HP State Forest Corp. Ltd., Shimla V. ACIT, Shimla

ITA 1066/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8528 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-10-2015
• Assessment Year: 1994-1995
• Appeal Filed On: 01-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: Y K SUD
• Keywords: Business expenditure; Royalty expenses
• Section: 43B; 260A; 144; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1066/CHD/2014 ASSESSMENT YEAR : 1994-95 HP STATE FOREST CORP. LTD. VS. THE ACIT VAN NIGAM BHAWAN, SDA CIRCLE COMMERCIAL COMPLEX SHIMLA KASUMPTI SHIMLA PAN NO. AAACH4036L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. Y.K. SUD RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 18/01/2016 DATE OF PRONOUNCEMENT : 12/02/2016 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) SHIMLA DT. 04/09/2014. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL : 1. THAT THE CIT(A) WAS NOT JUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE ON THE TECHNICAL GROUNDS THAT STATEMENT OF FACTS HAD N OT BEEN GIVEN IN FORM NO. 35. SHE FAILED TO APPRECIATE THAT GROUNDS OF APPEAL WER E CLEARLY RAISED AND IT IS NOT MANDATORY TO FILE STATEMENT OF FACTS IN FORM NO. 35 . 2. THAT EVEN OTHERWISE SHE FAILED TO APPRECIATE THE FACTS AT THE TIME OF DECIDING THE APPEAL WERE AVAILABLE WITH HER IN THE WRITTEN SUBMISSIONS AND WHICH HAVE BEEN DULY REPRODUCED BY HER IN HER ORDER ALSO THEREFORE SHE WAS NOT JUSTIFIED IN IGNORING THE SAME AND DISMISSING THE A PPEAL ON TECHNICAL GROUNDS. 3. THAT THE CIT(A) HAS ERRED IN NOT DECIDING THE GR OUNDS OF APPEAL OF THE ASSESSEE ON MERITS ON THE GROUND THAT THAT THESE GR OUNDS ARE ADMINISTRATIVE IN NATURE AND THERE WAS NO INFIRMITY WITH THE ORDER PA SSED U/S 154 BY THE AO AND THUS DISMISSING THE APPEAL AS NOT MAINTAINABLE. 3. BRIEF FACTS RELATING TO THE CASE ARE THAT AN ASS ESSMENT ORDER WAS INITIALLY FRAMED ON THE ASSESSEE U/S 144 ON 28/11/1997 ESTIMA TING THE INCOME AT RS. 1.5 CRORES THEREAFTER ASSESSEE FILED AN APPEAL TO THE L D. CIT(A) WHO VIDE HER ORDER 2 DT. 07/11/2000 DISMISSED THE ASSESSEES APPEAL. THE ASSESSEE WENT IN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) TO THE ITAT WHO VIDE THEIR ORDER DT. 02/09/2003 RESTORED THE ASSESSMENT TO THE FILE OF THE AO TO FR AME DENOVO ASSESSMENT AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRODUC E BOOKS OF ACCOUNTS. THE HONBLE ITAT FURTHER DIRECTED THAT THE INCOME ASSES SED BY THE AO SHOULD NOT BE LESS THAN THE INCOME RETURNED IN ASSESSMENT YEAR. A GAINST THIS ORDER OF THE ITAT THE ASSESSEE FILED A MISCELLANEOUS APPLICATION (M.A ) CHALLENGING THE AFORESTATED DIRECTION OF THE ITAT. IN THE ORDER PAS SED DT. 30/07/2004 IN RESPONSE TO THE MISCELLANEOUS APPLICATION THE HONBLE ITAT D IRECTED THE AO THAT THE ASSESSED INCOME SHOULD NOT BE MORE THAN RS. 1.5 CRO RES IN THE IMPUGNED ASSESSMENT YEAR. THEREAFTER FRESH ASSESSMENT WAS FR AMED ON THE ASSESSEE VIDE ORDER DT. 29/03/2005 ESTIMATING THE INCOME AT RS. 1 .5 CRORES, IN THE ABSENCE OF PROPER REPLIES FILED BY THE ASSESSEE DURING THE ASS ESSMENT PROCEEDINGS AND NON ATTENDANCE AND NON PRODUCTION OF BOOKS OF ACCOUNT. IN APPELLATE PROCEEDING BEFORE THE LD. CIT(A), THE MATTER WAS REMANDED / RE STORED TO THE AO FOR FRESH ADJUDICATION AFTER EXAMINING THE BOOKS OF ACCOUNT O F THE ASSESSEE. THE AO IN RESPONSE THERETO SUBMITTED REMAND REPORT DT. 24/10/ 2005, RECOMMENDING FOLLOWING DISALLOWANCES TO THE RETURNED LOSS OF RS. 8,21,10,930/- FILED BY THE ASSESSEE. 1. U/S 43(B) RS. 1,35,00,237/- 2. PRIOR PERIOD EXPENSES RS. 1,99,58,607/- 3. ROYALTY PERTAINING TO EARLIER YEARS RS. 7,50,00, 000/- TOTAL RS. 10,84,58,844/- THEREAFTER THE LD. CIT(A) MADE THE AFORESTATED ADDI TIONS TO THE INCOME OF THE ASSESSEE AND COMPUTED THE NET TAXABLE INCOME AT RS. 2,63,47,914/- AFTER ADJUSTING ADDITION MADE OF RS. 10,84,58,844/- TO TH E RETURNED LOSS OF THE ASSESSEE OF RS. 8,21,10,930/-. THE LD CIT(A) THEREAFTER REST RICTED THE INCOME TO RS. 3 1,50,00,000/- IN VIEW OF THE DIRECTIONS OF THE HON BLE ITAT VIDE ITS ORDER DT. 30/07/2004. AGAINST THE ORDER OF THE LD. CIT(A) THE ASSESSEE FILED AN APPEAL TO THE HONBLE ITAT, WHO VIDE THEIR ORDER DT. 27/09/20 07 DELETED THE DISALLOWANCE MADE ON ACCOUNT OF ROYALTY EXPENSES AMOUNTING TO RS . 7.5 CRORES. THEREAFTER ON 09/06/2008 ORDER GIVING EFFECT TO THE ORDER OF THE HONBLE ITAT DT. 27/09/2007 WAS PASSED BY THE AO IN WHICH THE RELIEF GIVEN BY T HE HONBLE ITAT ON ACCOUNT OF ROYALTY EXPENSES WAS NOT ALLOWED BY THE AO FOR T HE REASON THAT THE ASSESSEE HAD NOT TAKEN THIS GROUND BEFORE THE LD. CIT(A) AND THEREFORE COULD NOT BE A GROUND FOR ADJUDICATION BEFORE THE HONBLE ITAT ALS O. THE APPEAL EFFECT ORDER DT. 09/06/2008 IS REPRODUCED HERE UNDER : ORDER GIVING EFFECT TO THE ORDER DATED 27.09.2007 O F THE HONBLE ITAT IN APPEAL ITA NO. 412/CHD/2007 FOR THE A.Y. 1994-95 IN THIS CASE ASSESSMENT U/S 144/254 WAS COMPLETED ON 29.03.2005 AT AN INCOME OF RS. 1.5 CRORE ON THE BASIS OF DIRECTIONS CONTAINED IN HONBLE ITATS ORDER DATED 02.09.2003 WHEREIN IT WAS DIRECTED THAT INCOM E TO BE ASSESSED BY THE A.O. SHOULD NOT MORE THAN RS. 1.5 CRORE. THE ASSESSMENT WAS MADE BY THE A.O. AT AN INCOME RS. 1.5 CRORE WHICH WAS UPHELD BY THE CIT(A) VIDE HIS ORDER DATED 19.02.2007. AGAINST THE ORDER OF CIT(A), THE ASSESS EE FILED APPEAL BEFORE THE HONBLE ITAT, CHANDIGARH. BEFORE THE HONBLE ITAT, THE ASSESSEE TOOK GROUND OF APPEAL THAT CIT(A) WAS NOT JUSTIFIED IN TREATING TH E ROYALTY OF RS. 7.50 CRORE AS TAX FOR THE PURPOSE OF SECTION 43B OF THE INCOME-TAX AC T. THE HONBLE ITAT, CHANDIGARH VIDE ITS ORDER NO. 412/CHD/2007 DATED 27 .09.2007 DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE HOLDING THAT ROYAL TY IS NOT TAX AND HENCE PROVISIONS OF SECTION 43B ARE NOT ATTRACTED IN RESP ECT OF PAYMENT OF ROYALTY. IN ORDER TO GIVE EFFECT TO THE ITATS ORDER, THE ASSES SMENT ORDER, CIT(A)S ORDER AND ITATS ORDERS WERE GIVEN FRESH LOOK. IT IS NOTICED THAT ISSUE REGARDING ROYALTY HAS NOT BEEN DISCUSSED IN THE ASSESSMENT ORDER NOR THE ASSE SSEE HAS TAKEN GROUND REGARDING ADDITION OF ROYALTY BEFORE THE CIT(A) THO UGH THE CIT(A) HAS MADE A MENTION REGARDING THE ISSUE OF ROYALTY IN THE ORDER DATED 19.02.2007 BUT THE DISCUSSION IS NOT BASED ON ANY SUCH GROUND TAKEN BY THE ASSESSEE AND MOREOVER THERE WAS NO ADDITION MADE ON ACCOUNT OF ROYALTY IN THE ASSESSMENT ORDER. THEREFORE, IT IS SEEN THAT SINCE AMOUNT OF RS. 7.5 CRORE HAS NOT BEEN SPECIFICALLY ADDED TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT ORDER NOR IT HAS BEEN THE SUBJECT MATTER OF GROUNDS OF APPEAL TA KEN BY THE ASSESSEE BEFORE THE CIT(A), THE RELIEF GIVEN BY THE HONBLE ITAT IN RESPECT OF AN ITEM OF ADDITION WHICH HAS NOT BEEN ADDED IN THE ASSESSMENT ORDER, T HERE IS TECHNICALLY NO RELIEF ALLOWED TO THE ASSESSEE BY THE HONBLE ITAT. THEREF ORE, NO RELIEF IS TO BE ALLOWED TO THE ASSESSEE ON THE BASIS OF HONBLE ITATS ORDE R. HENCE, INCOME AFTER GIVING EFFECT TO HONBLE ITATS ORDER DATED 27.09.2007 REM AINS AT RS. 1,50,00,000/-. 4. AGGRIEVED BY THE SAME THE ASSESSEE FILED AN APPE AL TO THE LD. CIT(A) WHO VIDE HER ORDER DT. 04/09/2014 DISMISSED THE ASSESSE ES APPEAL BY TREATING THE APPEAL AS DEFECTIVE IN THE ABSENCE OF STATEMENT OF FACTS IN FORM NO. 35. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE REPRODUCED HERE UNDER: 4 5. I HAVE GONE THROUGH THE FACTS OF THE CASE, SUBMI SSION OF ASSESSEE AND CASE LAWS CITED. DURING THE COURSE OF APPELLATE PRO CEEDINGS ASSESSEE WAS REQUIRED TO GIVE STATEMENT OF FACTS, AS FORM NO. 35 FILED ON 13/11/2007 DID NOT CONTAIN THE STATEMENT OF FACTS. ASSESSEE WAS REQUIR ED TO EXPLAIN WHY THE APPEAL SHOULD NOT BE TREATED AS DEFECTIVE IN ABSENCE OF ST ATEMENT OF FACTS IN FORM FORM NO. 35. ASSESSEE VIDE LETTER DT. 21/06/2014 SUBMITT ED THAT THE APPEAL CANNOT BE DECLARED AS DEFECTIVE SINCE IT IS NOT MANDATORY TO GIVE STATEMENT OF FACTS IN FORM NO. 35. HOWEVER, FOR STATEMENT OF FACT YOU MAY KIND LY REFER TO THE WRITTEN SUBMISSION OF ASSESSEE DATED 10/08/2009 FILED BEFOR E MY PREDECESSOR AND THE SAME MAY BE TREATED AS STATEMENT OF FACTS. THE CON TENTION OF ASSESSEE CANNOT BE ACCEPTED. KEEPING IN VIEW PROVISIONS OF RULE 45 OF INCOME TAX RULES, 1962 READ WITH FORM NO. 35, WHEREIN IT IS MANDATORY THAT ASSESSEE SHOULD GIVE CLEAR FACTS FOR ADJUDICATING THE VARIOUS ISSUES RAISED IN GROUNDS OF APPEAL. MOREOVER AS ON DATE OF HEARING THE CASE HAS TRAVELL ED THROUGH VARIOUS FACTUAL STAGES IF ASSESSEE IS NOT GIVING COMPLETE STATEMENT OF FACTS THE APPEAL OF ASSESSEE CANNOT BE HELD TO BE VALID. THUS THE APPEA L OF ASSESSEE IS DISMISSED ON THE TECHNICAL ISSUE OF BEING DEVOID OF UP TO DATE S TATEMENT OF FACTS. 5. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US. 6. BEFORE US THE LD. AR STATED THAT IN VIEW OF THE CLEAR DIRECTION OF THE HONBLE ITAT VIDE THEIR ORDER DT. 27/09/2007 DELETI NG THE ADDITION OF RS. 7.5 CRORES MADE ON ACCOUNT OF ROYALTY, THE LD. AO HAD E RRED IN NOT GIVING EFFECT TO THE AFORESTATED ORDER OF THE ITAT. LD. AR STATED TH AT WHILE THE ORIGINAL ASSESSMENT ORDER IN THIS CASE HAD BEEN PASSED ON 29/03/2005, E STIMATING THE ASSESSEES INCOME AT RS. 1.5 CRORES, IN APPELLATE PROCEEDINGS THE ASSESSMENT HAD BEEN RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUD ICATION DE NOVO AFTER CONSIDERING THE BOOKS OF ACCOUNT OF THE ASSESSEE. I N REMAND PROCEEDINGS, THE ASSESSING OFFICER HAD MADE DISALLOWANCE OF ROYALTY EXPENSES OF RS. 7.5 CRORES VIDE HIS REMAND REPORT DT. 24/10/2005. LD. AR PRODU CED BEFORE US THE QUESTIONNAIRE RAISED BY THE AO DURING THE REMAND PR OCEEDING DT. 22/09/2005 RAISING QUERIES ON VARIOUS ISSUES RELATED TO ASSESS MENT INCLUDING ROYALTY EXPENSES INCURRED BY THE ASSESSEE. LD. AR FURTHER PRODUCED B EFORE US THE COPY OF REPLY FILED BY THE ASSESSEE TO THE AFORESTATED QUESTIONNA IRE DT. 01/10/205 GIVING REPLY ON ALL ISSUES RAISED, INCLUDING ROYALTY EXPENSES IN CURRED BY THE ASSESSEE OF RS. 7.5 CRORES. COPY OF THE REMAND REPORT DT. 24/10/05 PROP OSING ADDITION ON ACCOUNT OF ROYALTY EXPENSES OF RS. 7.5 CORES WAS ALSO PRODU CED BEFORE US. LD. AR FURTHER STATED THAT AFTER CONSIDERING THE AFORESAID REMAND REPORT OF THE AO THE LD. 5 CIT(A) UPHELD THE ADDITION MADE ON ACCOUNT OF ROYAL TY EXPENSES AND FURTHER DREW OUR ATTENTION TO THE ORDER OF LD. CIT(A) AT PA RA 5 WHEREIN THE ISSUE OF ROYALTY HAD BEEN DISCUSSED BY THE LD. CIT(A) AND TH E ADDITION MADE BY THE AO UPHELD. THE LD. AR THEREFORE STATED THAT IT WAS INC ORRECT ON THE PART OF THE REVENUE TO STATE THAT THE ISSUE OF ROYALTY WAS NOT THERE BEFORE THE LD. CIT(A). THE LD. AR FURTHER STATED THAT THE HONBLE ITAT VI DE ITS ORDER DT. 27/09/2007 HAD DELETED THE ADDITION OF RS. 7.5 CRORES MADE ON ACCO UNT OF ROYALTY AND FURTHER SUBMITTED IN WRITING THAT NO APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE AFORESTATED ORDER OF THE ITAT AND IN VIEW THERE OF EFFECT OF THE SAME OUGHT TO HAVE BEEN GRANTED TO THE ASSESSEE. 7. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F THE AO/ CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 9. THE UNDISPUTED FACT EMERGING IN THE PRESENT CASE ARE THAT ADDITION ON ACCOUNT OF DISALLOWANCE OF ROYALTY EXPENSES WAS MAD E BY THE LD. CIT(A) IN HIS ORDER DT. 19/02/2007 ON ACCOUNT OF DISALLOWANCE REC OMMENDED BY THE AO IN REMAND PROCEEDINGS VIDE HIS REMAND REPORT DT. 19/02 /2007. THE RELEVANT PORTION OF THE REMAND REPORT IS RECOMMENDING / PROPOSING A DDITION OF RS. 7.5 CRORES OF ROYALTY EXPENSES IS REPRODUCED HERE UNDER: A.Y. 1994-95 ROYALTY PERTAINING TO EARLIER YEAR : DURING THE YEAR THE ASSESSEE HAS PAID ROYALTY AMOUN TING TO RS. 7.50 CRORE TO THE H.P. GOVT., WHICH PERTAIN TO EARLIER YEARS. THIS IS NOT ALLOWABLE. DURING THE COURSE OF REMAND PROCEEDINGS THE ASSESSEE HAS OBJECTED TO RAI SING OF THIS ISSUE DURING REMAND PROCEEDINGS, ON THE PLEA THAT IT IS A NEW QU ERRY. IN THIS CONNECTION IT S REITERATED THAT THE ISSUE WAS RAISED BY THE A.O. VI DE PARA L OF HIS SHOW CAUSE LETTER DT. 18/03/05. THE ASSESEE HAS ALSO PLEADED THAT THE ROYALTY WAS PROVIDED AFTER RECONCILIATION WITH THE FOREST DEPTT. AND THAT ON T HE SIMILAR ISSUE IN THE A.Y. 1995- 96, THE ITAT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THIS REGARD IT IS SUBMITTED THAT THE DEPTT. HAS ALREADY FILED APPEAL U/S 260A AGAINST THE DECISION OF THE ITAT ON THIS ISSUE. THEREFORE, THE AMOUNT OF ROYALTY PERTAINING TO EARLIER YEARS AND PROVIDED DURING THE YEAR MAY BE DISALLOWED. THE INCOME OF THE ASSESSEE FOR THE A.Y. 1994-95 MAY THEREFORE BE COMPUTED AS UNDER: 6 DECLARED LOSS (-) 8,21,10,930/- ADD BACK:- DISALLOWANCES AS DISCUSSED ABOVE (A) U/S 43B RS. 1,35,00,237/- (B) PRIOR PERIOD EXPENSES RS. 1,99,58,607/- (C) ROYALTY PERTAINING TO EARLIER YEARS RS. 7,50,00,000/- RS. 10,84,58,844/- RECOMMENDED TAXABLE INCOME RS. 2,63,47,914/- THE ITAT IN ITS ORDER DT. 02-09-2003, NOTED THAT TH E A.O. WHILE FRAMING THE ASSESSMENT DE NOVO, SHOULD NOT ASSESS THE INCOME FO R BOTH THE ASSESSMENT YEARS AT A FIGURES LESS THAN THE INCOME RETURNED BY THE A SSESSEE. HOWEVER, ON A MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE THE ITAT VIDE ITS ORDER DT. 30.07.2004 DIRECTED THAT THE ASSESSED INCOME FOR TH E A.Y. 1993-94 & 1994-95 SHOULD NOT BE MORE THAN RS. 1.4 CRORE AND RS. 1.5 CRORES R ESPECTIVELY. FOR YOUR KIND READY REFERENCE COPIES OF THESE TWO ORDERS ARE ENCLOSED. HOWEVER, IT IS SUBMITTED THAT THE DEPARTMENT HAS FILED APPEAL U/S 260A AGAINST TH E LATTER ORDER OF THE ITAT. IT IS ALSO REQUESTED THAT IN CASE THE INCOME FOR THE A.Y. 1994-95 IS TO BE RESTRICTED, A MENTION OF THE INCOME AT WHICH THE ASSESSMENT SHOUL D HAVE BEEN RIGHTFULLY COMPLETED MAY PLEASE BE MADE FOR THE BENEFIT OF LAT ER PROCEEDINGS IN THIS CASE AFTER THE ADJUDICATION OF THE APPEAL FILED BY THE D EPARTMENT BEFORE HONBLE HIGH COURT. THE LD. CIT(A) MADE THE DISALLOWANCE OF ROYALTY EXP ENSES BASED ON THE RECOMMENDATION OF THE AO IN HIS REMAND REPORT. THE RELEVANT PORTION OF THE CIT(A) ORDER UPHOLDING THE ADDITION IS ALSO REPRODUCED HERE UNDER: T5. AS FAR AS THE ISSUE OF ROYALTY IS CONCERNED TH E SAME IS COVERED BY THE DIRECT DECISION OF THE HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. GUJRAT STATE FOREST DEVELOPMENT (2007) 288 ITR 28 (GUJ). IN THE SAID DECISION THE HONBLE GUJRAT HIGH COURT HAS CATEGORICALLY HELD THAT THE R OYALTY IS TREATED TO BE A TAX AND THEREFORE FOR THE PURPOSE OF CLAUSE(A) OF SECTI ON 43B OF THE ACT, IT WOULD BE INCLUDIBLE IN THE TERM TAX. THE JUDICIAL PRONOUNC EMENT BY THE HONBLE GUJRAT HIGH COURT AND THE RELEVANT PARA OF THE IMPUGNED DE CISION IS REPRODUCED HEREUNDER. THUS, THE DEDUCTION OF ROYALTY U/S 43 B OF THE ACT IS A ALLOWABLE ONLY ON ACTUAL PAYMENT AND NOT ON ACCRUAL BASIS. BUSINESS EXPENDITURE- DEDUCTION ONLY ON ACTUAL PA YMENT- EFFECT OF SECTION 43B LIABILITY TO PAY ROYALTY IN ACCOUNTING YEARS RELEVA NT TO ASSESSMENT YEARS 1981-82 AND 1982-83 SETTLED BY ORDER PASSED IN JANUARY 1985 ROYALTY DEDUCTIBLE IN ASSESSMENT YEAR 1985-86- INCOME-TAX, 1961, S. 43B. A PERUSAL OF SECTION 43B OF THE INCOME-TAX ACT, 196 1, WOULD MAKES IT CLEAR THAT DEDUCTION BY WAY OF TAX, DUTY, CESS OR FEE, BY WHAT EVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE, SHALL BE ALLOWED ( IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED HIM) ON LY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS Y EAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. ROYALTY IS TREATED TO BE A TA X AND, THEREFORE, FOR THE PURPOSES OF CLAUSE (A) OF SECTION 43B, IT WOULD BE INCLUDIBLE IN THE TERM TAX HELD ACCORDINGLY, THAT SINCE THE ROYALTY PAYMENT IN DISPUTE RELATED TO THE ASSESSMENT YEARS 1981-82 AND 1982-83 AND THE MATTER WAS SETTLED BY THE STATE GOVERNMENT BY ITS RESOLUTION DATED JANUARY 2,1985, IT WAS DEDUCTIBLE IN THE ASSESSMENT YEAR 1985-86. THEREAFTER THE HONBLE ITAT VIDE THEIR ORDER DT. 27 /09/2007 DELETED THE AFORESTATED DISALLOWANCE BY HOLDING AT PARA 4 OF IT S ORDER AS FOLLOWS : 7 4. IF THE CONTENTION OF THE RESPECTIVE REPRESENTAT IVE AND THE IMPUGNED ORDER ARE ANALYSED, IT IS SEEN THAT THE LEARNED FIRST APPELLA TE AUTHORITY HAS MENTIONED THAT THE ROYALTY ISSUE IS COVERED BY THE DIRECT DECISION OF THE HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. GUJRAT STATE FOREST DEVELOPMENT (20 07) 288 ITR 28 (GUJRAT) AND THE HONBLE APEX COURT IN THE CASE OF GORE LAL DUBEY VS . CIT (2001) 248 ITR 3(SC). WITHOUT GOING INTO MUCH DELIBERATION, IT IS SEEN THAT THE D ECISION RELIED UPON BY THE LD. CIT(A), I.E. GORE LAL DUBE VS. CIT(SUPRA), HAS BEEN OVERRULED BY THE FIVE JUDGES BENCH OF THE HONBLE APEX COURT IN THE CASE OF WEST BENGAL & OTHERS VS. KESO RAM INDUSTRIES LTD. (266 ITR 721) WHEREIN AT PAGE 762, THEIR LORDSHIPS HAVE HELD THAT CESS ON ROYALTY IS A TAX BUT ROYALTY AS SUCH IS NOT A TAX. THEREFORE, IT CAN BE SAID THAT T HE DECISIONS RELIED UPON BY THE RESPECTIVE LD. REPRESENTATIVES AND ALSO BY THE LD. CIT(A) HAVE BEEN DULY CONSIDERED BY THE TRIBUNAL IN THE AFORESAID CASE OF ASSESSEE. THE REFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS, WE ALLOW THIS GROUND OF THE AS SESSEE BY HOLDING THAT ROYALTY IS NOT A TAX. CONSEQUENTLY, WE REVERSE THE STAND OF THE LD. CIT(A) ON THIS ISSUE. IT IS EVIDENT FROM THE ABOVE THAT THE ADDITION MADE ON ACCOUNT OF ROYALTY EXPENSES OF RS. 7.5 CRORES DURING FIRST APPELLATE P ROCEEDINGS STOOD DELETED AND CONSEQUENT BENEFIT OF THE SAME OUGHT TO HAVE BEEN G IVEN TO THE ASSESSEE IN THE APPEAL EFFECT ORDER PASSED. MOREOVER IN VIEW OF THE ADMITTED FACT THAT NO APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE AFORESAID ORDER, THE DELETION OF DISALLOWANCE HAS ATTAINED FINALITY. THE ARGUMENT FORWARDED BY THE AO THAT THE ISSUE REGARDING ROYALTY HAD NOT BEEN DI SCUSSED IN THE ASSESSMENT ORDER NOR WAS A GROUND BEFORE THE CIT(A) AND THE RE LIEF THEREFORE GIVEN BY THE ITAT IS TECHNICALLY NO RELIEF, HAS NO MERIT AT ALL IN VIEW OF THE CLEAR FINDINGS GIVEN ABOVE THAT THE ISSUE OF ROYALTY WAS RAISED IN REMAN D PROCEEDINGS WHICH TOOK PLACE DURING THE APPELLATE PROCEEDING BEFORE THE LD . CIT(A) AND ADDITION WAS MADE BY THE LD. CIT(A), IN VIEW OF THE REMAND REPOR T OF THE AO WHICH WAS IN TURN DELETED BY THE HONBLE ITAT VIDE ITS ORDER DT. 27/09/2007. IT IS PERTINENT TO POINT OUT AT THIS JUNCTURE THAT THE LD. AO HAD EXCE EDED HIS POWER WHILE COMMENTING ON THE RELIEF GRANTED BY THE HONBLE ITA T BY STATING THAT TECHNICALLY NO RELIEF HAD BEEN GRANTED BY THE ITAT SINCE THERE WAS NO ISSUE AS SUCH BEFORE THE ITAT. MOREOVER WE FIND THAT THE LD. CIT(A) HAS REJECTED T HE ASSESSEES APPEAL HOLDING IT TO BE DEFECTIVE, IN VIEW OF THE FACT THAT THE AS SESSEE HAD NOT GIVEN THE STATEMENT OF FACTS IN FORM NO. 35 FILED BY IT. THIS VIEW OF THE LD. CIT(A) WE FIND IS 8 INCORRECT AS THERE IS NO PROVISION OF LAW TREATING THE APPEAL FILED AS DEFECTIVE IN THE ABSENCE OF SUBMISSION OF STATEMENT OF FACTS. IN VIEW OF THE ABOVE WE HOLD THAT THE ASSESSEE BE G RANTED RELIEF TO THE EXTENT OF RS. 7.5 CRORES ON ACCOUNT OF ROYALTY EXPENSES INCUR RED IN VIEW OF THE ORDER OF THE HONBLE ITAT DT. 27/09/2007. 10. THE APPEAL FILED BY THE ASSESSEE IS THEREFORE A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/02/2016 SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 12/02/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR