ACIT, New Delhi V. M/s. Grand Windsor Resorts Ltd., Gurgaon

ITA 3529/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65470 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 05-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: S K VATTA
• Keywords: Gross profit estimation; Royalty expenses; Revenue expenditure; Capital expenditure
• Section: 142(1); 144

Judgement Text

ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.3529/DEL/2012 ASSESSMENT YEAR : 2006-07 ASSTT.COMMISSIONER OF INCOME TAX, VS GRAND WIND SOR RESORTS LTD. CIRCLE 12(1), D-63, SOUTH CITY I, NEW DELHI. GURGAON 122002 (PAN: AAACG4627Q) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATPAL SINGH, SR. DR RESPONDENT BY : SHRI S.K. VATTA O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A)-VIII, NEW DELHI FOR AY 2006-07 DATED 23.4.2012 FOR AY 2006-07 PASSED U/S 250(6) OF THE I NCOME TAX ACT, 1961(HEREINAFTER REFERRED TO AS THE ACT). 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. WHETHER LD. COMMISSIONER OF INCOME TAX(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING THE ADDITION OF RS.23,46,743/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF GP RATIO. 2. WHETHER LD. COMMISSIONER OF INCOME TAX(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 2 IN DELETING THE DISALLOWANCE OF RS.3,64,607/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ROYALTY PAYMENTS. 3. BRIEFLY STATED, THE FACTS OF THE CASE GIVING RIS E TO THIS APPEAL ARE THAT THE ASSESSEE FILED A RETURN OF INCOME DECLARING A T OTAL LOSS OF RS.19,50,292 AND THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND A NOTICE U/S 143(2) O F THE ACT ON 12.10.2007 AND AGAIN A NOTICE U/S 143(2) ALONG WITH QUESTIONNA IRE U/S 142(1) OF THE ACT WAS SENT AND SERVED ON THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT DURING THE YEAR UNDER CONSIDERATION, GP RATE WAS DE CLARED AT 45.74% AS AGAINST 50.87% AS DECLARED IN THE IMMEDIATELY PRECE DING ASSESSMENT YEAR. THE ASSESSEE SUBMITTED THAT THE FALL IN GP WAS DUE TO INCREASE IN COST OF FOOD, PROVISIONS AND STORES CONSUMPTION AND ALSO DU E TO SUBSTANTIAL INCREASE IN THE COST OF INPUTS AND DAIRY PRODUCTS ETC. THE ASSESSING OFFICER HELD THAT THE FALL IN GP IN SUCH LINE OF BUSINESS WAS NOT DES IRABLE INASMUCH AS THE ASSESSEE COMPANY HAD TRIED TO INFLATE THE EXPENSES UNDER VARIOUS HEADS AND THE ASSESSING OFFICER FINALLY ADOPTED THE GP RATE O F 50% AND THE DIFFERENCE CALCULATED TO RS.23,46,743 WAS ADDED BACK TO THE IN COME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO NOTED THAT THE CLAIM OF EXPENSES OF RS.14,58,428 ON ACCOUNT OF ROYALTY, MARKETING, RESERVATION TO RA DISSON, USA IS AN EXPENDITURE CAPITAL IN NATURE. THEREFORE, RELYING ON THE JUDGMENT OF ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 3 HONBLE SUPREME COURT IN THE CASE OF SOUTHERN SWITC H GEAR LTD. VS COMMISSIONER OF INCOME TAX 232 ITR 359 AND JONAS WO ODHEAD AND SONS (INDIA) LTD. VS COMMISSIONER OF INCOME TAX 224 ITR 342 (SC), THE ASSESSING OFFICER HELD THAT LOOKING INTO THE NA TURE OF THE BUSINESS OF THE ASSESSEE, 25% OF AMOUNT OF ROYALTY WAS TO BE HELD A S CAPITAL EXPENDITURE AMOUNTING TO RS.3,64,607 AND DISALLOWED AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE COMMISSIONER OF INCOME TAX(A)-VIII, NEW DELHI WHICH WAS ALLOWED PAS SING AN ORDER U/S 250(6) OF THE ACT. THE OPERATIVE PARAS OF THE ORDE R ARE BEING REPRODUCED AS UNDER:- IN CIT VS. GUJARAT CARBON LTD. 254 ITR 294 (GUJ.), IN ADDITION TO A LUMP SUM PAYMENT, THE ASSESSEE HAD TO PAY THE COLLABORATOR A ROYALTY BASED ON THE FIGURES OF SALES FOR A PERIOD OF 5 YEARS IN RETURN FOR VARIOUS AFTER INSTALLATION SERVICES BY TECHNICALLY QUALIFIED PERS ONS FOR SPOT TECHNICAL ASSISTANCE TO BE RENDERED BY THE COLLABORATOR. THERE WAS NO PROVISION IN THAT AGREE MENT REQUIRING THE ASSESSEE TO RETURN THE DESIGNS ETC. A FTER THE EXPIRY OF THE PERIOD OF 5 YEARS. UNDER THE SECOND AGREEMENT, THE ASSESSEE WAS REQUIRED TO PAY A ROYAL TY OF 3% OF THE NET EX FACTORY SALES PRICE FOR THE SUPPLY OF INFORMATION ON DAY TO DAY DEVELOPMENTS IN THE RANGE OF PRODUCTS MANUFACTURED BY THE ASSESSEE AND PERTAININ G TO THE RESEARCH CARRIED OUT BY THE COLLABORATOR. THE TRIBUNAL HELD THAT ROYALTY UNDER THE FIRST AGREEMEN T PERTAINED TO SERVICES IN RESPECT OF THE STAGE AFTER INSTALLATION OF THE PLANT AND THAT THE SUPPLY OF INFORMATION UNDER THE SECOND AGREEMENT WAS ONLY FOR THE ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 4 PURPOSE OF OBTAINING INFORMATION AS TO THE RANGE OF PRODUCTS MANUFACTURED BY THE ASSESSEE AND, THEREFOR E, PAYMENT OF ROYALTY UNDER BOTH AGREEMENTS WERE DIREC TLY RELATABLE TO THE SERVICES WHICH WERE IN THE REVENUE FIELD AND WERE ALLOWED AS REVENUE EXPENDITURE. THE GUJAR AT HIGH COURT AFFIRMED THE DECISION OF THE TRIBUNAL. IN THE CASE OF GOOD YEAR INDIA LTD. VS. ITO 73 ITD 189 (DE L), THE ASSESSEE MANUFACTURING TYRES ENTERED INTO AN AGREEMENT WITH THE FOREIGN COMPANY FOR TECHNICAL KN OW HOW FOR MANUFACTURE OF RADIAL TYRES. THE ASSESSEE OBTAINED RIGHT TO USE LICENSE FOR FIXED PERIOD OF 8 YEARS. UNDER THE AGREEMENT THE ASSESSEE AGREED TO PAY LUMP SUM PAYMENT BESIDE ROYALTY OF 2% ON NET EX FACTORY SALE PRICE OF PRODUCT FOR A PERIOD OF 5 YEARS FROM THE D ATE OF COMMERCIAL PRODUCTION. UNDER THE AGREEMENT, TECHNI CAL DATA, DESIGNS, PLANS ETC. REMAINED THE PROPERTY OF THE FOREIGN COMPANY. THE TRIBUNAL HELD IN THAT CASE TH AT THE ASSESSEE HAD NOT ACQUIRED OWNERSHIP RIGHTS OF TECHN ICAL KNOW HOW BUT TRANSFER OF USE OF LICENSES. THUS, TH ERE WAS NO ADVANTAGE OF AN ENDURING NATURE, AND HENCE IT WA S HELD AS A CASE OF REVENUE EXPENDITURE. SIMILAR VIE WS HAVE BEEN RENDERED IN CIT VS. ASHOK LEYLAND LTD. 13 0 ITR 900 (MAD.), CIT VS. EICHER MOTORS LTD. 163 TAXM AN 556 (MP), CIT VS. PREM HEAVY ENGG. WORKS LTD. 149 TAXMAN 301 (ALLH.), CIT VS. KANPUR CIGARETTES PVT. LTD. 147 TAXMAN 428 (ALLH.), CIT VS. SOUTH INDIA EXPORTS CO. LTD. 127 TAXMAN 478 (MAD.), CIT VS. SOUTHERN PRESSI NGS PVT. LTD. 125 TAXMAN 714 (MAD.), CIT VS. JYOTI ELEC TRIC MOTORS LTD. 121 TAXMAN 519 (GUJ.), CIT VS. POWER BU ILD LTD. 113 TAXMAN 327 (GUJ.). IN THE CASE OF THE APPELLANT, IT IS SEEN THAT IT H AD PAID ROYALTY FOR THE RIGHT TO USE THE TRADE MARK AN D KNOW HOW. THE TERMS OF THE AGREEMENT MAKE IT CLEAR THAT THE OWNERSHIP RIGHTS OVER TRADE MARK AND KNOW HOW VEST WITH RADISSON HOTELS INTERNATIONAL INC. ON TERMINA TION OR EXPIRATION OF THE AGREEMENT, THE APPELLANT SHALL RETURN ALL KNOW HOW OBTAINED UNDER THE AGREEMENT. WHAT HA S BEEN PAID UNDER THE AGREEMENT IS ROYALTY ON THE BAS IS OF NET SALES. IN TRAVANCORE SUGAR& CHEMICALS LTD. 62 ITR ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 5 566 (SC) IT HAS BEEN HELD THAT WHENEVER A PAYMENT I S BASED ON A PERCENTAGE OF TURNOVER OR PROFITS, IS NECESSARILY HAS NO RELATION TO CAPITAL VALUE OF THE ASSET, BECAUSE IT CANNOT BE KNOWN AT THE TIME OF THE AGREE MENT WHAT THE TURNOVER OR PROFITS WILL BE OVER A PERIOD OF YEARS. IN SIMILAR INTERPRETATION OF FACTS AND LAW IN THE CASE OF DCIT VS. SWARAJ ENGINES LTD. (2002) 124 TAXMAN 118 (CHD.) THE TRIBUNAL HELD THAT ROYALTY PAYMENT IS ALLOWABLE AS REVENUE EXPENDITURE, SINCE IT IS RELATED TO SALES AND THAT IT IS PAID FOR BETTER CON DUCT, EFFICIENCY AND IMPROVEMENT OF THE EXISTING BUSINESS OF PRODUCT ALREADY MANUFACTURED BY THE ASSESSEE. THE CASE OF SOUTHERN SWITCH GEARS LTD. RELIED UPON BY THE LD. AO IS DISTINGUISHABLE ON FACTS, BEC AUSE IN THE CASE OF SOUTHERN SWITCH GEARS BOTH ROYALTY ON S ALES AND LUMP SUM FOR TECHNICAL AID WAS PAYABLE IN 5 EQU AL INSTALLMENTS, WHEREAS, IN THE INSTANT CASE THE ASSE SSEE NEITHER PAID LUMP SUM AMOUNT AND THE PAYMENT IS ENTIRELY LINKED TO THE NET SALE. IN THE INSTANT CASE THE APPELLANT HAS NOT ACQUIRED ANY BENEFIT OF ENDURING NATURE AND IT WILL NOT CONS TITUTE ACQUISITION OF ANY ASSETS. FURTHER BY PAYMENT OF R OYALTY, THE OWNERSHIP RIGHT OVER TRADE MARK AND KNOW HOW DOESNT TRANSFER TO THE APPELLANT. THE APPELLANT COMPANY HAS A NON-EXCLUSIVE RIGHT TO USE THE TRADEM ARKS WITHIN THE TERRITORY OF INDIA AND THE ROYALTY IS DE TERMINED ON THE BASIS OF PERCENTAGE OF TURNOVER AND IS NOT P AID AS LUMP SUM, THEREFORE, THE SAME CAN INCREASE OR DECRE ASE ON THE BASIS OF TURNOVER. IT IS ALSO PERTINENT TO NOTE THAT THE ABOVE EXPENDITURE HAS NOT BEEN DISALLOWED BY TH E DEPARTMENT EITHER IN THE PRECEDING AYS OR IN THE SUCCEEDING AYS. THE DECISIONS RELIED ON BY THE AO FOR ENFORCING OF DISALLOWANCE OUT OF PAYMENT OF ROYALTY HAVE BEEN RENDERED ON DISTINGUISHABLE SETS OF FACT AND ARE NO T APPLICABLE TO THE ISSUE IN QUESTION. ON THE CONTRA RY, AND AS PER DISCUSSION SUPRA, SINCE ROYALTY HAS BEEN PAI D FOR A ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 6 RIGHT TO USE TRADE MARK AND KNOW HOW FOR A LIMITED PERIOD UNDER THE TERMS OF AN AGREEMENT, I HOLD THAT NO ASSET OF ENDURING NATURE HAS BEEN ACQUIRED IN CONSIDERATION OF PAYMENT OF ROYALTY, MARKETING AND RESERVATION FEE. THE DISALLOWANCE OF TH OF THE EXPENSE IS WITHOUT MERITS. THE GROUND IS ALLOWED. HENCE THIS APPEAL BEFORE US BY THE REVENUE. 5. GROUND NO.1 RELATES TO DISALLOWANCE MADE ON ACCOUNT OF LOW GP R ATE BY THE ASSESSING OFFICER. THE LD. DR SUBMITTED THA T THE ASSESSING OFFICER RIGHTLY NOTED THAT DURING THE YEAR UNDER CONSIDERAT ION, GP RATE WAS DECLARED AT 45.75% AS AGAINST 50.87% AS DECLARED IN THE IMME DIATELY PRECEDING ASSESSMENT YEAR. HE FURTHER SUBMITTED THAT THE ASS ESSING OFFICER RIGHTLY ADOPTED GP RATE OF 50% AND DISALLOWED THE DIFFERENC E IN GP TO THE TUNE OF 2.46% AMOUNTING TO RS.23,46,743. THE DR SUPPORTED THE ASSESSMENT ORDER AND FINALLY SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX(A) DELETED THIS ADDITION WITHOUT ANY REASONABLE AND SOUND BASI S. 6. THE ASSESSEES REPRESENTATIVE SUPPORTING THE IMP UGNED ORDER IN THIS REGARD SUBMITTED THAT WHEN THE ASSESSING OFFICER HA S ACCEPTED BOOKS OF ACCOUNTS AND FINAL ACCOUNTS OF THE ASSESSEE AND HE HAS NOT PROCEEDED TO MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTIO N 144 AND THE PROVISION OF SECTION 145(3) OF THE ACT, THEN IT IS NOT PERMIS SIBLE TO THE ASSESSING ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 7 OFFICER TO ADD DIFFERENCE ON THE BASIS OF LOW GP RA TE COMPARED WITH EARLIER ASSTT. YEARS. 7. ON CAREFUL CONSIDERATION OF THE SUBMISSIONS AND THE FACTS AND CIRCUMSTANCES OF THE CASE, WE OBSERVE THAT IN THE I MPUGNED ORDER, THE COMMISSIONER OF INCOME TAX(A) HELD THAT THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION ON ACCOUNT OF LOW GP WAS PASSED WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS AN D WITHOUT BRINGING ANY INCRIMINATING MATERIAL OR EVIDENCE ON RECORD. AT T HIS STATE, WE FIND IT APPROPRIATE TO FOLLOW THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS M/S JACKSON H OUSE 210 TIOL 296 HC-DELHI WHEREIN IT WAS HELD AS UNDER:- IN ANY CASE, THE QUESTION WHETHER THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE DEFECTIVE AND/OR INCOMPLETE, OR NOT, WAS A QUESTION OF FACT. NEITHE R THE COMMISSIONER OF INCOME TAX(A) NOR THE ITAT FOUND TH E ACCOUNTS TO BE DEFECTIVE OR INCOMPLETE. BOTH, COMMISSIONER OF INCOME TAX(A) AS WELL AS THE TRIBUN AL WERE SATISFIED WITH THE STOCK REGISTER MAINTAINED B Y THE ASSESSEE AND APPRECIATED THE FACT THAT THE RAW MATE RIAL, I.E., THE FABRIC PURCHASED BY THE ASSESSEE WAS TO B E MEASURED IN METRES, WHEREAS THE FINISHED PRODUCTS W ERE TO BE COUNTED IN NUMBERS. NO REASONABLE GROUND HAS BEEN MADE OUT FOR THIS COURT TO GO IN TO THIS QUEST ION AND REVISIT THE FINDING RETURNED BY THE COMMISSIONER OF INCOME TAX(A) AND THE ITAT. THE QUESTION AS TO WHETHER THE ASSESSEE HAD DULY EXPLAINED THE DROP IN THE GROSS PROFIT RATIO OR NOT WAS A QUESTION OF FACT. IT IS NOT AS IF THE ASSESSEE DI D NOT GIVE ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 8 ANY PLAUSIBLE EXPLANATION FOR THE FALL IN GROSS PRO FIT DURING YEAR IN QUESTION. HE GAVE A NUMBER OF REASO NS IN THIS REGARD AND THE EXPLANATION GIVEN BY THE ASSESS EE HAVING BEEN ACCEPTED BY THE COMMISSIONER OF INCOME TAX(A) AS WELL AS BY THE TRIBUNAL, IT IS NOT FOR TH IS COURT TO GO INTO SUCH A QUESTION OF FACT. 8. IN VIEW OF ABOVE DISCUSSION AND FOLLOWING THE JU DGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF M/S JACKSON (SUPRA) , WE ARE INCLINED TO HOLD THAT THE LD. COMMISSIONER OF INCOME TAX(A) RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOW GP RATE COMPARING TO THE IMMEDIATELY PRECEDING YEAR. WE ALSO HOLD THAT THE ACTION OF THE ASSESSING OFFICER MAKING THE ADDITION ON ACCOUNT OF LOW GP RA TE IS NOT SUSTAINABLE BECAUSE THE ASSESSING OFFICER DID NOT REJECT THE BO OKS OF ACCOUNTS OF THE ASSESSEE AND HE DID NOT BRING ANY INCRIMINATING MAT ERIAL OR EVIDENCE AGAINST THE ASSESSEE IN THIS REGARD. ACCORDINGLY, THE LD. C OMMISSIONER OF INCOME TAX(A) RIGHTLY RELIED ON THE JUDGMENT OF HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF M/S JACKSON HOUSE (SUPRA) AND WE ARE UNABLE TO SEE ANY REASON TO INTERFERE WITH THESE FINDINGS PERTAINING TO GROUND NO. 1. AS PER DISCUSSIONS MADE HEREINABOVE, GROUND NO. 1 IS DISMI SSED. ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 9 9. GROUND NO.2 RELATES TO THE DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ROYALTY PAYMENTS. 10. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTI ES IN THE LIGHT OF MATERIAL ON RECORD BEFORE US. LD. DR SUBMITTED THA T THE ASSESSING OFFICER RELIED ON THE JUDGMENT OF APEX COURT IN THE CASE OF SOUTHERN SWITCHGEAR (SUPRA) AND M/S JONAS WOODHEAD AND SONS (INDIA) LTD . VS CIT (SUPRA), DISALLOWING 25% OF ROYALTY PAYMENT BEING CAPITAL EX PENDITURE IN NATURE AND RIGHTLY ADDED THE SAME TO THE TOTAL INCOME OF THE A SSESSEE. HE FURTHER SUBMITTED THAT IN THIS REGARD, THE COMMISSIONER OF INCOME TAX(A) DELETED THE ADDITION WITHOUT APPRECIATING THE FACTS AND CIR CUMSTANCES OF THE CASE AND THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED SETTING ASIDE THE IMPUGNED ORDER IN THIS REGARD. 11. THE ASSESSEES REPRESENTATIVE VEHEMENTLY CONTEN DED AND SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CAS E ARE DIFFERENT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE IN SOUTHERN SWI TCHGEAR LTD. BECAUSE IN THIS CASE THE ROYALTY ON SALES AND LUMP SUM PAYMENT FOR TECHNICAL AID WAS PAYABLE IN FIVE EQUAL INSTALLMENTS WHEREAS IN THE P RESENT CASE, THE ASSESSEE NEVER PAID ANY LUMP SUM AMOUNT AND THE PAYMENT WAS ENTIRELY LINKED TO THE NET SALES OF THE ASSESSEE. THE ASSESSEES REPRESEN TATIVE SUPPORTED THE IMPUGNED ORDER AND FINALLY SUBMITTED THAT THE ACTIO N OF THE ASSESSING ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 10 OFFICER WAS NOT JUST AND PROPER AS PER PROVISIONS O F THE ACT AND JUDGMENT OF HONBLE APEX COURT. 12. AFTER CAREFUL CONSIDERATION OF THE ARGUMENTS OF BOTH THE PARTIES AND ORDERS OF THE AUTHORITIES BELOW, WITH REGARD TO THE ISSUE OF DISALLOWANCE ON ACCOUNT OF ROYALTY EXPENSES, WE OBSERVE THAT THIS F ACT HAS NOT BEEN DISPUTED BY THE REVENUE THAT THE PAYMENT OF ROYALTY, MARKETI NG AND RESERVATION FEES PAID TO THE RADISSON USA, RHW AND RISMO HAD A DIREC T NEXUS AND CALCULATED ON THE BASIS OF REVENUE GENERATED FROM R OOM RENT COLLECTION, MARKETING AND RESERVATION FEES WHICH IN NO WAY COUL D BE CONSTRUED AS CAPITAL IN NATURE. ON CAREFUL PERUSAL OF THE JUDGM ENT OF HONBLE APEX COURT IN THE CASE OF SOUTHERN SWITCHGEAR LTD. (SUPRA), WE OBSERVE THAT THE BENEFIT OF THE RATIO OF THE JUDGMENT IN THE PRESENT CASE IS NOT AVAILABLE TO THE REVENUE BECAUSE THERE WAS A LUMP SUM PAYMENT BY THE ASSESSE E FOR ROYALTY ON SALES AND TECHNICAL AID WHICH WAS PAYABLE IN FIVE EQUAL I NSTALLMENTS WHEREAS IN THE INSTANT CASE, THERE IS NO LUMP SUM PAYMENT BY T HE ASSESSEE AND THE ROYALTY PAYMENT IS PURELY LINKED TO THE NET SALES O F THE ASSESSEE. THEREFORE, WE ARE INCLINED TO HOLD THAT THE ADDITION MADE BY T HE ASSESSING OFFICER WAS UNREASONABLE BASED ON MISINTERPRETATION OF THE FACT S AND CIRCUMSTANCES OF THE CASE AND ON THE CONTRARY, THE LD. COMMISSIONER OF INCOME TAX(A) RIGHTLY CONSIDERED THE CITATIONS SUBMITTED BEFORE HIM AND P ROPERLY APPRECIATED THE ITA NO.3529/DEL/2012 ASSTT.YEAR: 2006-07 11 FACTS AND CIRCUMSTANCES OF THE CASE IN HAND AS WELL AS THE FACTS OF THE CASES CITED BEFORE HIM. IN VIEW OF ABOVE, WE HAVE NO REA SON TO INTERFERE IN THE IMPUGNED ORDER IN REGARD TO DELETION OF DISALLOWANC E ON ACCOUNT OF ROYALTY EXPENSES BY THE LD. COMMISSIONER OF INCOME TAX(A) A ND GROUND NO. 2 IS ALSO DISALLOWED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.9.2012. SD/- SD/- (G.D. AGRAWAL) (CHANDRA MOHAN GA RG) VICE PRESIDENT JUDICIAL MEMBER DT. 21ST SEPTEMBER, 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR