Expeditors International (India) (P.) Ltd v. Additional Commissioner of Income-tax

ORDER

P.M. Jagtap Accountant Member :

These two appeals, one by the assessee being ITA No. 2684/Del/2005 and other by the Revenue being ITA No. 2691/Del/2005 are cross-appeals which are directed against the order of learned CIT(A)-XIV, New Delhi, dt. 31st March, 2005.

2. First, we shall take up the Revenue's appeal being ITA No. 2691/Del/2005, ground No. 1 of which relates to the disallowance made by the AO on account of expenditure in respect of VSAT uplinking charges amounting to Rs. 43,60,772 and global accounts manager expenses amounting to Rs. 18,60,874 which stands deleted by the learned CIT(A).

3. The assessee in the present case is a company which is engaged in the business of supplying chain management, logistics and freight forwarding services in relation to movement of goods and cargo within India and outside India by road, rail, air or ship. This business involves activities of packaging, warehousing, loading/unloading, transportation, customs clearance and other cargo handling functions at both ends besides moving the goods by air or sea where goods are crossing the international borders. A return of income for the year under consideration was filed by it on 30th Oct., 2001 declaring a total income of Rs. 10,22,24,010. Along with the said return, annual accounts were also filed by the assessee company and the notes to accounts forming part thereof contained the following note as Note 10 :

"The company has provided for communication (VSAT uplink charges) and other expenses (global account managers salary aggregating to Rs. 1,14,68,763 (amount provided during the year ended 31st March, 2001-Rs. 62,21,646) as payable to the holding company which are subject to approval of RBI."

4. During the assessment proceedings, the assessee company was required by the AO to explain the exact nature of amount provided as mentioned in the aforesaid note. In reply, it was submitted on behalf of the assessee company that global account managers are those employees of parent company viz., Expediters, USA or any of its subsidiaries which are fully responsible for taking care of global Expeditors who had operations in many countries. It was submitted that the operational expenses of these employees are distributed amongst various group concerns operating in different countries in proportion to revenue generated in that country from the customer account. As regards VSAT uplink charges, it was submitted that the same are the internet linking charges and are in noway in the nature of consultancy or service fees. It was also submitted that RBI approval is no more required for payment of both these amounts to the parent company due to familiarization and the same are deductible being business expenditure. According to the AO, the amount payable by the assessee company to parent company on account of communication VSAT uplinking charges, however, was in the nature of fees for technical services and as no tax at source was deducted from the payment of the said amount, he held that the same was disallowable under s. 40(a)(i). As regards the other amount, he held that the same was payable on account of salary to global account manager as clearly stated in the relevant note to accounts and the assessee company should have deducted tax at source from the payment of the said amount. As no such tax was deducted by the assessee company, he held that the said amount was also liable to be disallowed as per the provisions of s. 40(a)(iii). He, therefore, disallowed the entire amount of Rs. 62,21,646 provided by the assessee company on account of amounts payable to the parent company towards VSAT uplink charges and global account managers salary.

5. The matter was carried before the learned CIT(A) and the submissions made before the AO were reiterated on behalf of the assessee company before him. The learned CIT(A) found merit in the said submissions and accepting the same, he held that the communication charges for VSAT uplinking were not covered in the definition of "fees for technical services" as given in Explanation below s. 9(l)(vii). He held that no tax from the payment of the said charges thus was deductible at source and the disallowance made by the AO by invoking the provisions of s. 40(a)(i) was not sustainable. As regards the amount payable towards global account managers salary, he found that the same represented reimbursement of expenses incurred by global account managers for taking care of global customers of Expediters Group who had operations in many countries. He held that the said amount thus was not in the nature of payment of salary and the same being in the nature of reimbursement of expenses by the assessee company, it was not chargeable to tax in India. He held that no tax at source thus was deductible from the said amount also and the question of disallowance of the same under s. 40(a)(iii) did not arise. Accordingly, he deleted the entire disallowance of Rs. 62,21,646 made by the AO on this issue.

6. At the time of hearing before us, the learned Departmental Representative strongly supported the order of the AO on this issue making the disallowance under ss. 40(a)(i) and 40(a)(iii). He submitted that the nature of amounts in question as rightly held by the AO was such that tax at source was deductible therefrom and the assessee having failed to deduct such tax, the disallowance was rightly made by the AO by invoking the provisions of ss. 40(a)(i) and 40(a)(iii) which were clearly applicable. He contended that the learned CIT(A), however, has not appreciated the exact nature of the said amounts while holding that no tax at source was deductible from the payments of the said amounts made by the assessee company. According to him, the relief allowed by the learned CIT(A) on this issue is thus not well-founded and his impugned order giving relief to the assessee on this issue is liable to be set aside.

7. The learned counsel for the assessee, on the other hand, submitted that the parent company viz. Expediters, USA had global contract with SITA to provide global communication network to all its associated concerns including the assessee company. He submitted that the cost incurred by the parent company for this facility is allocated amongst the subsidiaries and associate concerns as per actual usage. He contended that the said facility provided by SITA is a standard facility available to all those who are willing to pay just like telephone and no technical knowledge is being made available so as to treat the payment made for the said facility as fees for technical services. According to him, SITA has merely undertaken to transmit the signal sent by a broadcaster for a price and it is thus a service contract which does not involve any transfer of technology. He contended that there is no right which is conferred under the contract to the assessee company for use of any secret process and the amount in question having been paid merely for the use of services for transmission of data, the same cannot be treated as payment for fees for technical services so as to attract the deduction of tax at source as rightly held by the learned CIT(A). In support of this contention, he relied, inter alia, on the decision of Hon'ble Madras High Court in the case of Skycell Communications Ltd. & Anr. v. Dy. CIT & Ors. [2001] 170 CTR (Mad) 238 : [2001] 251 ITR 53 (Mad) and that of Delhi Bench of Tribunal in the case of Dy. CIT v. PanAmSat International Systems Inc. [2006] 103 TTJ (Del) 861 .

8. As regards the expenditure on account of global account manager, the learned counsel for the assessee submitted that the parent company viz. Expeditors, USA is a centralized hub for co-ordinating all information relating to cargo movements and recoveries from inter se units. He submitted that global management staff is placed at the headquarters for looking after this co-ordination work and the expenses incurred in relation to them are apportioned amongst all the associate enterprises including the assessee company on the basis of revenue generation. He submitted that the expenses so apportioned are reimbursed by all the associate concerns to the parent company periodically. He contended that the employees belonging to global management staff placed at headquarters thus are not the employees of the assessee company but they are the employees of the parent company and there being no relation of employer employee between the assessee company and the said employees, the reimbursement of expenses incurred on them could not be treated as salary so as to attract the provisions of s. 40(a)(iii).

9. We have considered the rival submissions and also perused the relevant material on record. It is observed that the amount payable by the assessee company to its parent company on account of VSAT uplinking charges was held to be in the nature of fees for technical services by the AO without giving any reason whatsoever in his order. It was explained on behalf of the assessee company before him that the said charges being only for internet linking were in noway in the nature of consultancy or technical fees. The nature of the said payment as explained by the assessee, however, was appreciated by the learned CIT(A) in the right perspective and on such appreciation, he held that the charges paid for the said services were not covered in the definition of "fees for technical services" as given in Expln. 2 to s. 9(1)(vii). While supporting the decision of the learned CIT(A) on this issue, the learned counsel for the assessee has explained that the services in question were provided by its parent company through SITA whereby a global communication network was made available to all the associated concerns of Expeditors Group including the assessee company. He has also placed on record a documentary evidence at page No. 253 of his paper book which supports his explanation that what had been made available by SITA was the communication facility essential for the business of the entire group as such. He has also placed on record a statement giving working as to how the charges paid by the parent company to SITA were apportioned amongst the different group companies operating in different countries including the assessee company. All these details furnished by the assessee on record clearly show that the charges reimbursed by the assessee company to its parent company for VSAT uplinking provided through SITA were not in the nature of fees for technical services and the same were paid merely for availing communication facility for transmitting data without there being any right conferred upon the assessee for use of any secret process or formula. In the case of Skycell Communications Ltd. (supra) cited by the learned counsel for the assessee, it was held by the Hon'ble Madras High Court that mere collection of a fee for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services. It was also held that the fact that the service provider had installed sophisticated technical equipment does not on that score make it provision of a technical service. In the case of PanAmSat International Systems Inc. (supra), Delhi Bench of Tribunal has held that the payment of service fee by broadcaster for use of transponder to transmit the signals and not for use of any process does not amount to royalty and the same cannot be considered and taxed as "fees for technical services" under the relevant article of the DTAA. Keeping in view both these judicial pronouncements cited by the learned counsel for the assessee and having regard to all the facts of the case, we are of the view that the VSAT uplinking charges paid by the assessee company to its parent company were not in the nature of fees for technical services and the same being not liable for deduction of tax at source, the disallowance made by the AO by invoking the provisions of s. 40(a)(l) was not sustainable. Similarly, we are of the view that the amount paid by the assessee company to its parent company on account of reimbursement of expenditure incurred in respect of global accounts manager cannot be treated as payment of salary so as to attract the deduction of tax at source. Undisputedly, the global management staff employed at headquarters were the employees of the parent company viz. Expeditors, USA and there being no employer employee relationship between the said employees and the assessee company, the reimbursement of expenses incurred in relation to them on proportionate basis by the assessee company to the parent company could not be treated as in the nature of salary paid by the assessee company. It was a case of reimbursement of common expenses incurred by the parent company for the benefit of all the group concerns including the assessee company which did not attract any deduction of tax and there was no question of making any disallowance by invoking the provisions of s. 40(a)(iii) for non-deduction of tax from such reimbursement. In that view of the matter, we uphold the impugned order of the learned CIT(A) deleting the disallowance made by the AO by invoking the provisions of ss. 40(a)(i) and 40(a)(iii). Ground No. 1 of the Revenue's appeal is accordingly dismissed.

10. In ground No. 2, the Revenue has challenged the action of the learned CIT(A) in deleting the disallowance made by the AO of assessee's claim for loss of Rs. 18,33,581 on account of foreign exchange fluctuation.

11. In its return of income, the assessee company had claimed a loss of Rs. 18,33,581 on account of foreign exchange fluctuation by adopting the foreign currency rate as on the last date of the relevant previous year i.e., 31st March, 2001. According to the AO, the said loss debited by the assessee company in its P&L a/c merely represented its notional loss and the same, therefore, was disallowed by him. The learned CIT(A), however, deleted the said disallowance and allowed the claim of the assessee for the loss relying on the decision of Delhi Special Bench of Tribunal in the case of Oil & Natural Gas Corpn. Ltd. v. Dy. CIT [2002] 77 TTJ (Del)(SB) 387 : [2002] 83 ITD 151 (Del)(SB) wherein it was held that the event i.e. the change in the value of foreign currency in relation to Indian currency having already taken place in the current year, the loss incurred by the assessee was a fait accompli and not a notional one.

12. At the time of hearing before us, the learned representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the judgment of Hon'ble Delhi High Court in the case of Commissioner Of Income Tax… v. Woodward Governor India Pvt. Ltd.….. [2007] 210 CTR (Del) 354 : [2007] 294 ITR 451 (Del) wherein it was held that the liability arising out of contracts had already stood accrued the minute the contract was entered into and the mere postponement of the payment of such liability to a future date would not extinguish the same so as to render it notional or contingent. It was also held that any increase in such liability as a result of fluctuation in the value of foreign currency in relation to Indian currency thus was a fait accompli and such increase in liability as per the exchange rate prevailing on the last date of the financial year was allowable as deduction being not notional or contingent. Respectfully following the said judgment of Hon'ble jurisdictional High Court, we uphold the impugned order of the learned CIT(A) on this issue and dismiss ground No. 2 of the Revenue's appeal.

13. In ground No. 3, the Revenue has challenged the action of the learned CIT(A) in deleting the disallowance made by the AO on account of depreciation on computer to the extent it was attributable to the increase in WDV as a result of foreign exchange fluctuation.

14. The liability payable in foreign exchange towards acquisition of computer was reinstated by the assessee company in its books of account at the exchange rate prevailing on the balance sheet date and the corresponding loss was added to the WDV for the purpose of claiming depreciation. According to the AO, the impact of foreign exchange fluctuation could be considered only at the time of actual repayment and not at the intermediary stage. He held that the depreciation claimed by the assessee by capitalizing the loss as a result of foreign exchange fluctuation thus was not allowable. The learned CIT(A), however, allowed the said claim of the assessee for depreciation relying on the preamended provisions of s. 43A as applicable to the year under consideration and on the decision of Hon'ble Gujarat High Court in the case of New India Industries Ltd. v. CIT [1994] 119 CTR (Guj) 306 .

15. At the time of hearing before us, the learned representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the judgment of Hon'ble Delhi High Court in the case of Woodward Governor India (P) Ltd. (supra) wherein it was held that in a case where an assessee has acquired any capital asset from abroad for the purpose of his business or profession on credit or on deferred payment terms or against a loan in foreign currency and the whole or part of the cost of such asset or of the loan in foreign currency is outstanding as on the date on which there was a change in the rate of exchange of currency, the original actual cost to the assessee of such asset is required to be increased or as the case may be reduced correspondingly, inter alia, for the purposes of depreciation. It was also held that the amendment made to s. 43A w.e.f. 1st April, 2003 was prospective and would accordingly apply in relation to asst. yr. 2003-04 and subsequent years. As the assessment year involved in this appeal is 2001-02, we respectfully follow the judgment of Hon'ble Delhi High Court in the case of Woodward Governor India (P) Ltd. (supra) and uphold the impugned order of the learned CIT(A) on this issue. Ground No. 3 of the Revenue's appeal is accordingly dismissed.

16. Now, we shall take up the assessee's appeal being ITA No. 2684/Del/2005, ground No. 1 of which relates to the assessee's claim for depreciation at a higher rate of 60 per cent on items such as UPS, printers, scanners, modem, NT server etc. which stands allowed by the AO as well as by the learned CIT(A) @ 25 per cent.

17. At the time of hearing before us, the learned representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of a co-ordinate Bench of this Tribunal in assessee's own case for asst. yr. 2003-04 rendered vide its order dt. 19th July, 2007 in ITA No. 4364/Del/2006 wherein it was held that the peripherals such as printers, scanners, NT server, etc. form integral part of the computer and the same, therefore, are eligible for depreciation at a higher rate as applicable to a computer. Respectfully following the said decision of the Tribunal in assessee's own case, we set aside the impugned order of the learned CIT(A) on this issue and direct the AO to allow the depreciation on the computer peripheral items at a higher rate of 60 per cent as claimed by the assessee company. Ground No. 1 of the assessee's appeal is accordingly allowed.

18. Ground No. 2 of the assessee's appeal relates to the disallowance made by the AO and confirmed by the learned CIT(A) on account of expenditure incurred by the assessee company on leasehold improvements and temporary erections treating the same as of capital nature.

19. In its return of income, depreciation @ 100 per cent was claimed by the assessee on temporary erections amounting to Rs. 8,64,918 stating that it was a case of temporary wooden structures erected in warehouses which were taken on lease as per the requirement of the customers for warehousing. On examination of the relevant details, it was, however, noticed by the AO that the expenditure claimed to be incurred on temporary wooden structures was inclusive of civil work, flooring, electricals, Exide battery, work-stations, copier tables, aluminium partitions, rolling shutters, sanitary fittings etc. He, therefore, treated the said expenditure amounting to Rs. 8,64,918 as of capital nature and allowed depreciation thereon @ 10 per cent resulting in a disallowance of Rs. 7,78,426. Similarly, the deduction claimed by the assessee amounting to Rs. 15,53,214 on leasehold improvements was disallowed by the AO treating the same as capital expenditure.

20. Before the learned CIT(A), it was submitted on behalf of the assessee company that it had incurred expenditure in respect of premises taken on rental basis amounting to Rs. 8,64,918 and Rs. 15,33,214. It was submitted that the amount of Rs. 8,64,918 was debited to temporary erection account and 100 per cent depreciation thereon was claimed while the amount of Rs. 15,33,214 debited to leasehold improvement account was claimed as deduction in the computation of total income. Complete details of both these amounts were furnished by the assessee before the learned CIT(A) and a detailed note was also filed in support of its claim for deduction of the said amounts. It was contended that both these amounts represented expenditure incurred in respect of premises taken on temporary lease of one to three years and it was required to be incurred to make the leasehold premises suitable for warehousing as per the requirement of the customers. It was also contended that the said expenditure was mainly incurred on wooden partition, paneling, repair of flooring, false ceiling, etc. and the same being temporary structures was allowable as deduction in full.

21. The submissions made on behalf of the assessee on this issue as above were not found acceptable by the learned CIT(A). According to him, a higher depreciation of 100 per cent was allowable only under the block "buildings" for purely temporary erections such as wooden structures and the expenditure incurred by the assessee company being mainly on furniture and fixtures, depreciation thereon at 100 per cent could not be allowed. He also examined the bills produced by the assessee company in support of the expenditure in question and found that there was one final bill dt. 18th May, 2000 for interior works by Vriksha Consolids amounting to Rs. 10,63,857 for civil work, wood work, flooring, electricals, additional works, etc. Keeping in view the description of the work given therein, he held that the said expenditure incurred in relation to Chennai office was of capital nature. Relying on Expln. 1 to s. 32(1), he held that the said expenditure incurred on the leasehold premises was not allowable being of capital in nature and only depreciation thereon could be allowed. He also found on verification of other bills that the expenditure in question incurred by the assessee company was inclusive of purchase of Exide batteries, providing of workstations, filing units, painting, aluminium partitions etc. According to the learned CIT(A), the said expenditure did not come under the block of .assets "building" and therefore, depreciation @ 100 per cent was not allowable thereon as claimed by the assessee. He further found that there was one bill of M/s Spring Field dt. 20th Sept., 2000 amounting to Rs. 2,93,750 for providing of flooring, workstations, fax table, filing units etc. at Bombay office of the assessee company. According to the learned CIT(A), the said expenditure could not be said to have been incurred in relation to temporary erections in the warehouse taken on lease as claimed by the assessee company. He, therefore, upheld the action of the AO in allowing depreciation @ 10 per cent on temporary erections amounting to Rs. 8,64,918. As regards the remaining expenditure of Rs. 15,33,214 claimed to be incurred on leasehold improvements, he held that the same was capital in nature falling under two blocks i.e. "building" and "furniture and fixtures". He, therefore, directed the AO to bifurcate and categorize the said expenditure under these two blocks and allow the depreciation at the rates applicable to the respective blocks.

22. The learned counsel for the assessee submitted that old factory sheds were taken by the assessee company on temporary lease for use as godowns. He submitted that the said factory sheds being very old required extensive repairs in order to make them suitable for use as godowns as per the requirements of the customers of the assessee company. He submitted that the expenditure so incurred was mainly for erecting temporary structures in order to create specific additional storage and work space for the staff and going by the nature of the repair work done, it was purely of a revenue nature. He submitted that the authorities below, however, invoked Explanation to s. 30 to treat the said expenditure as of capital nature ignoring firstly that the expenditure incurred being of revenue in nature, the said Explanation was not applicable at all and secondly, that the factory sheds in respect of which the said expenditure was incurred had been taken on lease by the assessee company only for a period of one to three years. In this regard, he invited our attention to a copy of the lease agreement placed at page No. 70 of the assessee's paper book as well as to the details of expenditure in question claimed to be incurred on repairs placed at page No. 65 of his paper book. He also invited our attention to the provisions of ss. 30(a)(i) and 30(a)(ii) to point out that the words used therein are "repairs" and "current repairs" respectively. He contended that the word used in s. 30(a)(i) which is applicable in respect of premises taken on lease is "repairs", the scope of which is wider than the words "current repairs". His contention in this regard was that the expenses in question incurred by the assessee company being in the nature of repairs, the same have to be allowed irrespective of whether the same are of capital nature. In support of this contention, he relied on the decisions of Hon'ble Delhi High Court in the case of Instalment Supply P. Ltd. v. Commissioner Of Income-Tax, Delhi-Ii. [1984] 40 CTR (Del) 313: [1984] 149ITR 52 (Del)and in the case of CIT v. Escorts Finance Ltd. [2006] 205 CTR (Del) 574 .He also contended that the treatment given by the assessee company in its books of account to the expenditure incurred on repairs is not decisive to decide the nature thereof, whether capital or revenue.

