DCIT, New Delhi V. M/s. Ruskin Titus India (P) Ltd., New Delhi

ITA 1791/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5650 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 06-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: VIDHI AGARWAL

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1791/DEL/2016 ASSESSMENT YEAR: 2011-12 DCIT, CIRCLE 21(2), NEW DELHI. (APPELLANT) VS. RUSKIN TITUS INDIA (P) LTD.(FORMERLY KNOWN AS M/S. CARYAIRE AIR SYSTEM COMPONENT (P) LTD.), C-434, 3 RD FLOOR, DEFENCE COLONY, NEW DELHI. PAN- AADCC0463B (RESPONDENT) APPELLANT BY SH. SURENDER PAL, SR. DR RESPONDENT BY MS. LALITA KRISHNAMURTHY AND MS. VIDHI AGARWAL, C.A. ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-7, NEW DELHI DATED 28.01.2016 FOR THE ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUND : ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,40,98,000/- MADE BY A .O. ON ACCOUNT OF ROYALTY PAID BY TREATING THE EXPENDITURE AS CAPITAL IN NATURE. DATE OF HEARING 29.01.2019 DATE OF PRONOUNCEMENT 31.01.2019 ITA NO. 1791/DEL/2016 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME ON 25.11.2011 DECLARING LOSS OF RS.2,03,63,512/-. IN T HE ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAD CLAIMED ROYALT Y OF RS.1,40,98,000/- AND PAID TO FOLLOWING THREE PARTIES : (I). CARYAIRE EQUIPMENTS INDIA PVT. LTD. - RS.70, 49,000/- (II). AIR SYSTEM COMPONENTS INC, USA RS.35,24,50 0/- (III). RUSKIN COMPANY, USA RS.35,24,500/- AS PER ASSESSEE, THE ROYALTY WAS PAID AS PER TECHNI CAL SERVICES AND LICENSE AGREEMENT WITH THE ABOVE PARTIES IN CONSIDERATION O F THE SERVICES PROVIDED ON RECURRING BASIS AND PAYABLE FOR YEAR TO YEAR FOR A PERIOD OF 10 YEARS AND PAYMENT MADE ARE IN ACCORDANCE WITH ARTICLE 6 OF TH E AGREEMENT BASED ON YEARLY BASIS. THE ASSESSING OFFICER NOTICED THAT SI MILAR ISSUE WAS INVOLVED IN ASSESSMENT YEAR 2008-09 AND THERE IS NO CHANGE IN T HE CIRCUMSTANCES ATTENDING TO THE CURRENT YEAR. THE ASSESSING OFFICE R FURTHER OBSERVED THAT AGAINST THE ORDER OF THE LD. CIT(A) IN APPEAL FOR A .Y. 2008-09, THE APPEAL WAS FILED BY THE REVENUE BEFORE THE TRIBUNAL. ACCORDIN GLY, THE ASSESSING OFFICER DISALLOWED THE ROYALTY TREATING IT AS CAPITAL IN NA TURE AND MADE THE ADDITION IN THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED FROM TH E ORDER OF THE ASSESSING OFFICER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A ) WHO AFTER FOLLOWING THE DECISION OF ITAT IN ITA NO. 147/DEL/2012 DATED 06.0 1.2016 FOR A.Y. 2008-09 IN THE CASE OF ASSESSEE, ALLOWED THE APPEAL OF THE ASSESSEE OBSERVING AS UNDER : 5.3. IT IS NOTED THAT THE APPEAL WAS INSTITUTED ON SIMILAR FACTS FOR THE A. Y. 2008-09 WHICH WAS DECIDED IN FAVOUR OF THE APPELLANT BY THE CIT(A)-VI VIDE ORDER IN A. NO. 118/10-11 DATED 24.10.2011. THE HON'BLE ITAT HAS D ECIDED THE DEPARTMENTAL APPEAL PREFERRED AGAINST THE ORDER OF THE CIT(APPEA LS) IN FAVOUR OF THE APPELLANT IN ITA NO. 147/DEL/2012 VIDE ORDER DATED 06.01.2016. T HE HON'BLE ITAT HELD AS UNDER: ITA NO. 1791/DEL/2016 3 14. THE RATIO OF JUDGEMENT (SUPRA) IS THAT IN CASE OF THE FOREIGN COMPANY AGREEING NOT TO MANUFACTURE SIMILAR PRODUCT IN INDIA OR GIVE RIG HT FOR MANUFACTURE TO OTHERS, IT AMOUNTS TO EXCLUSIVE AND ENDURING ADVANTAGE AND SUB SEQUENTLY PAYMENT OF TECHNICAL AID OR FEE OR ROYALTY IS TO BE DISALLOWED. BUT THE JUDGEMENT (SUPRA) IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OR THE PRESENT CASE FOR THE SOLE REASON THAT IN THE INSTANT CASE, BENEFIT OF ENDURING NATURE HAS TO BE TRANSFER RED TO THE ASSESSEE COMPANY AS IS EVIDENT FROM ARTICLE 6 OF THE AGREEMENT. TRANSFEREE COMPANY I.E. CEIPL WOULD GET 3% OF THE NET SELLING PRICE OF THE LICENSED PRODUCTS M ANUFACTURED BY THE LICENSEE, CALCULATED AS PER ARTICLE 6 OF THE AGREEMENT, MEANI NG THEREBY, TRANSFEREE (CEIPL) WAS HAVING COMPLETE HEN ON TECHNICAL KNOW-HOW, ASSISTIN G SKILLS AND OTHER EXPERTISE AS PER ARTICLE 4 OF THE AGREEMENT. SO, FINDING NO ILLEGALI TY OR PERVERSITY IN THE FINDINGS RETURNED BY LD. CIT(APPEALS), GROUND NO. 2 IS ALSO DETERMINED AGAINST THE REVENUE. ' 5.4. SINCE THE FACTS ARE SIMILAR, RESPECTFULLY FOLL OWING THE ORDER OF THE HONBLE ITAT FOR A.Y. 2008-09, DISALLOWANCE OF RS.1,40,98,0 00/- MADE BY THE A.O. BY TREATING THE EXPENDITURE ON ROYALTY AS CAPITAL IN NATURE, I S DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS RULED IN FAVOUR OF THE APPELLANT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRI BUNAL. 3. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09. 4. HAVING CONSIDERED THE ARGUMENTS OF BOTH THE SIDE S AND GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE CLAIM OF ROYALTY WAS DISMISSED BY THE ASSE SSING OFFICER HOLDING IT AS CAPITAL IN NATURE, ON THE BASIS OF ASSESSMENT ORDER PASSED IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IN THE IDE NTICAL FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER HA S ALSO OBSERVED THAT THE APPEAL OF REVENUE IS UNDER ADJUDICATION BEFORE THE TRIBUNAL ON THIS ISSUE INVOLVED IN A.Y. 2008-09. HOWEVER, SINCE THE ITAT I N THE SAID CASE OF ASSESSEE ITA NO. 1791/DEL/2016 4 FOR THE ASSESSMENT YEAR 2008-09 HAS DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 06.01.2016 AS MENTIONED A BOVE, THE VERY BASIS OF REJECTING THE ASSESSEES CLAIM TAKEN BY THE ASSESSI NG OFFICER STANDS COLLAPSED. THEREFORE, THE ISSUE, BEING COVERED BY THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL (SUPRA), THE PRESENT APPEAL OF THE REVENUE IS FOUND DEVOID OF MERITS. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.01.2019. SD/- SD/- (H.S. SIDHU) (L.P. SA HU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31.01.2019 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI