ACIT, New Delhi V. M/s. Denso India Ltd., New Delhi

ITA 1421/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3875 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

ITA NO. 1421/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1421/DEL/2011 A.Y. : 2004-05 ACIT, CIRCLE 10(1), NEW DELHI VS. M/S DENSO INDIA, LTD., THE CAPITAL COURT, 3 RD FLOOR, OLOF PALME MARG, MUNIRKA, NEW DELHI (PAN/GIR NO. : AAACD4255F) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. KM GUPTA, ADV. DEPARTMENT BY : MS. Y. KAKKAR, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 30.11. 2010 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) ERRED BY DELETING THE ADDITION OF ROYALT Y PAYMENT OF ` 2,19,00,000/- BY HOLDING IT REVENUE EXPENSES AS AGA INST THE CAPITAL EXPENDITURE ASSESSED BY THE ASSESSING OFFICER. 3. ON THIS ISSUE ASSESSING OFFICER HAS NOT ALLOWED THE ROYALTY PAYMENT AS REVENUE EXPENDITURE AND TREATED THE SAME AS CAPITAL EXPENDITURE BY HOLING THAT IT PROVIDES ENDURING BEN EFIT TO THE ASSESSEE. ITA NO. 1421/DEL/2011 2 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AUTHO RIZED REPRESENTATIVE OF THE APPELLANT COMPANY. AS PER TH E TECHNICAL ASSISTANCE AGREEMENT ENTERED INTO BY THE APPELLANT COMPANY (LICENSEE) WITH DENSO CORPORATION OF JAPAN (LICENSOR) ON FIRST DECEMBER, 1999, THE LICENSO R WAS TO PROVIDE THE LICENSEE WITH TECHNICAL INFORMATION AND RIGHT UNDER THE PATENTS OWNED BY THE LICENSOR, FOR MANUFAC TURE AND SALE OF VARIOUS KINDS OF PRINTED MOTORS USED FOR COOLING FANS FOR CONDENSERS. IN CONSIDERATION FOR THIS, THE LICENSEE I.E. THE APPELLANT COMPANY WAS TO COMPENSATE THE LICE NSOR WITH A LUMP SUM PAYMENT OF 42,00,000/- YENS WITHIN 30 DAYS AND ALSO PAY TO THE LICENSOR RUNNING ROYALTY E QUIVALENT TO 3% OF THE NET SELLING PRICE OF CONTRACT PRODUCTS SOLD/ DISPOSED OF BY THE LICENSEE IN INDIA FOR A PERIOD O F 8 YEARS FROM THE DATE OF COMMERCIAL PRODUCTION DURING THE TER M OF THE AGREEMENT. IT HAS BEEN SUBMITTED THAT THE LU MP SUM PAYMENT OF ROYALTY HAS NOT BEEN CLAIMED BY THE APPEL LANT AS REVENUE EXPENDITURE AND IT IS ONLY THE RUNNING ROYALTY, WHICH IS DEPENDENT ON THE VOLUME OF GOODS PRODUCED AND WHICH IT IS CLAIMING AS REVENUE EXPENSES EVERY YEAR. THIS ITA NO. 1421/DEL/2011 3 PAYMENT OF RUNNING ROYALTY HAS BEEN ALLOWED AS A RE VENUE EXPENSE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2000- 01 AND DURING THE ASSESSMENT YEAR 2001-02 WHEN IT W AS DISALLOWED BY THE ASSESSING OFFICER, THE LD. COMMISS IONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE MAD E AND THIS DECISION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS CONFIRMED BY THE ITAT, DELHI. ADDITIO NS ON THIS ACCOUNT MADE IN A.Y.S 2002-03 AND 2003-04 WER E ALSO DELETED BY MY PREDECESSOR LD. COMMISSIONER OF INCOME T AX (APPEALS). SINCE THERE IS NO CHANGE IN THE FACTS O F THE CASE THIS YEAR, RESPECTFULLY FOLLOWING THE ORDERS OF THE ITAT AND MY PREDECESSOR LD. COMMISSIONER OF INCOME TAX (APPEALS ), I HEREBY DELETE THE ADDITION OF ` 2,19,00,000.0 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ROYALTY PAYMENT BY THE APPELLANT COMPANY TO DENSO CORPORATION OF JAPAN. TH IS GROUND OF APPEAL IS ALLOWED. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY RELYING UPON THE ITAT DECISION IN ASSESSEES OWN CASE FOR EARLIER YEARS. ACCORDIN GLY, FOLLOWING THE PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. ITA NO. 1421/DEL/2011 4 COMMISSIONER OF INCOME TAX (APPEALS). HENCE, WE D ECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND UPHOLD THE ORDER OF T HE LD. COMMISSIONER OF INCOME TAX (APPEALS). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENU E STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/5/2011, UP ON CONCLUSION OF HEARING. SD/- SD/- [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [A.D. JAIN] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 23/5/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3.CIT 4.CIT (A) 5. DR, IT AT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES