Depreciation not allowable on Govt approvals not creating any right

We find that contents of the above letter manifest that the Department of post had approved specific Electronic Franking Machine of Pitney Bowes, Inc., USA. . The Approvals were granted separately for four machines between 03/10/1996 to 03/09/1999. These Franking machines were utilised for sales of the stamp papers, and thus the Department of post approved models with the technical specifications, having rigid quality control during the process of manufacturing and also ensured that machines are tamperproof and free from all defects. The assessee has not produced before us copies of these approvals to verify as to whom those approvals were addressed. The assessee has also not produced copy of letter sent by the Department of post addressed to M/s KOAL. The letter reproduced above has been issued by the Department of Post on the request of the assessee and first para makes that clear. The middle part of letter contains list of machines approved and bottom part contains certain obligations on the assessee. If we presume that similar letter would have been issued to M/s KOAL, then, similar obligations or duties must have been cast on M/s KOAL through that letter. In our opinion, issuing the letter of approval of machines of “Pitney Bowes Inc, USA”to M/s KOAL if any, cannot create any rights in favour of M/s KOAL. The letter, if any issued communicating approvals of machines of Piteny Bowes to M/s KOAL, was not because of any kind of eligibility criteria of said company. The letter issued to M/s KOAL would be in its agent status and compliance of which was dependent on supply of machines by the Pitney Bowes Inc, USA to M/s KOAL. The moment, the Pitney Bowes Inc USA, terminates the agreement of distribution of its machines, the letter issued by the Department of post in the name of M/s KOAL also loses its sanction. The KOAL has not got any rights to sale in favour due to letter issued by the Department of Post. M/s KOAL got letter for sale of machines of M/ s Pitney Bowes Inc, USA because it was distributor of said company and thus it got right to sale of those machines in India because of its distribution rights. We do not find any material which could suggest that M/s KOAL was having right of transferring such “letter communicating approvals by the Department of Post”to any person of its choice. The Department of post has conveyed approval of the machines of “Pitney Bowes Inc. USA”and imposed certain obligations on the assessee to perform. In view of our discussion, we are of the opinion that the above referred letter communicating government authorization/ approval, was neither a license or business or commercial rights in the hands of M/s KOAL nor it was having any right to transfer those Approvals to any person of its choice. It is the Department of post, who was having authority to approve Electronic franking Machines in India and approval of machines of Pitney Bowes Inc USA, has not created any kind of rights in the hands of M/s KOAL , which could be transferred to any third party. On the contrary, in view of the approval of Machines by Department of post, certain obligations of maintaining records and ensuring of no tampering, have been imposed on the assessee. The right to sale those franking machine India was as a result of distribution rights granted by M/s Pitney Bowes Inc , USA, and not due to Government Approvals. In the case of M/s Sharp Business System 254 CTR 0233, Hon’ble, Delhi High Court has held that for any right to be in the “nature of business or commercial right”as laid down in section 32(1)(ii) of the Act, two criteria should be met. First that it should be “right in rem”and the second it should be alienable or transferable.