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19. As regards the ground No.4, the assessee had claimed Rs.1,72,32,337/- as design charges out of which an amount Rs.1,31,05,337/- represented actual salaries paid to employees functioning in the R & D division of the assessee (which was shown by the assessee in its books of account as Research and ITA No.1185 & 1123/B/11 Development) and Rs.40,67,000/- represented the amount expanded by the assessee towards procuring various designs from M/s Microsys Design Lab Pvt. Ltd., Singapore which is a subsidiary of M/s Excel Precision Manufacturing Ltd., which in turn is wholly owned subsidiary of assessee company and the assessee received basic designs of few models of machines from Microsys. The AO held the entire expenditure to be capital in nature and allowed depreciation thereon. An appeal, the CIT(A) confirmed the disallowance holding that the assessee has itself shown the expenditure under the head 'Research and Development'. Aggrieved the assessee is in appeal before us. 19a. The learned counsel for the assessee, while reiterating the submissions made by the assessessee before the authorities below submitted that the assessee had produced ledger extract to evidence that the Research and Development expenses were actually salary paid to the employees engaged in the R & D division but at the end of the year was shown as R& D expenditure, therefore, it is clearly Revenue expenditure and ought to have been allowed as such. He submitted that both the AO as well as the CIT(A) have not considered the issue in the proper perspective and have erroneously held it to be capital in nature. He submitted that the Revenue ITA No.1185 & 1123/B/11 authorities have to examine the exact nature of expenditure and not go by the presentation of the accounts by the assessee. He submitted that the issue of whether the said amount represents salaries paid to R & D employees can be verified by the AO and the same has to be allowed as Revenue expenditure.

23. As regards other expenses as designing charges, we find that the assesee's contention before the AO has been that the M/s Microsys Design Lab Pvt. Ltd., caters to the design requirements of the assessee by giving the basic design of future models of machines and the design activity in machine tool manufacturing industry is a continuous process and the design is based on the customer's requirements. The AO has held that the designs have become the asset of the assessee company and, therefore, are capital in nature. We find that the assessee's contention that these designs are used for manufacturing of the machine tools as per the customer's requirements has not been considered by the authorities below. If a design is used in all the tools manufactured by the ITA No.1185 & 1123/B/11 assessee irrespective of the customer's requirement, then it can be said that the design is capital asset but if the design is changing for each tool manufactured by the assessee as per the customer's requirements, then it can not be said that it is giving an enduring benefit and is capital in nature. Therefore, this issue is sent back to the file of the AO for reconsideration after giving the assessee an opportunity of hearing as to exact nature of the designs procured by the assessee and to decide the issue in accordance with law.