IN THE HIGH COURT OF DELHI AT NEW DELHI 
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   ITA 434/2013  
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 COMMISSIONER OF INCOME TAX-IV   ..... Appellant 
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 Through:  Mr.Kamal Sawhney, Advocate 
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 versus 
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 M/S H T MUSIC and ENTERTAINMENT CO LTD 
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 ..... Respondent 
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 Through:  Nemo. 
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 3 
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 ITA 435/2013 
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 COMMISSIONER OF INCOME TAX IV ..... Appellant 
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 Through:   Mr.Kamal Sawhney, Advocate 
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 versus 
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 M/S H T MUSIC and ENTERTAINMENT CO LTD 
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 ..... Respondent 
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 Through:  Mr.V.P.Gupta, Advocate 
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 CORAM: 
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 HON'BLE MR. JUSTICE SANJIV KHANNA 
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 HON'BLE MR. JUSTICE SANJEEV SACHDEVA 
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 O R D E R 
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    25.09.2013 
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 CM No.14054/2013 (exemption) in ITA 435/2013 
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 Exemption allowed, subject to all just exceptions. 
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 CM No.14053/2013 (delay) in ITA 434/2013 
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 CM No.14055/2013 ( delay) in ITA 435/2013 
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 There is delay of 65 days and 117 days in refiling of the appeals. 
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 For the reasons stated in the applications, the delay in filing and 
 refiling the appeal is condoned. 
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 The applications stand disposed of. 
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 ITA434/2013 and ITA 435/2013 
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 These two appeals by the revenue under Section 260A of the Income Tax Act relate to assessment years 2007-08 and 2008-09. 
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 Two common issues are raised in these two appeals.  The first 
 common issue relates to expenditure incurred on training of staff.  The 
 contention of the revenue is that this was capital expenditure.  The 
 contention cannot be accepted as the employees were not a capital asset 
 or fixed asset of a company.  Employees were trained for greater 
 efficiency and superior performance. But this cannot be a ground to hold 
 that the assessee company had incurred capital expenditure or that they 
 had derived enduring benefit.    Employees undergo training for their 
 skill improvements, which may and should in turn result in better 
 efficiency and increased productivity. Nevertheless, it is incorrect to 
 assume that every expenditure that may increase productivity or enhance 
 profits must be capital expenditure.   Better or improved skills and 
 knowledge, is personal to an employee. It does not add to the profit 
 making apparatus or structure and is not acquisition of a source of 
 profit.  Employee is entitled to change his employer and move on.   The 
 following observations in Empire Jute Company v. Commissioner of Income 
 Tax; (1980) 124 ITR 0001(SC) are apposite and illustrate the principle of 
 law applicable:- 
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 ?The revenue, however, contended that by purchase of loom hours the 
 assessee acquired a right to produce more than what it otherwise would 
 have been entitled to do and this right to produce additional quantity of 
 goods constituted addition to or augmentation of its profit-making 
 structure. The assessee acquired the right to produce a larger quantity 
 of goods and to earn more income and this, according to the revenue, 
 amounted to acquisition of a source of profit or income which though 
 intangible was nevertheless a source or ‘‘ spinner ‘‘ of income and the 
 amount spent on purchase of this source of profit or income, therefore, 
 represented expenditure of capital nature. Now it is true that if 
 disbursement is made for acquisition of a source of profit or income, it 
 would ordinarily, in the absence of any other countervailing 
 circumstances, be in the nature of capital expenditure. But we fail to 
 see how it can at all be said in the present case that the assessee 
 acquired a source of profit or income when it purchased loom hours. The 
 source of profit or income was the profit-making apparatus and this 
 remained untouched and unaltered. There was no  enlargement of the 
 permanent structure of which the income would be the produce or fruit. 
 What the assessee acquired was merely an advantage in the nature of 
 relaxation of restriction on working hours imposed by the working time 
 agreement, so that the assessee could operate its profit-earning 
 structure for a longer number of hours. Undoubtedly, the profit-earning 
 structure of the assessee was enabled to produce more goods, but that was 
 not because of any addition or augmentation in the profit-making 
 structure, but because the profit-making structure could be operated for 
 longer working hours. The expenditure incurred for this purpose was 
 primarily and essentially related to the operation or working of the 
 looms which constituted the profit-earning apparatus of the assessee. It 
 was an expenditure for operating or working the looms for longer working 
 hours with a view to producing a larger quantity of goods and earning 
 more income and was, therefore, in the nature of revenue expenditure.? 
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 (Emphasis Supplied) 
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 With regard to royalty payment, it is noticed that the payment was 
 to be made on ?Need Hours Basis?.  The respondent assessee did not 
 acquire any enduring or long term right in the copyright and was entitled 
 to play songs/music and had made payment to access the music, which was 
 broadcast.  No capital asset or right was acquired by the respondent 
 which could be transferred and sold to the third party. 
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 In the appeal for the assessment year 2008-09 another issue 
 relating to rate of depreciation on KBA servo regulator has been raised. 
 As per the Tribunal, the Voltage Stabilizer was an integral part of the 
 computer system.  The said finding is a finding of fact.  In view of the 
 decision of Delhi High Court in CIT v. BSES Yamuna Power Limited; ITA 
 1267/2010 decided on 31.08.2010, the Tribunal has rightly held that 
 depreciation should be allowed @ 60%. 
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 The appeals are dismissed being devoid of merit. 
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 SANJIV KHANNA, J 
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 SANJEEV SACHDEVA, J. 
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 SEPTEMBER 25, 2013/sv 
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 $ 10 
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