Addl. CIT, Noida V. M/s. H-One India (P) Ltd., Greater Noida

ITA 154/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4134 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 11-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: D D BANSAL
• Keywords: Business expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : C NEW DELHI) BEFORE SHRI A.D. JAIN, J UDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA. NO.154/DEL./2010 (ASSESSMENT YEAR : 2003-04) ADDL.CIT, VS. M/S H-ONE INDIA (P) LTD., NOIDA. (FORMERLY M/S HONGO INDIA PVT. LTD.) 12, UDYOG VIHAR, SURAJPUR KASNA ROAD, GREATER NOIDA. (PAN/GIR NO.AAACH3032L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.D. BANSAL, FCA REVENUE BY : SMT. MONA MOHANTY, SR.DR ORDER PER A.K. GARODIA, AM THIS IS A REVENUES APPEAL DIRECTED AGAINST THE OR DER OF THE CIT(A), GHAZIABAD DATED 13.10.2009 FOR AY 2003-04. THE ONLY EFFECTIV E GROUND RAISED BY THE REVENUE WHICH READS AS UNDER: WHETHER LD.CIT(A) IS JUSTIFIED IN HOLDING THAT THE PAYMENT OF ROYALTY OF RS.65,90,376/- MADE TO HONGO COMPANY LIMITED (NOW H -ONE COMPANY LIMITED), JAPAN IS REVENUE IN NATURE, WITHOUT APPRE CIATING THE FACTS OF THE CASE PROPERLY. 2. BRIEF FACTS ARE THAT THE PRESENT ASSESSEE IS A PRIVATE LIMITED COMPANY IN WHICH 95% SHARES ARE HELD BY HONGO COMPANY LTD., JAPAN. THE ASSESSEE IS PAYING 3% ROYALTY ON INTERNAL SALES AND 3% ON EXPORTS SUBJECT TO TAXE S. IT IS OBSERVED BY THE AO IN PARA.5.1 OF THE ASSESSMENT ORDER THAT SIMILAR PAYMENT OF ROY ALTY WAS MADE BY THE ASSESSEE COMPANY TO THE SAME COMPANY OF JAPAN, M/S HONGO COM PANY LTD. IN AYS2001-02 AND 02-03 AND IN THOSE YEARS, SUCH PAYMENT OF ROYALTY HAS BEEN CONSIDERED AS CAPITAL EXPENDITURE FOR THE REASONS THAT THE SAME HAS ENDUR ING ADVANTAGE. ON THIS BASIS, IN THIS YEAR ALSO, THE AO HELD THAT THE PAYMENT OF ROYALTY IS CAPITAL EXPENDITURE. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A) WHO HAS DELETED THIS DISALLOWANCE ON THE BASIS OF TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR AY 2001- 02. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER WHEREAS THE LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). IT IS ALSO SUBMITTED BY HIM THAT TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR AY 2001-02 IS A VAILABLE ON PAGES 14-35 OF THE PAPER BOOK. IT IS ALSO SUBMITTED THAT THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR AY 2005-06 IS ALSO AVAILABLE ON PAGES 36-40 OF THE PAPER BOOK AND IN BOTH THESE YEARS, THE TRIBUNAL HAS DELETED THIS DISALLOWANCE. IT WAS HELD BY THE TRIBUNAL THAT ROYALTY PAYMENT BY THE ASSESSEE COMPANY TO THE EXTENT OF 3% OF NET SALES P AID TO M/S HONGO COMPANY LTD., JAPAN IS ALLOWABLE BUSINESS EXPENDITURE IN THE HAND S OF THE ASSESSEE AND THE SAME CANNOT BE HELD TO BE A CAPITAL IN NATURE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN AYS 2001-02 & 05-06, SIMIL AR ISSUE WAS BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE AND IN THOSE YEARS, IT WAS HELD BY THE TRIBUNAL THAT PAYMENT OF ROYALTY EQUAL TO 3% OF NET SALES PAID TO M/S HONGO COMPANY LTD., JAPAN IS AN ALLOWABLE BUSINESS EXPENDITURE IN THE HANDS OF THE ASSESSEE C OMPANY AND THE SAME CANNOT BE HELD AS CAPITAL IN NATURE. SINCE THE FACTS IN THE PRESE NT YEAR ARE IDENTICAL, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE CIT(A) IN VIEW OF THE SE TWO TRIBUNALS DECISIONS IN ASSESSEES OWN CASE. WE, THEREFORE, UPHOLD THE ORD ER OF THE CIT(A). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 6. ORDER PRONOUNCED IN OPEN COURT ON THE DATE OF HE ARING I.E. 29.04.2010. SD/- SD/- (A.D. JAIN) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, APRIL 29, 2010. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT