SUM FOR THE TECHNICAL AND PAYABLE IN FIVE EQUA L INSTALLMENTS THE PAYMENT TO BE SPREAD OVER A PERIOD OF TIME. TH E TRIBUNAL DISALLOWED 25% OF THE TECHNICAL FEES AND 25% OF THE ROYA LTY PAID BY THE ASSESSEE TO THE FOREIGN COMPANY. THE HIGH COURT HE LD THAT A PERUSAL OF THE VARIOUS CLAUSES OF THE AGREEMENT CLEARL Y INDICATED THAT THE TECHNICAL KNOWLEDGE THAT THE ASSESSEE OBTAINE D THROUGH THE AGRE EMENT WITH THE FOREIGN COMPANY SECURE D TO THE ASSESSEE AN ENDURING ADVANTAGE AND BENEFIT IN THAT THE SAME WAS AV AILABLE TO THE ASSESSEE FOR ITS MANUFACTURING AND INDUSTRIAL PROCESS EVEN AFTER THE TERMINATION OF THE AGREEMENT. THE HIGH COURT HELD THAT THE RIGHT TO MANUFACTURE CERTAIN GOODS EXCLUSIVELY IN INDIA SHOULD BE TAKEN TO BE AN IN DEPENDENT RIGHT SECURED BY THE ASSESSEE FROM TH E FOREIGN COMPANY WHICH WAS OF AN ENDURING NATURE THAT CONSEQUENTLY THE ENTIRE TECHNICAL FEES COULD NOT BE ALLOWED AS A REVENUE EXPENDITURE AND THAT THE TRIBUNAL WAS THEREFORE RIGHT IN ITS VIEW THAT 25% OF THE TECHNICAL AND FEES WOULD I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 8 HAVE TO BE TAKEN AS BEING CAPITAL IN NATURE. SINCE THE FOREIGN COMPANY HAS ALSO AGREED NOT TO MANUFACTURE IN INDIA ANY OF THE PRODUCTS IN QUESTION OR GRANT OR MAKE AVA ILABLE TO ANY OTHER PERSON ANY INFORMATION RELATING TO MA NUFACTURE LICENCE OR RIGHTS FOR ANY OF THE PRODUCTS IN QUESTION IN INDIA TH EREBY CONFERRING ON THE ASSESSEE EXCLUSIVE RIGHT OF MANUFACTURE AND TH E SALE OF THE PRODUCTS THE HIGH COURT HELD THAT THE CLAUSE IN THE AGREEMENT INDICATED THAT THE ASSESSEE PAID THE ROYALTY FOR THE ACQUISITION OF AN EXCLUSIVE PRIVILEGE OF MANUFACTURING AND SELLING THE PROD UCTS AND THE AC QUISITION OF AN EXCLUSIVE PRIVILEGE OF MANUFACTURI NG AND SELLING THE PR ODUCTS AND THE ACQUISITION OF SUCH A RI GHT WAS RIGHTLY TREATED BY THE AFFIRMED THE DISALLOWANCE OF ROYALTY ESTIMATED AT 25% BY THE TRIBUNAL. ON APPEAL TO THE SUPREME COURT: THE SUPREM E COURT AFFIRMED TH E JUDGMENT OF THE HIGH COURT. THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THAT OF THE APPELLANT. FURTHER SINCE DECISION OF SOUTHER N SWITCHGEAR LTD (SUPRA) WAS RENDERED LATER TO THAT OF THE IAEC PUMPS LTD (SUPRA) THE DECISION IN THE CASE OF SOUTHERN SWITCHGEAR WOUL D PREVAIL. AS THE ASSESS EE COMPANY HAS A JOINT VENTURE AGREEMENT WITH A FO REIGN COMPANY IT CANNOT BE RULED OUT THAT THERE WAS NO TECHNICAL AID FOR SETTING UP THE FACTORY. TH EREFORE CONSIDERING THE TOTALITY OF THE FACTS IN TH E CASE OF THE APPELLANT AN D RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COUR T IN SOUTHERN SWITCHGEAR (SUPRA) I DIRECT THE AO TO TREAT 25% OF ROYALTY PAYMENT AS CAPITAL EXPENDITURE AND THE BALANCE 75% AS REVENUE EXPENDITURE. TH E AO IS ALSO DIRECTED TO ALLOW APPROPRIATE DEPRECIATION ON THE 25% CAPITAL EXPENDITU RE IN ACCORDANCE WITH LAW. THE GROUND IS PARTLY ALLOWED. 