DCIT, New Delhi V. M/s. Honda Siel Power Products Pvt. Ltd., Uttar Pradesh

ITA 3907/DEL/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8998 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2003-2004
• Appeal Filed On: 12-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Royalty expenses; Capital expenditure
• Section: 143(3)

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 3907/DEL/2015 (ASSESSMENT YEAR: 2003 - 04 ) DCIT, CIRCLE - 11(1), NEW DELHI VS. M/S. HONDA SIEL POWER PRODUCTS LTD, PLOT NO. 5, SECTOR - 41, GREATER NOIDA INDUSTRIAL DEVELOPMENT AREA, DISTT. GAUTAM NAGAR, UP PAN: AAACH8464L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SURENDER PAL, SR. DR ASSESSEE BY: SHRI NEERAJ KUMAR JAIN, ADV MS. SHAILY GUPTA, CA DATE OF HEARING 04/10 / 2018 DATE OF PRONOUNCEMENT 1 0 / 12 / 2018 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - 4, NEW DELHI DATED 30.03.2015 FOR THE ASSESSMENT YEAR 2003 - 04. 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 2,11,67,250/ - MADE ON ACCOUNT OF CAPITALIZATION OF ROYALTY EXPENSES. 3 . BRIEF FACTS OF THE CASE SHOWS THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 197319 896/ - ON 27.11.2003. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS PASSED ON 01.10.2009, WHEREIN, THE LD AO MADE DISALLOWANCE OF RS. 21167250/ - ON ACCOUNT OF ROYALTY EXPENSES PAID HELD TO BE OF CAPITAL NATURE. THE INCOME WAS ASSESSED AT RS. 234470158/ - . THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT(A) WHO PASSED THE ORDER DATED 30.03.2015 DELETING THE ABOVE ADDITION RELYING ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CASE OF ASSESSEE FOR ASSESSMENT YEAR 2000 - 01 TO 2002 - 03. PAGE | 2 4 . THE REVENUE AGGRIEV ED WITH THE ORDER SUBMITTED THAT THE AMOUNT OF ROYALTY EXPENSES PAID BY THE ASSESSEE ARE CAPITAL IN NATURE. 5 . THE LD DR REFERRED THE ORDER OF THE LD AO IN PARA NO. 1.1 TO 1.11 AND HENCE THE ABOVE EXPENDITURE IS CAPITAL IN NATURE. THE LD DR SUPPORTED THE ORD ER OF THE LD CIT(A) AND STATED THAT IDENTICAL ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE FOR EARLIER YEARS BY THE DECISION OF THE HON'BLE DELHI HIGH COURT . HE ALSO SUBMITTED THAT FOR SUBSEQUENT YEAR TOO ISSUE IS COVERED IN FAVOUR OF ASSESSEE. 6 . WE HAVE CAR EFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF GENERATING SETS ETC. IT ENTERED INTO A TECHNICAL COLLABORATION CONTRACT WITH HONDA MOTORS COMPANY FOR AVAILING TECHNICAL ASSISTANCE IN RELATION TO ASSEMBLY, MANUFACTURING, DISTRIBUTION AND SALE OF ITS PRODUCTS. THE ROYALTY WAS TO BE PAID BY THE ASSESSEE TO THAT COMPANY FOR THE INTRODUCTION OF NEW MODELS INTRODUCED BY THE ASSESSEE. THE IDENTICAL ISSUE AND THE SAME AGREEMENT WAS A MATTER OF DISPUTE BEFORE THE HON'BLE DELHI HIGH COURT IN ASSESSEES OWN CASE FOR EARLIER YEARS. THE HON'BLE DELHI HIGH COURT HAS CONSISTENTLY FOR VARIOUS YEARS H AS DECIDED THE ISSUE HOLDING THAT SUCH ROYALTY EXPENDITURE ARE NOT CAPITAL EXPENDITURE IN NATURE. THE HON'BLE DELHI HIGH COURT HAS DECIDED THE ISSUE FOR ASSESSMENT YEAR 2007 - 08 TO 2009 - 10 AND ALSO FOR THE EARLIER YEARS WHICH HAS BEEN REFERRED BY THE LD CIT(A ). AS THE ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE HON'BLE HIGH COURT FOR EARLIER ASSESSMENT YEARS AND SUBSEQUENT ASSESSMENT YEARS , RESPECTFULLY FOLLOWING THEM , WE DISMISS THE APPEAL OF THE REVENUE AND HOLD THAT RS. 21167250/ - OF ROYALTY EXPENDITURE IS REVENUE IN NATURE. ACCORDINGLY, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 0 / 12 / 2018 . - SD/ - - SD/ - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICI AL MEMBER ACCOUNTANT MEMBER DATED: 1 0 / 12 / 2018 A K KEOT COPY FORWARDED TO 1 . APPLICANT PAGE | 3 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI