M/s. Bosch Limited, Bangalore V. DCIT (LTU), Bangalore

ITA 102/BANG/2011

• Counselvise Citation: 10221114 RSA 2011
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-07-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 02-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA
• Assessee Lawyers: P J PARDIWALLA
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V.VASUDEVAN, JUDICIAL MEMBER ITA NO.102(B)/2011 (ASSESSMENT YEAR: 2001-02) M/S BOSCH LIMITED, THE DY.COMMISSIONER OF INCOME T AX, HOSUR ROAD, (LTU) JSSTOWERS, 100 FT. RING ROAD, BANGALORE-560 030 BANASHANKARI III ST AGE, PAN NO.AAACM 9840P BANGALORE-560 085. ASSESSEE BY : SHRI P.J.PARDIWALLA, SR. ADVOCATE REVENUE BY : SHRI S.K.AMBASTHA, CIT DR DATE OF HEARING : 04-07-2012 DATE OF PRONOUNCEMENT : 18-07-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 30.11.2010 OF CIT(A), LTU, BANGALORE, RELATING TO A Y 01-02. 2. THE FIRST ISSUE THAT ARISES FOR CONSIDERATION I N THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED I N REJECTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80-O OF THE ACT, WHILE COMPUTING TOTAL INCOME. THE FACTS AND CIRCUMSTANCE S GIVING RAISE TO THE AFORESAID ISSUE ARE AS FOLLOWS: ITA NO.102(B)2011 2 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN TH E BUSINESS OF MANUFACTURE OF FUEL INJECTION PUMPS, SPARK PLUGS & AUTOMATIVE PRODUCTS. THE ASSESSEE CLAIMED THAT IT HAD RECEIVE D A SUM OF RS.4,85,77,960/- FROM ROBERT BOSCH GMBH, GERMANY AN D CLAIMED THAT 50% OF THE SUM SO RECEIVED WAS ELIGIBLE FOR DE DUCTION U/S.80- O OF THE ACT. THE PROVISIONS OF SEC.80-O OF THE AC T PROVIDES AS FOLLOWS: 80-O. DEDUCTION IN RESPECT OF ROYALTIES, ETC., FRO M CERTAIN FOREIGN ENTERPRISES.--(1) WHERE THE GROSS TOTAL INC OME OF AN ASSESSEE, BEING AN INDIAN COMPANY OR A PERSON (OTHE R THAN A COMPANY) WHO IS RESIDENT IN INDIA, INCLUDES ANY INC OME RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT OF A F OREIGN STATE OR FOREIGN ENTERPRISE IN CONSIDERATION FOR TH E USE OUTSIDE INDIA OF ANY PATENT, INVENTION, DESIGN OR R EGISTERED TRADE MARK AND SUCH INCOME IS RECEIVED IN CONVERTIB LE FOREIGN EXCHANGE IN INDIA, OR HAVING BEEN RECEIVED IN CONVE RTIBLE FOREIGN EXCHANGE OUTSIDE INDIA, OR HAVING BEEN CONV ERTED INTO CONVERTIBLE FOREIGN EXCHANGE OUTSIDE INDIA, IS BROU GHT INTO INDIA, BY OR ON BEHALF OF THE ASSESSEE IN ACCORDANC E WITH ANY LAW FOR THE TIME BEING IN FORCE FOR REGULATING PAYM ENTS AND DEALINGS IN FOREIGN EXCHANGE, THERE SHALL BE ALLOWE D, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, DEDUCTION OF AN AMOUNT EQUAL TO (I) FORTY PER CENT. FOR AN ASSESSMENT YEAR BEGINNI NG ON THE 1ST DAY OF APRIL, 2001 ; (II) THIRTY PER CENT. FOR AN ASSESSMENT YEAR BEGIN NING ON THE 1ST DAY OF APRIL, 2002 ; (III) TWENTY PER CENT. FOR AN ASSESSMENT YEAR BEGI NNING ON THE 1ST DAY OF APRIL, 2003 ; (IV) TEN PER CENT. FOR AN ASSESSMENT YEAR BEGINNIN G ON THE 1ST DAY OF APRIL, 2004, ITA NO.102(B)2011 3 OF THE INCOME SO RECEIVED IN, OR BROUGHT INTO, INDI A, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE AND NO D EDUCTION SHALL BE ALLOWED IN RESPECT OF THE ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2005, AND ANY SUBSEQUENT ASSESSMENT YEAR. PROVIDED THAT SUCH INCOME 4. THE CLAIM OF THE ASSESSEE WAS THAT THE SUM OF R S. 4,85,77,960/- FROM ROBERT BOSCH GMBH, GERMANY, WAS CONSIDERATION RECEIVED FOR USE OUTSIDE INDIA OF PA TENT, INVENTION, DESIGN OR REGISTERED TRADE MARK AND THEREFORE ENTI TLED TO DEDUCTION U/S.80-O OF THE ACT. THERE IS NO DISPUTE REGARDING THE SATISFACTION OF THE OTHER CONDITIONS MENTIONED IN SEC.80-O OF TH E ACT. THE ONLY DISPUTE IS AS TO WHETHER THE CONSIDERATION RECEIVE D BY THE ASSESSEE WAS FOR USE OUTSIDE INDIA OF PATENT, INVEN TION, DESIGN OR REGISTERED TRADE MARK. 5. THERE WERE DIFFERENT AGREEMENTS BETWEEN THE ASS ESSEE WHICH WAS EARLIER KNOWN AS MOTOR INDUSTRIES CO. LTD. (MIC O) AND ROBERT BOSCH GMBH, GERMANY (HEREINAFTER REFERRED TO AS BOS CH). A GENERAL DESCRIPTION OF THESE AGREEMENTS, IN OUR HUM BLE OPINION, WILL BE NECESSARY TO DECIDE THE CONTROVERSY IN THES E APPEALS. ITA NO.102(B)2011 4 1. THE FIRST AGREEMENT IS DATED 11.10.1991 AND IS FOR DEVELOPMENT OF SINGLE CYLINDER PUMPS OF THE TYPE PF . UNDER THIS AGREEMENT, BOSCH ENTRUSTED RESPONSIBILITY TO C ARRY OUT FOR BOSCH THE DEVELOPMENT OF SINGLE CYLINDER PUMPS OF THE TYPE PF. THE MANNER IN WHICH THE WORK IS TO BE CON DUCTED WOULD BE IN ACCORDANCE WITH SEPARATE INDIVIDUAL SCH EDULES AND SPECIFICATIONS WHICH BOSCH MAY STIPULATE AND TH E ASSESSEE MIGHT AGREE. BOSCH AGREED TO PROVIDE ALL TECHNICAL INFORMATION NECESSARY FOR CONDUCTING SPECIFIC WORK. CLAUSE 2.4 OF THIS AGREEMENT PROVIDES THAT IN CASE THE ASS ESSEE BECOMES AWARE OF PROPERTY RIGHTS WHICH MAY BE RELEV ANT IN CONNECTION WITH THE DEVELOPMENT TO BE CONDUCTED BY THE ASSESSEE, THEN THE ASSESSEE SHOULD INFORM BOSCH AND SHALL NOT USE SUCH RIGHTS WITHOUT BOSCHS PRIOR PERMISSION/AGREEMENT. CLAUSE 2.5 OF THE AGREEMENT PROVIDES THAT THE ASSESSEE SHALL FURNISH TO BOSCH WITHIN TWO MONTHS AFTER THE END OF EACH CALENDAR HALF YEAR IN WRITING ALL ESSENTIAL RESULTS OF ITS WORKS ACHIEVED DURING THE RESPECTIVE PERIOD INCLUDING PROTOTYPES, TESTING REPORTS, DESIGN DRAWI NGS AND/OR OTHER DOCUMENTS PERTAINING TO THE WORK, AS THE CASE MAY BE. CLAUSE 3.1 OF THE AGREEMENT PROVIDES THAT THE RESUL TS OF RESEARCH SHALL BE USED BY THE ASSESSEE, BOSCH OR TH EIR SUBSIDIARIES. CLAUSE 3.3 OF THE AGREEMENT PROVIDES THAT ANY RESULTS ARISING FROM OR IN CONNECTION WITH THIS DEV ELOPMENT AGREEMENT WHICH INCORPORATES AN INVENTION, A PATENT AND /OR UTILITY MODEL IN INDIA SHALL BE APPLIED FOR IN THE NAME OF THE ASSESSEE OR IN THE NAME OF BOSCH. IN CASE THE APPL ICATION IS MADE IN THE NAME OF BOSCH, THE ASSESSEE WAS TO GIVE THE NECESSARY ENDORSEMENT FOR SUCH APPLICATION. CLAUSE 3.4 OF THE AGREEMENT PROVIDES THAT AFTER A PERIOD OF 8 WEE KS FROM THE DATE OF APPLICATION FOR ANY SUCH PATENT AND/OR UTILITY MODEL IN INDIA, BOSCH WAS FREE TO USE AND/OR EXPLOI T SUCH INVENTION AND MAY, AT ITS SOLE DISCRETION, APPLY FO R PATENTS AND/OR UTILITY MODELS IN ANY COUNTRY OUTSIDE INDIA AND IS FREE TO MAINTAIN OR LAPSE ANY PROPERTY RIOGHTS ARISING T HEREFROM INCLUDING THOSE IN INDIA. THE COMPENSATION FOR SUC H RIGHTS IS INCLUDED IN THE COMPENSATION PAID BY BOSCH TO THE A SSESSEE UNDER THE AGREEMENT IN CLAUSE 4.1. CLAUSE 4.1 PRO VIDES THAT THE CONSIDERATION PAYABLE BY BOSCH TO THE ASSESSEE FOR CARRYING OUT ALL WORK AND GRANTING ALL RIGHTS TO BO SCH SHALL BE DM 350,000,00 (THREE HUNDRED AND FIFTY THOUSAND DEU TSCHE ITA NO.102(B)2011 5 MARK). CLAUSE-7 OF THE AGREEMENT PROVIDES THAT THE ASSESSEE SHOULD NOT CARRY OUT ANY WORK FOR THIRD PARTIES IN WHICH RESULTS ARISING FROM THIS AGREEMENT MAY BE USED DUR ING THE TENURE OF THE AGREEMENT. CLAUSE-9 OF THE AGREEMENT PROVIDES THAT THE TENURE OF THE AGREEMENT SHALL BE 5 YEARS F ROM 9.5.1991 AND SHALL BE RENEWED BY MUTUAL CONSENT OF THE PARTIES ON MUTUAL TERMS. BY AN AMENDMENT DATED 4.11.1994 THE CONSIDERATION PAYABLE UNDER THE AGREEMENT DATED 11.10.1991 WAS INCREASED TO 450,000,00 (FOUR HUNDRED AND FIFTY THO USAND DEUTSCHE MARK). BY A SECOND SUPPLEMENTARY AGREEMENT DATED 13.2.1996 CERTAIN CLAUSES REGARDING EMPLOYEES DEPUTATION AS C ONTAINED IN THE AGREEMENT DATED 11.10.1991 WERE MODIFIED. 2. THE SECOND AGREEMENT IS DATED 11.7.1995 AND IS FOR DEVELOPMENT OF MULTICYLINDER PUMPS OF THE TYPE PE-A . ALL THE CONDITIONS OF THIS AGREEMENT ARE MATERIALLY THE SAM E AS THE FIRST AGREEMENT DESCRIBED EARLIER AND ARE NOT BEING REPEATED. THERE WAS AN AGREEMENT DATED 9.8.1998 WHEREBY THE CONSIDERATION PAYABLE AS PER THE AGREEMENT DATED 11 .7.1995 WAS MODIFIED. 3. THE THIRD AGREEMENT IS DATED 18.2.1998 AND IS IN RE LATION TO DEVELOPMENT OF MECHANICALLY CONTROLLED DISTRIBUTOR PUMPS. ALL THE CONDITIONS OF THIS AGREEMENT ARE MATERIALLY THE SAME AS THE FIRST AGREEMENT DESCRIBED EARLIER AND ARE NO T BEING REPEATED. 4. THE FOURTH AGREEMENT IS DATED 14.9.1998 AND IS IN RELATION TO DEVELOPMENT OF SPARK PLUGS U-TYPE AND OTHER TYPE S AS MUTUALLY AGREED FROM TIME TO TIME. ALL THE CONDI TIONS OF THIS AGREEMENT ARE MATERIALLY THE SAME AS THE FIRST AGRE EMENT DESCRIBED EARLIER AND ARE NOT BEING REPEATED. 5. THE FIFTH AGREEMENT IS DATED 23.10.1998 AND IS IN R ELATION TO DEVELOPMENT OF COMPACT ALTERNATOR TYPE GCB1. ALL THE CONDITIONS OF THIS AGREEMENT ARE MATERIALLY THE SAM E AS THE FIRST AGREEMENT DESCRIBED EARLIER AND ARE NOT BEING REPEATED. ITA NO.102(B)2011 6 6. THE CASE OF THE AO WAS THAT CONSIDERATION PAID B Y BOSCH TO THE ASSESSEE UNDER THE AFORESAID AGREEMENTS CANNOT BE S AID TO BE PAID FOR USE OUTSIDE INDIA OF ANY PATENT, INVENTION, DES IGN OR REGISTERED TRADE MARK BECAUSE THE ASSESSEE WAS MERELY CARRY OU T DEVELOPMENT WORK UNDER BOSCHS SUPERVISION AND CONT ROL AND CO- ORDINATION. ACCORDING TO THE AO THE CONSIDERATION WAS PAID FOR CARRYING OUT CERTAIN RESEARCH THAT MAY YIELD AN INV ENTION BUT NOT FOR THE PURPOSE OF USING SUCH INVENTION WHICH IS AN UNCERTAIN EVENT. IN THIS REGARD THE AO ALSO REFERRED TO THE AGREEMENT WHEREBY IT WAS PROVIDED THAT THE RESULTS OF THE DEV ELOPMENT WORK, IF IT GIVES RAISE TO ANY INVENTION, THEN EITHER BOS CH OR THE ASSESSEE COULD MAKE APPLICATION FOR REGISTRATION OF SUCH INT ELLECTUAL PROPERTY RIGHTS (IPR). THE AO THUS HELD THAT WHAT THE ASSESSEE DID WAS MERELY RENDERING OF TECHNICAL SERVICES AND THE CONSIDERATION RECEIVED WAS FOR RENDERING TECHNICAL SERVICES AND T HEREFORE THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S.80-O OF THE ACT. THE CIT(A) AGREED WITH THE REASONING OF THE AO. ON FUR THER APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL, THE TRIBUNAL BY I TS ORDER DATED 12.6.2008 IN ITA NO.335 & 336/BANG/05 FOR AY 2000-0 1 AND 2001-02 ON THE ABOVE ISSUE REMANDED THE SAME TO THE AO FOR FRESH CONSIDERATION. THE TRIBUNAL IN PARA-11.7 AT PAGE-5 2 OF ITS ORDER ITA NO.102(B)2011 7 HELD THAT FOR CLAIMING DEDUCTION U/S.80-O, THE ASSE SSEE SHOULD HAVE RIGHT OVER ANY PATENT, INVENTION, DESIGN OR RE GISTERED TRADEMARK. THE TRIBUNAL ALSO NOTICED THAT THE ASSE SSEE HAD APPLIED FOR GRANT OF PATENT IN RESPECT OF SOME OF T HE INVENTIONS IN THE COURSE OF ITS CARRYING OUT DEVELOPMENT WORK FOR BOSCH. THE TRIBUNAL REMARKED THAT AS TO WHETHER AN APPLICATION FOR PATENT CAN BE EQUATED WITH PATENT IS SOMETHING WHICH HAS TO BE EXAMINED IN THE LIGHT OF THE RELEVANT PATENT LAW. THE TRIBUNA L FINALLY GAVE ITS CONCLUSIONS IN PARA 11.8 OF ITS ORDER AT PAGE-55 AS FOLLOWS: 11.8. PATENT HAS BEEN DEFINED UNDER PATENTS ACT, 1 970 AS PER SECTION 2(M) OF THE ACT. ACCORDING TO IT, PATE NT MEANS A PATENT FOR ANY INVENTION GRATED UNDER THIS ACT. SE CTION 2 (J) OF THE PATENTS ACT DEFINES INVENTION AND ACCORDING TO THIS DEFINITION, INVENTION MEANS A NEW PRODUCT OR PROCES S INVOLVING AN INVENTING STEP AND CAPABLE OF INDUSTRI AL APPLICATION. MEANING OF DESIGN IS TO BE TAKEN AS U NDERSTOOD BY A NORMAL PERSON. THUS, THE ASSESSING OFFICER WI LL HAVE TO RE-EXAMINE AS TO WHETHER THE ASSESSE PERMITTED THE USE OF ANY PATENT, INVENTION, DESIGN OR REGISTERED TRADE M ARK AND RECEIVED CONSIDERATION, AFTER GOING THROUGH THE REP ORTS SUBMITTED BY THE ASSESSE TO BOSCH. SINCE WE ARE NO T HAVING THE BENEFIT OF GOING THROUGH SUCH REPORTS, THEREFOR E, WE DEEM IT PROPER TO RESTORE THE ISSUE ON THE FILE OF THE A SSESSING OFFICER AND THE ASSESSING OFFICER WILL ALLOW ONLY N ET INCOME FROM SUCH USE FOR THE PURPOSE OF COMPUTING DEDUCTIO N U/S.80-O ITA NO.102(B)2011 8 7. PURSUANT TO THE AFORESAID ORDER THE TRIBUNAL, TH E AO BY LETTER DATED 27.2.2003 CALLED UPON THE ASSESSEE TO GIVE DE TAILS OF ANY APPLICATION MADE FOR GRANT OF PATENT AND ALSO FURNI SH COPIES OF THOSE APPLICATIONS. BY ITS REPLY DATED 7.3.2003, T HE ASSESSEE GAVE THE REQUIRED DETAILS WHICH ARE AS FOLLOWS: 1. TWO APPLICATIONS BOTH DATED 11.10.1999 FOR PATENT FOR PRODUCT ASBESTOS FREE SEALANT FOR FUEL INJECTION P UMP-DRY METHOD AND ASBESTOS FREE SEALANT FOR FUEL IN JECTION PUMP-WET METHOD 2. APPLICATION DATED 18.2.2002 FOR PATENT OF A PROCES S FOR PARTIAL MASKING OF BLEEDER SCREW (USED ON ROTARY DI STRIBUTOR TYPE FUEL INJECTION PUMP) TO INHIBIT PLATING. 3. APPLICATION DATED 14.6.2001 FOR PATENT FOR ROLLER TAPPET WITH COLD ADVANCE. 4. APPLICATION DATED 27.7.2002 FOR PATENT FOR EXHAUSE GAS RECIRCULATION VALVE CONTROLLER UNIT. 5. APPLICATION DATED JANUARY, 2001 FOR PATENT FOR NE EDLE LIFT SENSOR. 6. APPLICATIONS DATED 3.12.2001 FOR PATENT FOR ELEMEN T WITH EXTERNAL ORIENTATION IN SINGLE CYLINDER (PF) PUMPS AND FOR BALL TYPE NON RETURN ARRANGEMENT IN FUEL INJECTION PUMPS. 7. APPLICATION DATED FEBRUARY, 2003 FOR PATENT FOR HI GH PRESSURE PUMP FOR USE IN PF-COMMON RAIL SYSTEM. BY LETTER DATED 1.7.2008, THE ASSESSEE PUT FORTH A PLEA THAT THE CONSIDERATION RECEIVED BY IT FROM BOSCH WAS ALSO FO R RIGHT TO USE DESIGNS AND THE PROTO SAMPLES DEVELOPED BY THE ASSE SSEE. THE ASSESSEE GAVE A MASS OF EVIDENCE IN THE FORM OF DRA WINGS ALLEGEDLY ITA NO.102(B)2011 9 GIVEN BY IT TO BOSCH FOR USE BY BOSCH FOR WHICH THE CONSIDERATION WAS RECEIVED FOR WHICH THE ASSESSEE CLAIMED DEDUCTI ON U/S.80-O OF THE ACT. THESE ARE AVAILABLE AT PAGES 150 TO 208. THE AO BY LETTERED DATED 23.2.2009 CALLED UPON THE ASSESSEE T O EXPLAIN AS TO WHETHER THE DESIGNS SUPPLIED TO BOSCH BY THE ASSESS EE ARE NEW PRODUCTS DEVELOPED BY THE ASSESSEE OR IMPROVEMENTS MADE BY THE ASSESSEE TO EXISTING PRODUCTS. THE AO ALSO CALLED UPON THE ASSESSEE TO FURNISH REPORTS FURNISHED BY BOSCH AS T HE TRIBUNAL HAD DIRECTED THE AO TO EXAMINE THOSE REPORTS AND TH EN CONCLUDE AS TO WHETHER THE CONSIDERATION RECEIVED BY THE ASSESS EE FROM BOSCH WAS ELIGIBLE FOR DEDUCTION U/S.80-O OF THE ACT. IN REPLY THE ASSESSEE BY LETTER DATED 12.3.2009 SUBMITTED THAT T HE DETAILS ASKED FOR BY THE AO WERE BEYOND THE SCOPE OF THE RE MAND PROCEEDINGS. THE ASSESSEE FURNISHED COPIES OF REPO RTS SENT BY BOSCH AND THE SAME ARE AVAILABLE AT PAGES 251 TO 47 1 OF THE ASSESSEES PAPER BOOK. BY LETTER DATED 8.11.2010 T HE AO CALLED UPON THE ASSESSEE TO LINK THE PAYMENT OF RS.4, 85,7 7,960/- FROM ROBERT BOSCH GMBH, GERMANY WITH THE SPECIFIC DESIGN S, PATENTS INVENTIONS ETC. THE AO ALSO ENQUIRED AS TO WHETHER ANY PATENT HAS BEEN GRANTED ON THE APPLICATION MADE BY THE ASSESSE E FOR GRANT OF PATENT. BY LETTER DATED 23.11.2010, THE ASSESSEE S UBMITTED THAT ITA NO.102(B)2011 10 RS.3,67,37,005/- AND RS.1,18,40,955/- ARE RECEIVED FROM ROBERT BOSCH GMBH, GERMANY IN TERMS OF THE DEVELOPMENT AGR EEMENTS. COPIES OF WHICH WERE ALREADY FILED WITH YOU. THE D EVELOPMENT AGREEMENTS REQUIRED MOTOR INDUSTRIES COMPANY LTD., (MICO, PREVIOUS NAME OF THE APPELLANT) TO FURNISH THE ESSE NTIAL RESULTS OF THE WORK INCLUDING THE DESIGNS/DRAWINGS BY SPECIFIE D DATES. ACCORDINGLY, VARIOUS REPORTS, DESIGNS/DRAWINGS WERE FURNISHED TO ROBERT BOSCH GMBH FROM TIME TO TIME. HENCE THE A MOUNT RECEIVED FROM ROBERT BOSCH GMBH IS REFERABLE TO THE VARIOUS REPORTS, DESIGNS/DRAWINGS FURNISHED TO THEM. THE A SSESSEE ALSO POINTED OUT THAT VIDE OUR LETTERS DATED 10-02- 2009 AND 12-03- 2009, COPIES OF THE DESIGNS/DRAWINGS FURNISHED BY U S TO ROBERT BOSCH GMBH HAVE BEEN FILED WITH YOU. THE ASSESSEE A LSO ENCLOSED WITH THIS LETTER COPIES OF THE FOLLOWING REGISTRATI ON OF PATENT GRANTED BY THE PATENT OFFICE, VIZ., A) TWO PATENTS FOR AN A SBESTOS FREE SEALANT AND A PROCESS FOR PREPARATION OF AN ASBESTO S FREE SEALANT MATERIAL FOR USE AS SEALANT AT JOINTS IN FUEL INJEC TION PUMPS-DRY METHOD AND FOR WET METHOD FOR A PERIOD OF 20 YEARS FROM 5.11.1999. B) PATENT FOR ROLLER TAPPET WITH COLD A DVANCEW FOR A PERIOD OF 20 YEARS FROM 25.7.2001; C) PATENT FOR SE LF ACTUATING HYDRAULICALLY CONTROLLED BALL VALVE DELIVERY SYSTEM IN FUEL/INJECTION ITA NO.102(B)2011 11 PUMPS FOR 20 YEARS FROM 25.12.2001. D) PATENT FOR ELEMENT WITH EXTERNAL ORIENTATION IN SINGLE CYLINDER (PF) PUMPS FOR 20 YEARS FROM 20.12.2001; E) PATENT FOR HIGH PRESSURE PUMP F OR USE IN PETROL FUEL-COMMON RAIL SYSTEM FOR A PERIOD OF 20 Y EARS FROM 18.11.2002. 8. IN THE LIGHT OF THE ABOVE EVIDENCE FILED BY THE ASSESSEE BEFORE THE AO IN THE REMAND PROCEEDINGS PURSUANT TO ORDER OF I TAT, THE AO PASSED ORDER DATED 16.10.2009. THE AO FIRSTLY HELD THAT THE ASSESSEE TO CLAIM DEDUCTION U/S.80-O OUGHT TO HAVE ALLOWED RIGHT TO USE PATENT OR DESIGN OWNED BY IT. HE HELD THAT THE ASSESSEE DID NOT OWN PATENT OR DESIGN AND THEREFORE THE QUESTION OF GETTING CONSIDERATION FOR RIGHT TO USE PATENT OR DESIGN COU LD NOT BE ACCEPTED. HE ALSO HELD THAT THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE DEVELOPED ANY DESIGN WHICH WAS SENT TO BOS CH FOR WHICH THE CONSIDERATION IN QUESTION WAS RECEIVED. THE AO THEREAFTER HELD AS FOLLOWS: 5.3. WHEN THE HONBLE TRIBUNAL DIRECTED THE AO TO RE- EXAMINE WHETHER THE ASSESSEE PERMITTED THE USE OF PATENTS, DESIGNS ETC, AFTER VERIFYING THE REPORTS S UBMITTED BY THE ASSESSEE TO THE FOREIGN COMPANY, EVIDENTLY, THE REPORTS WERE TO BE VERIFIED FROM THIS ANGLE. THE D IRECTION WILL NOT BE TO VERIFY SIMPLY WHETHER THE ASSESSEE H AS PASSED ON THE DESIGN AND RECEIVED CONSIDERATION THE REFOR. BECAUSE IN SUCH A CASE THERE IS NOTHING TO BE VERIF IED. ITA NO.102(B)2011 12 CONSIDERING THESE FACTS, WHAT HAS TO BE VERIFIED HE RE IS WHETHER THE ASSESSEE SUPPLIED BY THE ASSESSEE TO BE FOREIGN ENTERPRISE HAVE BEEN ASKED TO BE VERIFIED B ECAUSE USUALLY THESE DOCUMENTS WILL CONTAIN THE REPORT OF THE WORK DONE BY THE ASSESSEE, THE PROGRESS MADE IN SUC H WORK ETC. IN FACT, EVEN IN THE ASESSEES CASE, THE AGREEMENT BETWEEN THE ASSESSEE AND BOSCH (THE FOREI GN ENTERPRISE) SAYS IN PARA 2.5 THAT AFTER EACH CALEND AR HALF YEAR THE ASSESEE HAS TO FURNISH A REPORT OF THE ES SENTIAL RESULTS OF ALL ITS WORK. IN OTHER WORDS, THE VERIF ICATION OF THE ASSESSEES REPORTS TO THE FOREIGN ENTERPRISE AS PER HONBLE ITATS DIRECTIONS IS TO EXAMINE WHETHER TH E ASSESSEE HAS SUPPLIED THE DESIGNS WITHI THE MEANING OF SEC.80 0. 5.7 AS DISCUSSED IN THE PROCEEDING PARAGRAPHS, THE ISSUE TO BE EXAMINED IS NOT DESIGNS PER SE, BUT SUPPLY OF THE DESIGNS WITHIN THE MEANING OF SEC.80 0. THE ASSES SEE WAS ASKED TO FURNISH EVIDENCE I THIS REGARD TO SHOW THAT THE DESIGNS SUPPLIED BY IT WERE OWNED BY IT AND THU S THE ASSESSEE HAD ALLOWED THE USE OF THE SAME BY BOSCH. HOWEVER, IN SPITE OF THE OPPORTUNITIES GIVEN NO SUC H EVIDENCE HAS BEEN FURNISHED BY THE ASSESSEE. ONLY COPIES OF SOME DESIGNS AND DOCUMENTS PURPORTING TO BE THE REPORTS SENT TO BOSCH HAVE BEEN FILED. INCIDENTAL LY, ALL THE WRITINGS ON THE COPIES OF THE DESIGNS AND THE PURPO RTED REPORTS OF THE ASSESSEE TO BOSCH ARE IN GERMAN LANG UAGE. THEREFORE, THESE DOCUMENTS FILED Y THE ASSESSEE DO NOT AT ALL SHOW THAT THE ASSESSEE HAD ALLOWED THE USE OF T HE DESIGNS WITHIN THE MEANING OF SEC.80 0. THEREFORE , I HAVE TO HOLD THAT THE ASSESSEEE IS NOT ELIGIBLE FOR THE DEDUCTION U/S 80-0. 9. THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AGA INST ORDER DATED 16.10.2009. THE CIT(A) CALLED FOR A REMAND REPORT ON THE EVIDENCE FILED BEFORE THE AO BY THE ASSESSEE. THE AO FILED A REMAND REPORT DATED 26.11.2010 BEFORE CIT(A). THE ASSESSEE FILED REPLY DATED ITA NO.102(B)2011 13 29.11.2010 TO THE REMAND REPORT OF THE AO. AFTER CONSIDERING ALL THE ABOVE, THE CIT(A) HELD AS FOLLOWS: 4.2 ON A CAREFUL CONSIDERATION OF THE APPELLANT S CONTENTIONS, THE AOS ARGUMENTS AND BASED ON AN IN DEPTH ANALYSIS OF THE REMAND REPORT DATED 26-11-2010 AS W ELL AS THE REBUTTAL DATED 29-11-2011 FILED BY THE APPELLAN T, I AM OF THE CONSIDERED OPINION THAT THE AO HAS RIGHTLY DENI ED THE DEDUCTION U/S 80-0 FOR THE DETAILS REASONS ENUMERAT ED HEREUNDER;- I) REGARDING THE QUERY RAISED TO ESTABLISH THE LINK BETWEEN THE PAYMENTS RECEIVED TOTALLING OF RS.4,85,77,960/-(RS.3,67,37,005/- + RS.1,18,40,955/ -) WITH SPECIFIC DESIGNS, PATENTS, INVENTIONS ETC., TH E APPELLANT REPLIED VIDE LETTER DATED 23-11-2010 THAT THE AMOUNTS WERE RECEIVED FROM ROBERT BOSCH GMBH, GERMANY IN TERMS OF THE DEVELOPMENT AGREEMENTS. IN OTHER WORDS, THE DEVELOPMENT AGREEMENTS MERELY REQUIRED THE APPELLANT TO FURNISH THE ESSENTIAL RES ULTS OF THE WORK INCLUDING THE DESIGNS/DRAWINGS BY SPECIFIE D DATES. ACCORDINGLY, VARIOUS REPORTS, DESIGNS/DRAW INGS WERE FURNISHED TO ROBERT BOSCH GMBH FROM TIME TO TIME. HENCE THE AMOUNTS RECEIVED FROM ROBERT BOSC H GMBH WERE REFERABLE TO THE VARIOUS REPORTS, DESIGNS/DRAWINGS FURNISHED THAT SOFT COPIES OF THE DESIGNS WERE ELECTRONICALLY DELIVERED BY PLACING TH E SAME ON THE BOSCH INTRANET SERVER. IT WAS ALSO POI NTED OUT THAT THE PURPOSE OF REMITTANCE WAS MENTIONED AS FEES FOR DEVELOPMENT WORKS. II) AS REGARDS THE COPIES OF APPLICATIONS FILED FOR THE REGISTRATION OF PATENTS AND APPROVALS GIVEN BY THE CONTROLLER OF PATENTS, THE AO OBSERVED THAT WHILE M OST OF THE APPLICATIONS APART FROM THE ONE DATED 05-11- 1999 WERE FILED IN JULY 2001 AND LATER, THE ORDERS/APPROVALS OF CONTROLLER OF PATENTS WERE RECE IVED ONLY DURING THE PERIOD 2006 TO 2008. IN ITS REJOIN DER DATED 29-11-2010, THE APPELLANT OPINED THAT THIS DI D NOT N ANY MANNER AFFECT THE APPELLANTS CLAIM SINCE IT ITA NO.102(B)2011 14 WAS COMMON KNOWLEDGE THAT THE ISSUE OF CERTIFICATE S INVOLVED A PROCESS OF VERIFICATION BY THE PATENT OF FICE WHICH WAS A TIME CONSUMING ONE. THE APPELLANT ALSO DREW ATTENTION TO THE FACT THAT THE APPLICATIONS AN D CERTIFICATES WERE ISSUED IN THE APPELLANTS NAME WH ICH PROVED THAT THE APPELLANT WAS THE OWNER OF THE DESI GNS. IN PARA-6 OF THE APPELLANTS REJOINDER DATED 29-11- 2010, THE APPELLANT POINTED OUT THAT SOME OF THE DESIGNS CONTAINED THE WORDS ORIGINAL MICO/DVE3. WHICH PROVED BEYOND A SHADOW OF DOUBT THAT THE APPELLANT WAS THE ACTUAL OWNER OF THE DESIGN. III) IN THIS CONNECTION, IT IS IMPERATIVE TO EMPHASIZE T HAT AS PER CLAUSES 3.1, 3.3 & 3.4 OF THE DEVELOPMENT AGREEMENT, THE PATENTS COULD BE APPLIED FOR IN THE NAME OF MICO OR BOSCH AND BOSCH, MICO AND THEIR SUBSIDIARIES WERE FREE TO USE/EXPLOIT SUCH INVENTIONS/PATENTS AS WELL AS THE RESULTS OF RESEAR CH ARISING FROM OR IN CONNECTION WITH THE DEVELOPMENT AGREEMENT AND THE RESULTS THEREFROM COULD BE REGISTERED EITHER IN THE NAME OF MICO OR IN THE NAM E OF BOSCH. I AM OF THE CONSIDERED OPINION THAT IRRESPECTIVE OF WHETHER OR NOT THE CERTIFICATES/APP ROVALS OF THE CONTROLLER OF PATENTS WERE ISSUED IN THE APPELLANTS NAME, CLAUSES 3.1,3.3 & 3.4. OF THE DEVELOPMENT AGREEMENT MAKE IT ABUNDANTLY CLEAR THA T THE APPELLANT WAS NOT THE OWNER ( OR, AT LEAST, CLE ARLY NOT THE SOLE OWNER) OF ANY PATENT, INVENTION OR DES IGN. INCIDENTALLY, BOTH THE APPELLANTS LETTERS DATED 23.11.2010 & 29.11.2010 ARE STRANGELY SILENT ON THE QUERY AS TO WHETHER THE INTELLECTUAL PROPERTY RIGHT S OVER THESE PATENTS OR DESIGNS VESTED WITH THE APPELLANT OR BOSCH. IT IS ALSO PERTINENT TO NOTE THAT THE ENGL ISH TRANSLATION OF THE DRAWINGS CONTAINED THE WORDS THIS DRAWING IS THE EXCLUSIVE PROPERTY OF ROBERT BOSCH G MBH WITHOUT THEIR CONSENT IT MAY NOT BE REPRODUCED OR G IVEN TO THIRD PARTIES. THIS ASPECT IS AMPLY SUPPORTED Y CLAUSE 2.3 OF THE AGREEMENT WHICH STATES THAT ALL TECHNICAL INFORMATION , INPUTS AND SOFTWARE REQUIRE D FOR COMPUTER AIDED DESIGN (CAD) DESIGN CALCULATION WILL BE SUPPLIED BY BOSCH TO MICO. AS RIGHTLY POINTED BY T HE ITA NO.102(B)2011 15 AO, IF THE OWNERSHIP OF THE DRAWINGS/DESIGNS DOES N OT VEST WITH THE APPELLANT, THE AGREEMENT IS OBVIOUSLY ONLY A TECHNICAL COLLABORATION AGREEMENT. IN THE ABSEN CE OF OWNERSHIP, THE QUESTION OF THE APPELLANT PERMITTING USE OF DESIGNS AND RECEIVING MONIES FOR ALLOWING SUCH SO CALLED USE CLEARLY DOS NOT ARISE. IV) WITH REGARD TO THE DIRECTION TO THE APPELLANT TO ES TABLISH THAT THE PATENTS APPLIED FOR WERE FOR DESIGNS CREAT ED FOR USE BY BOSCH LTD., THE AO OBSERVED IN HIS REMAND REPORT DATED 26-11-2010 THAT IT WAS IMPOSSIBLE TO M AKE OUT FROM THE ENGLISH TRANSLATION OF SOME OF THE DESIGNS/DRAWINGS FURNISHED WHETHER THESE DESIGNS WERE DEVELOPED BY THE APPELLANT AND SUPPLIED TO ROB ERT BOSCH GMBH, GERMANY. MOREOVER, THERE WAS ALSO NOTHING TO SUGGEST THAT THEY RELATE TO THE AGREEMEN T BASED ON WHICH DEDUCTION U/S 80-0 WAS CLAIMED. IN ITS REJOINDER DATED 29-11-2010, THE APPELLANT POINT ED OUT THAT THE BOTTOM OF PAGE-2 OF THE REPORT FOR THE DISTRIBUTOR PUMP BORE THE SIGNATURE OF THE DESIGN DEPARTMENT CARRYING OUT THE DESIGN, NAMELY, MICO/DVE3 DESIGN DEPT WHICH PROVED THAT THE DESIGNS WERE DEVELOPED BY THE APPELLANT, DVE3 BEING THE NAME OF THE DEPARTMENT IN MICO. EVEN IF THAT W ERE INDEED THE CASE, ALL THE DRAWINGS BEAR THE CATEGORI CAL ASSERTING OF THE PROPRIETARY RIGHTS OF BOSCH. ON T HIS BASIS ALONE, AND THE IMPOSSIBILITY OF PERMITTING US E BY THE APPELLANT THAT POINTS TO, I AM OF THE VIEW THAT THE APPELLANT IS NOT ENTITLED TO THE BENEFITS OF S.80-0 . V) FINALLY, THE APPELLANT PLACED RELIANCE ON THE DECIS ION OF THE HONBLE ITAT, CHENNAI BENCH IN THE CASE OF M/S ONTRACK SYSTEM LTD., 292 ITR(AT) 68 WHEREIN THE TRIBUNAL DECIDED THE ISSUE IN THE ASSESSEES FAVOUR DESPITE THE AOS FINDING THAT AT NO POINT OF TIME THE ASSESSEE IS THE OWNER OF THE ALLEGED DESIGNS. ON A PERUSAL OF THE ORDER OF THE HONBLE ITAT FROM WHICH THE APPELLANT IS ATTEMPTING TO DRAW STRENGTH IN ARGUING ITS CASE, I FIND THAT THE RELIANCE ON THE SAID ORDER IS MISPLACED AND THE FACTS AND RATIO OF THE DECISION D O NOT APPLY TO THE FACTS OF THE INSTANT CASE. IN THE CITE D DECISION, THE TRIBUNAL HAS GONE INTO THE FACTS OF T HAT ITA NO.102(B)2011 16 PARTICULAR CASE WHEREIN, THE APPELLANT WAS IN THE BUSINESS OF DESIGNING WEBSITES FOR CLIENTS. IN THAT CONTEXT, THE TRIBUNAL HELD THAT THE CREATION OF A W EBSITE IS DESIGNING WITHIN THE DEFINITION OF THE WORD DESIGN FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER S.80-0. SIMULTANEOUSLY (AND THIS PORTION OF THE ORDER IS CONVENIENTLY OMITTED BY THE APPELLANT), THE TRIBUNA L ALSO REITERATED THAT IN ORDER TO CLAIM THE BENEFIT OF S.80- 0. IT IS ESSENTIAL TO HAVE APPROPRIATE RIGHT OVER SUCH PATENT, INVENTION, DESIGN, REGISTERED TRADEMARK, ET C. I.E SUCH A RIGHT THAT WILL ALLOW THE PARTY TO PERMIT US E OF SUCH PATENT, INVENTION, DESIGN, OR REGISTERED TRADE MARK BY ANOTHER PARTY. AS IS AMPLY CLEAR FROM THE FACTS OF THE CASE HIGHLIGHTED SUPRA, THIS IS NOT SO IN THE CASE OF THE APPELLANT. BY VIRTUE OF THE AGREEMENT WITH BO SCH AND THE TERMS OF THE AGREEMENT AS WELL AS THE CATEGORICAL ASSERTION OF THE PROPRIETARY RIGHTS OF BOSCH OVER THE DRAWINGS THAT CONTAIN THE DESIGNS, IT IS ABUNDANTLY CLEAR THAT THE APPELLANT IS IN NO POSITI ON TO ALLOW USE OF THE DESIGNS AND THAT BOSCH IS FREE TO USE THE DESIGNS, IN ANY CASE. IN THE CIRCUMSTANCES, IT CANNOT BE HELD THAT THE FEES RECEIVED FROM BOSCH WE RE FOR USE OF THE DESIGNS BUT CAN ONLY BE CONSIDERED A S FEES FOR SERVICES RENDERED. CONSEQUENTLY, I WOULD HAVE TO HOLD THAT THE APPELLANT IS NOT ENTITLED TO THE DEDUCTION UNDER S.80-0 AND AFFIRM THE ACTION OF THE AO. 10. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 11. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO THE EVIDENCE FILED BY THE ASSESSEE BEFORE US. HE DREW OUR ATTEN TION TO THE FACT THAT AT PAGE 156 OF THE PAPER BOOK THERE IS REFEREN CE TO THE FACT ITA NO.102(B)2011 17 THAT THE DESIGN WAS DEVELOPED BY DVE WHICH REFERS T O DEPARTMENT WHICH DEVELOPED THE DESIGN AND IT WAS THE ASSESSEE WHO DEVELOPED THE DESIGN. HE DREW OUR ATTENTION TO THE VARIOUS D ESIGNS FILED IN THE PAPER BOOK. IT WAS SUBMITTED THAT CERTIFICATE OF REGISTRATION OF PATENTS AS AND WHEN THEY WERE REGISTERED WERE ALSO FILED BEFORE THE REVENUE AUTHORITIES. IT WAS SUBMITTED BY HIM THAT OWNERSHIP OF THE PATENT OR DESIGN IS NOT A CONDITION PRECEDENT F OR ALLOWING CLAIM FOR DEDUCTION U/S.80-O OF THE ACT. HE REFERRED TO THE DECISION OF THE ITAT MUMBAI IN THE CASE OF MRS. SHEILA ANIL PAU L V. ASSISTANT COMMISSIONER OF INCOME-TAX 90 ITD 605 (MUM). THE A SSESSEE CARRIED ON THE BUSINESS OF CREATING DESIGN IN MAN-M ADE AS WELL AS SYNTHETIC FABRICS WITH THE HELP OF VARIOUS DESIGNER S. SUCH DESIGNS AS MADE BY THE ASSESSEE WERE BEING SOLD TO FOREIGN CUSTOMERS AS WELL AS LOCAL CUSTOMERS AND ASSESSEE USED TO RECEIV E DESIGNING CHARGES DURING THE YEAR. THE ASSESSEE CLAIMED DED UCTION U/S.80- O OF THE ACT IN RESPECT OF CHARGES SO RECEIVED. TH IS WAS DENIED BY THE ASSESSING OFFICER, WHO HELD THAT DEDUCTION UN DER SECTION 80- O IS ADMISSIBLE IN RESPECT OF ANY INCOME RECEIVED B Y THE ASSESSEE FROM FOREIGN GOVERNMENT OR ENTERPRISES FOR THE USE OUTSIDE INDIA OF ANY PATENT, INVENTION, DESIGN OR REGISTERED TRADE M ARK. ACCORDING TO ASSESSING OFFICER THE WORD 'DESIGN' ALONG WITH P ATENT, INVENTION, ITA NO.102(B)2011 18 REGISTERED TRADE MARK ETC. INDICATES THAT THIS WORD SHOULD BE OF SIMILAR NATURE I.E. AN IDENTIFIABLE OR REGISTERED D ESIGN. ACCORDING TO HIM MERE DESIGN OF GARMENTS DO NOT FALL UNDER THIS CATEGORY. ACCORDING TO HIM A DESIGN FOR THE PURPOSE OF DEDUCT ION UNDER SECTION 80-O SHOULD BE TOTALLY DISTINGUISHABLE AND IDENTIFIABLE DESIGN. WITH THESE OBSERVATIONS HE HAS HELD THAT TH E CLAIM OF THE ASSESSEE DID NOT QUALIFY FOR THE DEDUCTION UNDER SE CTION 80-O OF IT ACT. ON FURTHER APPEAL THE TRIBUNAL HELD THAT SINC E THE TERM DESIGN HAS NOT BEEN DEFINED IN THE I.T. ACT, THEREF ORE, FOR CORRECT INTERPRETATION IT IS ESSENTIAL TO SEEK THE HELP OF THE TECHNICAL MEANING AS WELL AS THE MEANING OF THIS TERM WHEREVE R USED IN OTHER STATUTES/ACTS. IT IS NECESSARY TO ADOPT THE M EANING OF THE WORD USED IN GENERAL PARLANCE TO AVOID ANOMALIES, A BSURDITIES AND BASICALLY TO IMPART JUSTICE. ACCORDING TO THE LEARN ED COUNSEL FOR THE ASSESSEE THE AFORESAID DECISION WILL SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE. FURTHER REFERENCE WAS MADE TO TH E DECISION OF CHENNAI BENCH OF ITAT IN THE CASE OF ONTRACK SYSTEM S LTD. VS. ACIT 292 ITR (AT) 68 (CHENNAI), WHEREIN IT WAS HELD THAT CREATING A WEB DESIGN FOR A WEBSITE WAS A DESIGN WITHIN THE ME ANING OF SEC.80-O OF THE ACT ENTITLED TO DEDUCTION. OUR ATT ENTION WAS ALSO DRAWN TO THE VARIOUS DESIGNS PURPORTED TO HAVE BEEN SUPPLIED TO ITA NO.102(B)2011 19 BOSCH BY THE ASSESSEE. A STATEMENT OF THE REPORT O F WORK GIVEN BY BOSCH TOGETHER WITH ENGLISH TRANSLATION HAS BEEN FI LED IN A TABULAR FORM BEFORE US. THE SUBMISSIONS AS MADE BEFORE THE REVENUE AUTHORITIES WERE REITERATED. 12. THE LEARNED DR SUBMITTED THAT THE AGREEMENT BE TWEEN THE ASSESSEE AND BOSCH WAS TO CARRY OUT DEVELOPMENT WOR K ON INPUTS PROVIDED BY BOSCH. THE ASSESSEE HAS NOT GIVEN ANY DETAILS AS TO WHAT WAS THE INPUT GIVEN BY BOSCH ON THE BASIS OF W HICH THE ASSESSEE EITHER DEVELOPED PATENT OR DESIGN. IN THI S REGARD HE ALSO HIGHLIGHTED THE FACT THAT THE AGREEMENT BETWEEN THE PARTIES DOES NOT SAY ANYTHING ABOUT SUPPLY OF DESIGN. HIS FURTH ER SUBMISSION WAS THAT THERE IS NO EVIDENCE TO SHOW THAT THESE DE SIGNS WERE USED OUTSIDE INDIA BY BOSCH. HE LAID EMPHASIS ON THE FA CT THAT THE ASSESSEE FAILED TO CORRELATE THE PAYMENTS RECEIVED BY THE ASSESSEE FROM BOSCH WITH THE SUPPLY OF DESIGN TO OR FOR USE OF PATENT BY BOSCH. RELIANCE WAS PLACED BY HIM ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF PC THOMAS VS. ACIT 326 ITR 388 (KER) WHEREIN IT WAS HELD THAT DEDUCTION U/S.80-O O F THE ACT IS ALLOWED FOR RIGHT TO USE INTELLECTUAL PROPERTY RIG HTS AND SINCE THE ASSESSEE IN THE PRESENT CASE COULD NOT ESTABLISH EX ISTENCE OF ITA NO.102(B)2011 20 INTELLECTUAL PROPERTY RIGHTS IN THEM FOR THE PREVIO US YEAR IN QUESTION, THE DEDUCTION CANNOT BE ALLOWED. HE ALSO REFERRED TO THE FACT THAT UNDER THE AGREEMENT BETWEEN ASSESSEE AND BOSCH PAYMENT WAS AN ANNUAL PAYMENT AND NOT LINKED WITH A NY USE OF INTELLECTUAL PROPERTY RIGHTS. IT WAS HIS SUBMISSIO N THAT THE BURDEN WAS ON THE ASSESSEE TO SHOW THAT IT HAD SUPPLIED DE SIGN OR ALLOWED USE OF PATENT OUTSIDE INDIA FOR WHICH CONSIDERATION WAS RECEIVED AND SINCE THE ASSESSEE FAILED TO DO SO, THE CLAIM W AS RIGHTLY DISALLOWED BY THE REVENUE AUTHORITIES. IN ALL OTHE R RESPECTS, HE RELIED ON THE ORDER OF THE REVENUE AUTHORITIES. 13. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS. SEC. 80-O OF THE ACT AS IT EXISTED PRIOR TO ITS AME NDMENT W.E.F 1-4- 98 ALLOWED DEDUCTION IN RESPECT OF ANY INCOME BY WA Y OF ROYALTY, COMMISSION, FEES OR ANY SIMILAR PAYMENT RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT OF A FOREIGN STATE OR A FOREIGN ENTERPRISE IN CONSIDERATION FOR THE USE OUTSIDE INDIA OF ANY PATE NT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS, OR SIMILAR PROPERTY RIGHT, OR INFORMATION CONCERNING INDUSTRIAL, COMMER CIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL MADE AVAI LABLE OR PROVIDED OR AGREED TO BE MADE AVAILABLE OR PROVIDED TO SUCH ITA NO.102(B)2011 21 GOVERNMENT OR ENTERPRISE BY THE ASSESSEE, OR IN CON SIDERATION OF TECHNICAL OR PROFESSIONAL SERVICES RENDERED OR A GREED TO BE RENDERED OUTSIDE INDIA TO SUCH GOVERNMENT OR ENTERP RISE BY THE ASSESSEE, AND SUCH INCOME IS RECEIVED IN CONVER TIBLE FOREIGN EXCHANGE IN INDIA . THE PORTIONS IN BOLD LETTERS WERE OMITTED W.E.F. 1- 4-98 AND THEREFORE ANY CONSIDERATION RECEIVED FOR USE OUTSID E INDIA IN RESPECT OF THE AFORESAID ITEMS WOULD NOT BE ELIGIBL E FOR DEDUCTION U/S.80-O OF THE ACT. THE NATURE OF SERVICES RENDER ED BY THE ASSESSEE IN THE PRESENT APPEAL UPTO AY 97-98 WOULD CLEARLY FALL WITHIN ANY OF THE CATEGORIES OF USE REFERRED TO IN SECTION 80-O OF THE ACT AS IT EXISTED UPTO AY 97-98. BUT FROM AY 9 8-99 THE SCOPE OF DEDUCTION BECAME RESTRICTED AND THE CASE OF THE ASSESSEE HAS TO BE TESTED ON THE BASIS OF THE PROVISIONS AS IT EXIS TED AFTER 1-4-98. 14. AS WE HAVE ALREADY SEEN THE CONSIDERATION RECE IVED BY THE ASSESSEE FROM BOSCH HAS TO BE FOR THE USE OUTSIDE I NDIA BY BOSCH OF ANY PATENT, INVENTION, DESIGN OR REGISTERED TRAD E MARK AND SUCH INCOME SHOULD BE RECEIVED IN CONVERTIBLE FOREIGN EX CHANGE IN INDIA. THE DISPUTE IN THE PRESENT CASE AS WE HAVE ALREADY SEEN IS AS TO WHETHER THERE WAS USE OUTSIDE INDIA BY BOSCH OF ANY PATENT, ITA NO.102(B)2011 22 INVENTION, DESIGN FOR WHICH THE CONSIDERATION IN QU ESTION WAS PAID BY BOSCH TO THE ASSESSEE. IN THIS REGARD THE ASSES SEE HAS TO PROVE THAT THERE WAS USE OUTSIDE INDIA BY BOSCH OF PATENT , INVENTION OR DESIGN OF THE ASSESSEE. 15. IN THE ORIGINAL PROCEEDINGS THE ASSESSEES STA ND WAS VERY VAGUE. IN THE STATEMENT OF FACTS FILED BEFORE THE CIT(A) AGAINST THE ORIGINAL ORDER OF ASSESSMENT, THE ASSESSEE CLAIMS T HAT IT CARRIED OUT RESEARCH/DESIGN/DEVELOPMENT WORKS IN RESPECT OF PRODUCTS SUCH AS SINGLE CYLINDER PUMPS OF THE TYPE PF, COMPA CT ALTERNATOR TYPE GCB1, SPARK PLUG U-TYPE ETC., IN THE CONSIDE RATION FOR THE USE OF THE RESULT OF SUCH RESEARCH/DESIGN/DEVELOPME NT DURING THE FY 2000-01, THE ASSESSEE RECEIVED FEES AMOUNTING TO RS.4,85,77,690/. THE FURTHER CLAIM OF THE ASSESSEE WAS THAT THE DEVELOPMENT WORKS CARRIED OUT BY IT RESULTING IN BR INING INTO EXISTENCE NEW DESIGNS OR INVENTIONS WHICH WAS ALLOW ED BY THE ASSESSEE TO BE USED BY BOSCH FOR WHICH BOSCH MADE P AYMENTS. 16. FROM THE TERMS OF THE AGREEMENT BETWEEN THE AS SESSEE AND BOSCH, WHICH WE HAVE ALRLEADY SET OUT IN THE EARLIE R PART OF THIS ORDER, IT IS CLEAR THAT THE ASSESSEE WAS REQUIRED T O CARRY OUT SOME DEVELOPMENT WORK FOR BOSCH. THE AGREEMENT CONTEMPL ATES THAT THE ITA NO.102(B)2011 23 MANNER IN WHICH THE WORK IS TO BE CONDUCTED WOULD B E IN ACCORDANCE WITH SEPARATE INDIVIDUAL SCHEDULES AND S PECIFICATIONS WHICH BOSCH MAY STIPULATE AND THE ASSESSEE MIGHT AG REE. BOSCH AGREED TO PROVIDE ALL TECHNICAL INFORMATION NECESSA RY FOR CONDUCTING SPECIFIC WORK. IT IS ALSO PROVIDED IN T HE AGREEMENT THAT IN CASE THE ASSESSEE BECOMES AWARE OF PROPERTY RIGH TS WHICH MAY BE RELEVANT IN CONNECTION WITH THE DEVELOPMENT TO B E CONDUCTED BY THE ASSESSEE, THEN THE ASSESSEE SHOULD INFORM BOSCH AND SHALL NOT USE SUCH RIGHTS WITHOUT BOSCHS PRIOR PERMISSION/AG REEMENT. THE AGREEMENT ALSO PROVIDES THAT ANY RESULTS ARISING FR OM OR IN CONNECTION WITH THE DEVELOPMENT AGREEMENT WHICH INC ORPORATES AN INVENTION, A PATENT AND /OR UTILITY MODEL IN INDIA SHALL BE APPLIED FOR IN THE NAME OF THE ASSESSEE OR IN THE NAME OF B OSCH. IN CASE THE APPLICATION IS MADE IN THE NAME OF BOSCH, THE A SSESSEE WAS TO GIVE THE NECESSARY ENDORSEMENT FOR SUCH APPLICATION . THE AGREEMENT ALSO PROVIDES THAT AFTER A PERIOD OF 8 WE EKS FROM THE DATE OF APPLICATION FOR ANY SUCH PATENT AND/OR UTIL ITY MODEL IN INDIA, BOSCH WAS FREE TO USE AND/OR EXPLOIT SUCH IN VENTION AND MAY, AT ITS SOLE DISCRETION, APPLY FOR PATENTS AND/ OR UTILITY MODELS IN ANY COUNTRY OUTSIDE INDIA AND IS FREE TO MAINTAI N OR LAPSE ANY PROPERTY RIGHTS ARISING THEREFROM INCLUDING THOSE I N INDIA. THE ITA NO.102(B)2011 24 COMPENSATION FOR SUCH RIGHTS IS INCLUDED IN THE COM PENSATION PAID BY BOSCH TO THE ASSESSEE UNDER THE AGREEMENT. THE TERMS OF THE AGREEMENT NOWHERE TALKS OF ANY DESIGN TO BE DEVELOP ED BY ASSESSEE AND GIVEN TO BOSCH. 17. IN THE PROCEEDINGS BEFORE THE AO AFTER REMAND BY THE TRIBUNAL, THE EMPHASIS OF THE ASSESSEE HAS BEEN MORE ON SUPPL Y OF DESIGN. IN THIS REGARD IT IS WORTHWHILE MENTIONING THAT THE TRIBUNAL IN ITS ORDER HAS VERY CATEGORICALLY HELD THAT TO BE ELIGIB LE FOR DEDUCTION THE ASSESSEE HAS TO ESTABLISH ITS OWNERSHIP TO PATE NT. THE ASSESSEES OWNERSHIP FOR PATENT DID NOT EXIST FOR A NY OF THE PRODUCTS FOR WHICH IT DEVELOPED ANY PATENT DURING T HE PREVIOUS YEAR RELEVANT TO AY 2001-02 EXCEPT FOR TWO PATENTS FOR AN ASBESTOS FREE SEALANT AND A PROCESS FOR PREPARATION OF AN AS BESTOS FREE SEALANT MATERIAL FOR USE AS SEALANT AT JOINTS IN FU EL INJECTION PUMPS-DRY METHOD AND FOR WET METHOD FOR A PERIOD OF 20 YEARS FROM 5.11.1999. EVEN IN RESPECT OF SUCH PATENT THE REGISTRATION CAME MUCH LATER. THUS THE CASE OF THE ASSESSEE THA T CONSIDERATION RECEIVED BY IT FROM BOSCH IS FOR RIGHT TO USE PATEN T, IN OUR VIEW CANNOT BE SAID TO HAVE BEEN ESTABLISHED. ITA NO.102(B)2011 25 18. AS FAR AS THE CLAIM OF THE ASSESSEE THAT THE C ONSIDERATION RECEIVED WAS FOR RIGHT TO USE DESIGN DEVELOPED BY T HE ASSESSEE, WE FIND THAT THE EVIDENCE FILED BY THE ASSESSEE IS VER Y SKETCHY. IN THE FIRST PLACE THERE IS NO EVIDENCE LET IN BY THE ASSE SSEE NOR CONFIRMATION BY BOSCH THAT DESIGNS WERE DEVELOPED B Y THE ASSESSEE AND TRANSMITTED TO BOSCH AND THAT BOSCH USED IT OUT SIDE INDIA FOR WHICH THE CONSIDERATION IN QUESTION WAS PAID. THE EVIDENCE FILED BY THE ASSESSEE IN THE FORM OF TABULAR STATEMENTS A LSO DO NOT CONFIRM THIS FACT. THESE TABULAR STATEMENTS CANNOT BE SAID TO BE REPORTS CONTEMPLATED BY THE TRIBUNAL IN ITS ORDER D ATED 12.6.2008. IN ANY EVENT THESE DOCUMENTS ARE NOT RELATABLE TO T HE AGREEMENT BETWEEN THE ASSESSEE AND BOSCH, WHICH WE HAVE ALREA DY SEEN NOWHERE MENTIONS DEVELOPMENT OF ANY DESIGN OR A RIG HT TO USE DESIGN DEVELOPED BY THE ASSESSEE BY BOSCH. THERE I S NOTHING ON RECORD TO ESTABLISH THE OWNERSHIP OF THE ASSESSEE O VER THESE DRAWINGS. APART FROM THE ABOVE, THE ASSESSEE HAS N OT BEEN ABLE TO LINK PAYMENTS WITH THE RIGHT TO USE ANY PARTICULAR DESIGN OR PATENT. DESPITE REPEATED REQUEST BY THE AO TO FILE SUCH LIN K, THE ASSESSEE FAILED TO COMPLY WITH THE REQUEST OF THE AO. ITA NO.102(B)2011 26 19. IN OUR VIEW FACTS WITH REGARD TO THE CLAIM FOR DEDUCTION U/S.80-O ARE WITHIN THE EXCLUSIVE KNOWLEDGE OF THE ASSESSEE. IT IS FOR THE ASSESSEE TO LET IN COGENT EVIDENCE TO SUBST ANTIATE ITS CLAIM. THE ASSESSEE IN OUR VIEW HAS FAILED TO DO SO AND IN THE CIRCUMSTANCES, THE REVENUE AUTHORITIES WERE JUSTIFI ED IN NOT ALLOWING THE CLAIM FOR DEDUCTION. THE CONCLUSIONS OF THE CIT(A) IN OUR VIEW WERE THEREFORE JUSTIFIED AND CALLS FOR NO INTERFERENCE. 20. THE AGREEMENT BETWEEN THE ASSESSEE AND BOSCH F OR CARRYING OUT DEVELOPMENT STARTED IN THE YEAR 1991. THE CLAI M OF THE ASSESSEE FOR DEDUCTION U/S.80-O OF THE ACT IN AYS PRIOR TO AY 98- 99, AS WE HAVE ALREADY OBSERVED, WOULD HAVE BEEN SU STAINABLE UPTO AY 97-98 BECAUSE OF THE LARGER COVERAGE OF ACT IVITIES FOR WHICH DEDUCTION WAS ALLOWED U/S.80-O OF THE ACT. THERE I S EVERY REASON TO SUSPECT THAT THE ASSESSEE HAS ATTEMPTED TO CAMOU FLAGE ITS CLAIM FOR DEDUCTION U/S.80-O OF THE ACT FOR AY 2001-02, S O AS TO BE IN CONFORMITY WITH THE AMENDED PROVISIONS OF LAW, THOU GH THE NATURE OF SERVICES REMAINED THE SAME AS IT EXISTED PRIOR T O AY 98-99. WE ARE ALSO CONSCIOUS OF THE FACT THAT THE PRESENT PRO CEEDINGS ARE PURSUANT TO THE ORDER OF REMAND BY THE TRIBUNAL AND THE SCOPE OF SUCH PROCEEDINGS IS LIMITED TO THE DIRECTIONS OF TH E TRIBUNAL. BUT ITA NO.102(B)2011 27 OUR CONCLUSIONS THAT THE ASSESSEE IS NOT ENTITLED T O DEDUCTION U/S.80-O OF THE ACT, IS BASED ON THE FACT THAT THE ASSESSEE HAS FAILED TO ESTABLISH ITS CLAIM FOR DEDUCTION ON THE BASIS OF THE CONDITIONS CONTEMPLATED BY THE AMENDED PROVISIONS O F LAW. 21. FOR THE REASONS GIVEN ABOVE, WE UPHOLD THE ORD ER OF CIT(A) ON THE ABOVE ISSUE. 22. THE NEXT ISSUE THAT ARISES FOR CONSIDERATION I S WITH REGARD TO LEVY OF INTEREST U/S.220(2) OF THE ACT. THE PLEA O F THE ASSESSEE BEFORE CIT(A) WAS THAT THE INTEREST SO COMPUTED WAS INCORRECT AS THE DATES TAKEN BY AO WERE INCORRECT AND THAT THE A O HAS NOT TAKEN INTO CONSIDERATION ADJUSTMENT OF REFUNDS OF T AXES DUE TO THE ASSESSEE. APART FROM THE ABOVE, THE ASSESSEE ALSO SUBMITTED THAT THERE WAS NO NOTICE OF DEMAND U/S.156 OF THE ACT IS SUED AND SERVED ON THE ASSESSEE AND THEREFORE THE VERY LEVY OF INTEREST U/S.220(2) OF THE ACT WAS NOT WARRANTED. THE CIT(A ) HOWEVER HELD THAT THE LEVY OF INTEREST IS MANDATORY AND NO APPEA L WOULD LIE AGAINST LEVY OF INTEREST U/S.220(2) OF THE ACT. 23. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEAR NED DRS SUBMISSION WAS THAT THE ASSESSEE HAS TO APPROACH TH E CIT IN EXERCISE OF HIS ADMINISTRATIVE POWERS FOR WAIVER OF INTEREST AND ITA NO.102(B)2011 28 CANNOT AGITATE THE ISSUE BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT APPEAL AGAINST LEVY OF INTEREST U/S.220(2) IS MAINTAINABLE AND IN THIS REGARD POINT ED OUT THAT THE ASSESSEE DENIED THE VERY LIABILITY TO INTEREST. HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CENTRAL PROVINCES MANGANESE ORE CO. VS. CIT 160 ITR 961 (S C) WHEREIN IT WAS HELD THAT THE LEVY OF INTEREST IS PART OF THE P ROCESS OF ASSESSMENT. ALTHOUGH SECTIONS 143 AND 144 DO NOT SP ECIFICALLY PROVIDE FOR THE LEVY OF INTEREST AND THE LEVY IS, I N FACT, ATTRIBUTABLE TO SECTION 139(8) OR SECTION 215, IT IS NEVERTHELES S A PART OF THE PROCESS OF ASSESSING THE TAX LIABILITY OF THE ASSES SEE. INASMUCH AS THE LEVY OF INTEREST IS A PART OF THE PROCESS OF AS SESSMENT, IT IS OPEN TO AN ASSESSEE TO DISPUTE THE LEVY IN APPEAL PROVID ED HE LIMITS HIMSELF TO THE GROUND THAT HE IS NOT LIABLE TO THE LEVY AT ALL. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A RE OF THE VIEW THAT IN THE LIGHT OF THE FACT THAT THE ASSESSEE HAS DENIED THE VERY LIABILITY TO LEVY OF INTEREST ON THE GROUND OF NON- SERVICE OF NOTICE U/S.156 OF THE ACT. IN VIEW OF THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF CENTRAL PROVINCES MANGANESE OR E (SUPRA), WE ARE OF THE VIEW THAT THE APPEAL AGAINST LEVY OF INT EREST IN THE ITA NO.102(B)2011 29 PRESENT CASE WOULD BE MAINTAINABLE. WE THEREFORE D IRECT THE AO TO CONSIDER THE CLAIM OF THE ASSESSEE AFRESH IN THE LI GHT OF THE SUBMISSIONS MADE BEFORE US CHALLENGING THE LEVY OF INTEREST. THE RELEVANT GROUND IS TREATED AS ALLOWED FOR STATISTIC AL PURPOSES. 25. IN THE RESULT THE APPEAL OF THE ASSESSEE IS TR EATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THE 18 TH DAY OF JULY, 2012. (N. BARATHVAJA SANKAR) ( N.V.VASUDEVAN) VICE PRESIDENT JUDICIAL MEMBER PLACE: BANGALORE DATED: 18-07-2012 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE