JUDGMENT:

KAPADIA, J. -- Leave granted in both the special leave petitions. Civil Appeal arising out of SLP(C) No. 8789/07:

[Moriroku UT India (P) Ltd. v. State of U.P. & Ors.]

2. This civil appeal filed by M/s Moriroku UT India (P) Ltd. is directed against judgment dated 6.4.2007 delivered by Division Bench of the Allahabad High Court in CWP (Tax) No. 13/04 by which, the writ petition filed by the appellant herein, seeking to restrain the AO from imposing any tax on moulds (toolings) supplied by its customer, Honda Siel Cars India Ltd., free of cost was sought to be taxed under Section 3 of U.P. Trade Tax Act, 1948, stood dismissed.

3. Appellant is the company registered under the Companies Act, 1956 and is a manufacturer of plastic automobile components. Appellant is manufacturing such components for use in the Honda Siel Cars manufactured in India by Honda Siel Cars Ltd. (hereinafter called the "customer"), as per designs and specifications given by it. The customer supplies tools, dies, moulds etc. (toolings) free of cost to the appellant herein to enable it to manufacture automobile components.

4. For the assessment year 2000-2001, a final assessment order was passed on 29.10.2002 under the provisions of the U.P. Trade Tax Act, 1948 ("1948 Act"). Thereafter, a notice under section 21 was issued by the AO for reassessment to which the appellant submitted its reply. By the said Notice, the appellant was called upon to show cause why amortisation cost in respect of toolings and moulds should not be taxed under section 3 of the 1948 Act.

5. Vide reassessment order dated 30.9.2003, tax was imposed on the amortisation cost on the ground that the sale price of the auto components should be the same both for the purposes of Central Excise Act, 1944 ("1944 Act") and for 1948 Act.

6. Being aggrieved, an appeal was preferred by the appellant-assessee under section 9 of the 1948 Act, which was rejected in the light of the circular dated June, 2003 issued by the Commissioner, Trade Tax, U.P. by which amortisation cost was sought to be taxed under the 1948 Act. Accordingly, the appellant herein challenged the validity of the circular which, as stated above, was upheld by the High Court. Hence, this civil appeal.

7. A short question which arises for determination in this civil appeal is: whether amortisation cost of toolings was includible in the sale price of auto components as in the case of excise duty under Central Excise Act, 1944? In other words, whether the Department was right in equating sales tax to excise duty.

8. For deciding this case, we are required to consider the concept of amortisation of costs. The expression "amortisation", in accountancy parlance is a general expression, which basically means the writing off of the cost of an asset over a period of time. As a matter of usage, "depreciation" is the expression used in relation to tangible assets, "depletion" to natural assets, which are subject to exhaustion, for example, oil deposits or mineral deposits, an "amortisation" to intangible assets, such as, patents, copyrights, trade marks etc. Thus, depreciation is a form of amortisation. The Accounting Standard (AS 28) relating to impairment of assets uses the following expression:

"Depreciation (amortisation) is a systematic allocation of the depreciable amount of an asset over its useful life."

9. One of the working differences between the depreciation and amortisation and the reason why the expression "depreciation" is used in relation to tangible man-made assets in preference to amortisation is that the notion of depreciation is to write off 90% of the cost of asset over its useful life either on a sliding scale system, which is the written-down value method, which works on the reducing balance principle or on the straight- line method in which 90% of the cost is written off over the est