23. The learned Departmental Representative, on the other hand, strongly relied on the impugned order of the learned CIT(A) in support of the Revenue's case on this issue. He submitted that the nature of expenses incurred by the assessee company on repairs is required to be ascertained on examination of the expenses actually incurred and after having done such examination, the learned CIT(A) has found that the expenses claimed by the assessee on repairs were mainly of capital in nature. He submitted that in its books of account, the assessee company itself has capitalized the said expenses which again supports the case of the Revenue that the same were not allowable as revenue expenditure. He invited our attention to the relevant findings recorded by the learned CIT(A) on examination of the expenses claimed to be incurred by the assessee company on repairs and urged that the said specific findings recorded by the learned CIT(A) may be taken into consideration while deciding the issue in question. As regards the decisions of Hon'ble Delhi High Court cited by the learned counsel for the assessee, he contended that the same are distinguishable on facts and cannot be of any help to the assessee in the present case.

24. We have considered the rival submissions and also perused the relevant material on record. We have also carefully gone through the details of expenses claimed to be incurred by the assessee on repairs placed at page No. 65 of the assessee's paper book as well as the findings recorded by the learned CIT(A) in his impugned order on examination of the said details. As is evident from the said details, the expenses amounting to Rs. 15,33,214 were incurred by the assessee company in relation to the Chennai and Mumbai office taken on lease and as pointed out by the learned CIT(A) in his impugned order on examination of the said details, the said expenses were mainly incurred on civil work, wood work, flooring, etc. The copies of relevant bills have also been filed in the assessee's paper book and a perusal of the same shows that as per the description given therein, the majority of the expenses were incurred for providing and fixing partitions, work-stations, meeting room tables, false ceiling etc. besides flooring and electrical work which are apparently of capital nature. At the same time, it is also observed that the said expenses were inclusive of expenses incurred on demolition of brick work, removal of existing partitions, relocation of cabinet unit, painting of old walls, fixing of vertical blinds etc. which are of revenue nature being incurred on repairs. The expenditure claimed to be incurred by the assessee company on repairs thus was on capital account as well as on revenue account and it is, therefore, necessary to examine the same in detail with respect to each item to ascertain their exact nature being capital or revenue. A similar exercise is also required to be done in respect of expenses of Rs. 8,64,918 claimed to be incurred by the assessee company on temporary erections in the premises taken on lease for godown purposes as the perusal of the details of the said expenses clearly shows that some of them were of capital nature whereas some of them were of revenue nature being incurred on repairs. As this exercise has not been done either by the AO or by the learned CIT(A) appropriately in the desired manner, we find it just and proper to restore this matter to the file of the AO for deciding the issue afresh after doing such exercise.

25. As regards the distinction sought to be made out by the learned counsel for the assessee between "repairs" and "current repairs" relying on the decisions of Hon'ble Delhi High Court in the case of Instalment Supply (P) Ltd. (supra) and Escorts Finance Ltd. (supra), we are of the view that what is relevant in the context of allowability of expenses incurred on repairs is the nature of the said expenditure, whether capital or revenue, and once it is found that the expenses are of capital nature, the same cannot be allowed as deduction irrespective of whether the same are incurred on repairs or current repairs. Similarly, if the relevant expenses are found to be of revenue nature, the same are to be allowed as deduction irrespective of the fact whether the same are incurred on repairs or current repairs. As a matter of fact, once the expenditure is held to be of capital nature, the same no more remains in the nature of repairs and it cannot be argued that the same is still allowable as expenditure on repairs under s. 30(a)(i). As regards the contention of the learned counsel for the assessee that the expenses in question were incurred on premises taken on lease temporarily for a period of one to three years, we find from the perusal of the lease agreement placed at page Nos. 66 to 79 of the paper book that the lease deed was for a period of three years which was renewable for a further period of three years with mutual consent of the parties as per cl. 17 of the lease agreement. It, therefore, cannot be said that the premises were taken on lease by the assessee company for a short period and the structures erected therein were thus temporary on this count. In any case, Explanation below s. 30(a) makes no distinction between the premises taken on lease for a short period or for a long period and this aspect of the matter thus has no bearing while ascertaining the exact nature of the expenses, whether capital or revenue. As such, considering all the facts of the case, we set aside the impugned order of the learned CIT(A) on this issue and restore the matter to the file of the AO for deciding the same afresh after examining the details of expenses claimed to be incurred by the assessee company on repairs to ascertain the exact nature thereof incurred by the assessee company on repairs to ascertain the exact nature thereof whether capital or revenue. Ground No. 2 of the assessee's appeal is accordingly treated as allowed.

26. In the result, the appeal of the Revenue is dismissed whereas the appeal of the assessee is treated as allowed as indicated above.