4.4 AGGRIEVED BY THIS ORDER WITH REGARD TO SUSTAINING PART DISALLOWANCE WITH RESPECT TO ROYALTY EXPENDITURE THE ASSESSEE IS IN APPEAL AND WITH RESPECT TO RELIEF GIVEN BY THE LD. CIT(A) IN THIS REGARD THE DEPARTMENT HAS COME UP IN APPEAL. SIMILAR ACTION HAS BEEN TAKEN WITH RESPECT TO OTHER THREE YEARS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) FOR OTHER YEAR S WITH RESPECT TO CONFIRMATION OF PART DISALLOWANCE THE ASSESSEE HAS FILED APPEALS AND IT WAS CONTENDED AT THE TIME OF HEARING THAT THE ASSESSEE HAS NOT ACQUIR ED ANY NEW ASSETS DURING THE YEAR UNDER CONSIDERATION AND ON EARLIER OCCASIONS THE DEPARTMENT IS ALLOWING THE CLAIM OF THE I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 9 ASSESSEE SO THERE IS C HANGE IN THE STAND ON THE DEPARTMENT WITHOUT ANY NEW MATERIAL OR DEVELOPMENT HAVING COME IN TO EXISTENCE AND WHILE MAKING REFERENCE TO THE TERMS OF VARIOUS AGREEMENTS AND GI VING SPECIFIC REFERENCE ABOUT RELEVANT CLAUSE BY WHICH DATA IS REQUIRED TO BE RETURNED ON TERMINATION OF THE AGREEMENT AS SPECIFICALLY CONTAINED IN ARTICLE 13.4 OR 14.4 IN A LL THE AGREEMENTS AND SINCE IT IS THE CASE OF USING OF THE DATA FOR A SPECIF IC PERIOD AND IN CASE OF TERMINATION OF CONTRACT OR CONTRACTUAL PER IOD HAVING COMPLETED IT HAS TO GO BACK TO THE OWNERS AND IT IS NOT EXCLUSIVE RIGHT TO THE MA NUFACTURER. THEREFOR E THE DECISION OF SOUTHERN SWITCHGEAR LTD. WOULD NOT APPLY IN THIS CA SE AND THE WHOLE CLAIM MADE BY THE ASSESSEE IS AN ALLOWABLE EXPEND ITURE WHICH HAS WRONGLY BEEN DISALLOWED BY THE ASSESSING OFFICER WHILE TREATING IT TO BE A CAPITAL EXPENDITURE AND THE LD. CIT(A) IS ALSO NOT JUSTIFIED JUST BY ALLOWING PART RELIEF AND SUSTAINING OF DEPRECIATION OF 25%. FURTHER REFERENCE WA S MADE TO THE DECISION OF HONBLE MADRAS HIGH COURT DATED 12.07.2010 IN TC(A) NOS. 552 TO 556 OF 2010 IN CIT VS. PANASONIC CARBON INDIA LTD. HONBLE DELHI HIGH COURTS DECISION REPORT ED IN 319 ITR 109 HONBLE M.P. HIGH COURT DECISION IN THE CASE OF CIT VS. EICHER MOTORS LTD. 293 ITR 464 HONBLE DELHI HIGH COUR TS DECISION IN THE CASE OF SHRIRAM PISTONS AND RINGS LTD. 307 ITR 363. THEREFORE THE OR DER OF THE LD. CIT(A) REQUI RES TO BE MODIFIED TO THE EXTENT TO ALLOW THE ENTIRE CLAIM OF THE ASSESSEE FOR ALL THE YEARS UNDER CONSIDERATION. 5. THE LD. DR STRONGLY OPPOSED TO THE PLEAS OF THE ASSESSEE AS RAISED AND CONTENDED THAT THE ASSESSEE HAS GOT BENEFIT OF ENDURING NATURE AND IT IS ALSO BEEN WORKED OUT IN RELATION TO SALES AND THE A SSESSEE HAS MISERABLY FAILED TO ESTABLISH I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 10 THAT IT IS BUSINESS EXPENDITURE WHEREAS IT IS A CLEAR CUT EXPENDITURE HAVING INCURRED FOR ACQUIRING OR MANUFACTURING RIGHT WHICH IS OF ENDURING NATURE. THEREFORE THE ASSESSING OFFICER HAS MADE PROPER DISA LLOWANCE BUT ALLOWING THE ADMISSIBLE DEPRECIATION ON SUCH EXPENDITURE AND THE LD. CIT(A) IS NOT LEGALLY CORRECT TO GIVE EVEN PART RELIEF AS ALLOWED BY THE LD. CIT(A). THEREFORE IT WAS URGED FOR SETTING ASIDE THE ORDER OF THE LD. CI T(A) AND RESTORING THAT OF THE ASSESSING OFFICER IN THIS REGARD. 6. THE LD. COUNSEL FOR THE ASSESSEE IN ORDER TO COUNTER THE SUBMISSIONS OF THE LD. DR HAS SUBMITTED THAT THE AGREEMENT BETW EEN THE ASSESSEE AND THE OTHER PARTIES WHO PROVIDED TECHNICA L KNOW-HOW TO THE ASSESSEE FOR A PARTICULAR PERIOD OF TIME AS CONTAINED IN THE AGREEMENT AN D ON TERMINATION OF THE CONTRACT IT IS SPECIFICALLY MENTIONE D THAT ALL DRAWINGS AND OTHER MATERIALS HAS TO BE RETURNED BACK TO THE PRINCIPLE/PROPRIETOR. THE SA ID KNOW-HOW SHOULD NOT BE PASSED ON TO ANY OTHER PERSON AND COULD ONLY BE US ED FOR MANUFACTURING PURPOSE OF THE ASSESSEE AND NOT FOR ANYBODY ELSE AND THER E IS ALSO A DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN SWITC HGEAR LTD. AND IN THAT CASE JOINT VENTURE AGREEMENT WAS WITH THE FOREIGN CO MPANY WHEREAS IN THE CASE OF THE ASSESSEE THIS IS AN AGREEMENT TO PROVI DE TECHNICAL AID FOR SETTING UP OF FACTORY BY THE NPR AND IN NO CASE IT CAN BE TAKEN AS CAPITAL EXPENDITURE. AS SUCH KEEPING IN VIEW OF THE ENTIRETY OF FACT S CIRCUMSTANCES AND MATERIAL ON RECORD THE PLEA OF THE ASSESSEE SHOULD BE ACCEPTED AND DISALL OWANCE MADE BY THE ASSESSING OFFICER AND PARTLY RESTRICTED BY THE LD. CI T(A) SHOULD BE FULLY DELETED. I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 11 7. WE HAVE HEARD BOTH THE SIDES CONSIDER ED THE MATERIAL ON RECORD AS WELL AS CASE LAW DISCUSSED BY THE LD. CIT(A) IN HI S ORDER AND CITED BY T HE RIVAL SIDES IN THE LIGHT OF RELEVANT CLAUSES OF AGREEMENT AN D FIND THAT THE LD. CIT(A) WHILE RELYING UPON THE DECISION OF THE HONBLE SUPREME C OURTS DECISION IN THE CASE OF SOUTHERN SWITCHGEAR LTD. (SUPRA) (ORDER DATED 11.12.1997) HAS DIRECTED THE ASSESSING OFFICER TO TREAT 25% OF THE ROYALTY PAYMENT AS CAPITAL EXPENDITURE AND THE BALANCE 75% AS REVENUE EXPENDITURE AND THE ASSE SSING OFFICER HAS FURTHER BEEN DIRECTED TO ALLOW APPROPRIATE DEPREC IATION ON THE 25% CAPITAL EXPENDITURE IN ACCORDANCE WITH LAW AND WHILE DOING SO THE LD. CI T(A) HAS PREFERRED TO FOLLOW THE ABOVE DECISION WHICH WAS PRONOUNCED LATER TO THAT OF CIT V. IAEC (PUMPS) LTD. 232 ITR 316 (SC) ( ORDER DATED 03.04. 1997) WHICH ACCORDING TO HIM WOULD PREVAIL. 7.1 WE HAVE CONSIDERED THE ARGUMENTS OF RIVAL SIDES AND MATERIALS ON RECORD IN THE LIGHT OF PRECEDENT RELIED UPON. WE HA VE ALSO CONSIDERED THE BASIS AND REASONING AS GIVEN BY THE LD. CIT(A) IN GIVI NG PART RELIEF TO THE ASSESSEE. SO FAR AS THE FACTS OF THE CASE IN HAND AND POINT AT ISSUE DECIDED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SOUTHERN SWIT CHGEARS LTD. (SUPRA) IS CONCERNED IT IS ALMOST IDENTICAL AND SUCH DECISION OF T HE HONBLE MADRAS HIGH COURT HAS FURTHER BEEN AFFIRMED BY THE HONBLE SUPREME C OURT IN THE SAID CASE OF SOUTHERN SWITCHGEARS LTD. (SUPR A) AND THE LD. CIT(A) HAS FOLLOWED SUCH DECISION TO GIVE PART RELIEF TO THE ASSESSEE AND NO DISTINGUISHING FEATURE HAS BEEN POINTED BY THE LD. DR IN THIS REGARD. THEREFORE WHILE CONCU RRING WITH THE FINDING AND THE CONCLUSION OF THE LD. CIT(A) IN THIS REGAR D WE UPHOLD HIS ACTION AND DI SMISS THIS GROUND IN ALL THE APPEALS OF THE REVENUE AS WELL AS OF ASSESSEE. I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 12 8. AS REGARDS THE ISSUE IN RELATION TO SALES PROMOTION EXPENDITURE FOR THE ASSESSMENT YEAR 1999-2000 IS CONCERNED THE ASSESSEE HAS CLAIMED A SUM OF ` .56 58 538/- AS SALES PROMOTION EXPENSES IN ADDITION TO THE TECHNICAL CONSULTANCY FEE PAYABLE AT 5% OF THE TOTAL TURNOVER. IT WAS PAID TO THE INDIAN PISTON LTD. (IPL). THE ASSESSING OFFICER HAS DISALLOWED IT ON THE GROUND THAT AS PER THE AGREEMENT WITH IPL NO SUCH AMOUNT IS PAYABLE BY THE ASSESSEE AND NO SUCH CLAIM WAS MADE IN THE IMMEDIATE PREVIOUS YEAR. AF TER PERUSING THE RELEVANT PORTION OF THE AGREEMENT BETWEEN THE ASSESSEE AND T HE IPL THE ASSESSING OFFICER HAS CONCLUDED AS UNDER: AS COULD BE SEEN FROM THE ABOVE THE TERMS OF AGREEMENT PROVIDED FOR ENTIRE MARKETING OF THE PRODUCTS OF IP RINGS ALSO FOR WHICH THE TECHNICAL ASSISTANT FEE AGREED IS 5%. IN THE PROFIT AND LOSS A CCOUNT IT IS SEEN T HAT AN AMOUNT OF RS.94 38 512/- HAS ALREADY BEEN DEBITED AS TECHNICAL CONSULTANCY FEE. THEREFORE AS PER THE AGREE MENT WITH IP LTD NO SU CH AMOUNT IS PAYABLE BY THE ASSESSEE. FURTHER IT IS ALSO SEEN THAT THE ASSESSEE HAD NOT CLAIMED SUCH EXPENDITURE IN THE IMMEDIATE PREVI OUS YEAR. THUS THE SALES PROMOTION EXPENSES CLAIMED BY THE ASSESSEE IS NOT PROVED. ACCORDINGLY THE AMOUNT IS ADDED BACK. 8.1 THE ASSESSEE TOOK UP THE MATTER IN APPEAL AND DURING THE C OURSE OF HEARING BEFORE THE LD. CIT(A) THE LD. AR OF THE ASSESSEE HAS SUBMITTED AS UNDER: THE ASSESSEE HAS A TIE UP WITH M/S. INDIA PISTONS LTD. FOR USING THEIR SALES DEPOT AND SALES NETWORK THROUGHOUT THE COUNTRY. IN DIA PISTONS LTD. BY VIRTUE OF THEIR PRESENCE IN THE MARKET FOR MORE THAN 60 YEARS GUIDE THE ASSESSEE IN PROMOTING THEIR PRODUCTS INTRODUCING NEW NEGOTIATI ON OF PRICES FOR OUR PRODUCTS SECURING ORDERS ON BEHALF OF THE APPELLA NT ETC. IP RINGS LTD DOES NOT HAVE ANY MARKETING SET UP ON ITS OWN. THE TIE UP WITH M/S. INDIA PI STONS LTD IS TO USE THEIR OFFICE AND OTHER I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 13 FACILITIES AT THE RESPECTIVE PLACES AND NOT FOR MEETING OUT THE SALES PROMOTIONAL EXPENDITURE INCURRED AT THE RESPECTIVE PL ACES BY THE ASSESSEE. SALES PROMOTION EXPENSES INCLUDE PROMOTIONAL EXPENSES LIKE INCENTIVES BASED ON SALES PARTICIPATING IN EXHIBITIONS INSTALLATION OF STALLS PRINTING OF PR OMOTIONAL BROCHURES PRODUCT GUIDELINES ISSUE OF FREE SAMPLES ETC. STEEL RINGS WERE SENT ON FOC BASIS FO R APPROVAL OF ORDERS TO ALL THE MAJOR CLIENTS OF THE COMPANY DURING THE SAID A SSESSMENT YEAR. STEEL RINGS WERE ALSO PROVIDED TO THE CUSTOMERS UNDER THE IN CENTIVE SCHEME. ALL THE CUSTOMERS WHO PURCHASED STEEL RINGS FROM THE COM PANY ON BULK QUANTITY WERE OFFERED WITH ADDITIONAL RINGS FREE OF COST UNDER THE PROM OTIONAL SCHEME OF THE COMPANY. SINCE THE REPLACEMENT MARKET OF IP RINGS LIM ITED ARE HANDLED BY M/S INDIA PISTONS LIMITED THE FOC RINGS WERE SUPPLIED BY M/ S INDIA PISTONS LTD. WHO IN TURN RAISED THE DEBIT NOTE ON IP RINGS LI MITED FOR THE FOC SALES. THESE EXPENSES WERE ALLOWED AS DEDUCTION DURING THE ASSESSMENT OF ASSESSMENT YEARS 1998-99 AND 2000-01 (COPY OF DEBIT NOTE RAISED BY M/S. INDIA PISTONS LTD ENCLOSED). 8.2 THE LD. CIT(A) WHILE CONSIDERING AND NOT ACCEPTING THE PLEA OF THE ASSESSEE HAS CONCLUDED TO CONF IRM THE IMPUGNED DISALLOWANCE OF ` .56 58 538/- MADE BY THE ASSESSING OFFICER WHILE DISM ISSING THIS GROUND OF APPEAL OF THE ASSESSEE. 8.3 STILL AGGRIEVED THE ASSESSEE TOOK UP THE MATTER IN FURTHER APPEAL AND WHILE REITERATING THE SUBMISSIONS AS MADE BEFORE THE LOWER AUT HORITIES THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT DURI NG THE YEAR UNDER CONSIDERATION NEW RINGS WERE INTRODUCED IN THE MARKET BY T HE IPL AND SINCE IT WAS NEW PRODUCT IN THE MARKET THIS ITEM WAS THROWN IN THE MA RKET ON FREE OF COST. NO DOUBT 5% OF THE I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 14 TURNOVER FOR TECHNICAL CONSULTANCY FEE WA S ALREADY THERE AND IN ADDITION TO THAT SALES PROMOTION EXPENSES HAVE BEEN CLAIMED AGAINST WHIC H IPL RAISED DEBIT NOTES AND SINCE IT WAS FIRST TIME PAYMENT AND NEIT HER BEFORE NOR AFTER IT HAS BEEN MADE BECAUSE INTRODUCTION OF THE NEW PRODUCT WAS DONE IN THIS YEAR. THEREFORE THERE WAS NO WRITTEN AGREEMENT AND THIS EXPENDITURE HAS BEEN CLAIMED ON THE BASIS OF THE ORAL COMMITMENT AND SINCE IT TAKES CARE OF FUTURE PRODUCT THEREFORE IT IS AN ALLOWABLE EXPENDITUR E WHICH HAS WRONGLY BEEN DI SALLOWED BY THE ASSESSING OFFICER AND THE LD. CIT(A) IS ALSO NOT JUST IFIED IN CONFIRMING SUCH DISALLOWANCE IT WAS PLEADED FOR ALLOWING THE CLAIM OF THE ASSESSEE. 8.3 THE LD. DR RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND PLEADED FOR CONFIRMATION OF THE IMPUGNED ORDER AS HUGE EXP ENDITURE HAS BEEN CLAIMED WITHOUT THERE BEING ANY AGREEMENT WITH THE IPL WHEN TECHNICAL CONSULTANCY FEE WAS PAYABLE AT 5% OF THE TURNOVER TO THE IPL. AS SUCH THE ASSESSING OFFICER IS JUSTIFIED IN REJECTING THE CLAIM AND THE LD. CIT(A) IS LEGALLY CORRECT TO CONFIRM SUCH DISALLOWANCE. IT WAS URGED FOR CONFIRMATION OF THE IMPUGNED ORDER IN THIS REGARD. 8.4 WE HAVE HEARD BOTH THE SIDES CONSIDER ED THE MATERIAL ON RECORD AS WELL AS RELEVANT PORTION OF THE OR DERS OF AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS CLAIMED A SUM OF ` .56 58 538/- AS SALES PR OMOTION EXPENSES IN ADDITION TO THE TECHNICAL CONSULTANCY FEE PAY ABLE AT 5% OF THE TU RNOVER TO THE IPL. IT IS ALSO NOT IN DISPUTE AS PER AGREEMENT WIT H IPL THAT THERE IS NO STIPULATION IN THE AGREEMENT BETWEEN THE ASSESSEE AND IPL ABOUT PAYMENT OF SUCH AMOUNT AND IT IS ALSO NOT IN DISPUTE THAT SUCH TYPE OF CLAIM WAS EVER MADE IN THE IMMEDIATE PREVIOUS YEAR WHEN SUCH A HUGE PAYMENT IS STATED TO HAVE BEEN MADE ON THE I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 15 BASIS OF SO CALLED ORAL CO MMITMENT WITHOUT PLACING ANY MATERIAL OR EVIDENCE TO PROVE THE EXPEDIENCY OF SUCH EXPENDITURE WITH THE BUSINESS OF THE ASSESSEE OR ANY NEXUS OF THE EXPENDITURE WITH BUSINESS IN THIS REGARD. THE PLEA OF THE ASSESSEE IS THAT IT IS A TIE-UP WITH M/S. IPL FOR USI NG THEIR SALES DEPOT AND SALES NETWORK THROUGHOUT THE COUNTRY AND IPL BY VI RTUE OF THERE PRESENCE IN THE MARKET FOR MORE THAN 60 YEARS GUIDE THE ASSESSEE IN INTRODUCING THE NEW PRODUCT AND ACQUIRING ORDER FOR THE ASSESSEE ETC. WHER EAS THE IP RINGS LTD. DOES NOT HAVE ANY MARKET SET UP IN ITS OWN AND WHEN SPECIFICALLY POINTED OUT THAT THERE IS ALREADY CLAUSE IN THE AGREEMENT FOR PAYMENT TECHNI CAL CONSULTANCY FEE PAYABLE AT 5% THE ASSESSEES COUNSEL ASSERTED FURTHER T HAT THERE WAS A DIRE NEED FOR SUCH EXPENDITURE AND IT HA S BEEN USED FOR LAUNCHING OF T HE NEW PRODUCT WITHOUT WHICH THE ASSESSEE COULD NOT APPROPRIATELY MARK ET THE NEW PRODUCT. BUT WHEN ASKED TO SUPPLY CERTAIN DATA IN DETAILS ABOUT J UDGMENT AND OTHER DETAILS THE ASSESSEE WAS UNABLE TO DO SO. CONSIDERING THE ENTIRETY OF FACTS CI RCUMSTANCES MATERIAL ON RECORD WE ARE INCLINED TO CONCUR WITH TH E CONCLUSION AS DRAWN BY THE LD. CIT(A) WHO IS FOUND TO HAVE CONSIDERED EACH A ND EVERY ASPECT OF THE ISSUE BEFORE ARRIVING AT THE CONCLUSION DRAWN BY HI M WHEN NO CONTRARY MATERIAL HAS BEEN PROVIDED BY THE ASSESSEE IN THIS REGAR D AND DISMISS THIS GROUND OF APPEAL OF 1999- 2000. 9. SIMILARLY FOR THE ASSESSMENT YEAR 2004-05 AND 05-06 THE SALES PROMOTION EXPENDITURE TO THE EX TENT OF 50% FOR THE THESE TW O YEARS HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER WHICH ACTION CAME TO BE CONFIRMED BY THE LD. CIT(A) IN APPEALS BY FOLLOWING THE ORDER FOR THE A SSESSMENT YEAR 1999-2000 PASSED BY HIM. I.T.A. NOS.1716 TO 1719 & 1687 TO 1690/MDS/10 16 CONSIDERING THE ENTIRETY OF FA CTS CIRCUMSTANCES AND MATERI AL ON RECORD WE FOLLOW THE ORDER FOR THE ASSESSMENT YEAR 1999-2000 PASSED BY US IN EARLIER PART OF THE ORDER ON THIS ISSUE AND DISMISS THIS GROUND OF APPEAL FOR BOTH THE ASSESSMENT YEARS ALSO. 10. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE AS WELL AS REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 25.02.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI DATED THE 25.02.2011 VM/- TO:THE ASSESSEE//A.O./CIT(A)/CIT/D.R. L