- (1.) THIS is an appeal by the Revenue against the order passed by the Tribunal, Chandigarh B Bench in ITA No. "(i) Whether in law the royalty and cess of royalty paid as a percentage of net selling price of licensed product is a capital expenditure not allowable as a deduction under s. 37 of the IT Act. (ii) Whether the Hon'ble Tribunal was right in law in allowing deduction under s. 35AB even after observing that the conditions for claim of said deductions were not fulfilled."
(2.) WE have heard Shri Yogesh Putney, advocate for the Revenue and Shri P.C. Jain, advocate for the respondent and with their consent, the appeals are disposed of finally. declaring its income at Rs. 30,43,17,955. At the time of filing the return, the assessee claimed deduction to the tune of Rs. 1,76,93,000 paid on account of royalty and cess of royalty to M/s Hitachi Ltd. Another deduction of Rs. 59,02,295 being 1/6th of Rs. 3,54,13,775 was claimed under s. 35AB of the Act, on account of payment made to M/s Teba Ltd. for acquiring their services connected with dismantling, packing and transporting of the plant purchased by the assessee in Finland and installation of the same in India.
(3.) The claim of the petitioner with regard to the above two issues was rejected by the AO while framing the assessment. against the order of CIT(A) was rejected by the Tribunal. As far as issue No. 1 is concerned, the Tribunal relied upon the order passed by the Tribunal in the case of Swaraj Engines. The order passed by the Tribunal in case of Swaraj Engines is under consideration before this Court in IT Appeal No. 99 of 2002 which has also been disposed of by a separate order of today [reported as CIT vs. Swaraj Engines Ltd. (2006) 203 CTR (P&H) 310 - -Ed.].;