DCIT, New Delhi V. M/s. Precision Pipes & Profiles Co. Ltd., New Delhi

ITA 5276/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7287 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 16-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K JAIN
• Assessee Lawyers: DEVI SHARAN SINGH
• Keywords: Revenue expenditure
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. B.C.MEENA, ACCOUNTANT MEMBER I.T.A .NO. - 5276 & 5275 /DEL/201 3 (ASSESSMENT YEAR - 2009 - 10 & 2007 - 08 ) DCIT, CIRCLE - 14(1), ROOM NO - 415, 4 TH FLOOR, C.R. BUILDING, NEW DELHI . (APPELLANT) VS PRECISION PIPES & PROFILES CO. LTD. 4561, DEPUTY GANJ, SADAR BAZAAR, NEW DELHI PAN - AAACM4873C (RESPONDENT) APPELLANT BY SH. V.K.JAIN, CA RESPONDENT BY SH. DEVI SHARAN SINGH, SR. DR ORDER PER DIVA SINGH, JM THESE ARE TWO APPEALS FIL E D BY THE REVENUE AGAINST THE SEPARATE ORDER S DATED 06.06.2013 FOR 2009 - 10 AND 2007 - 08 ASSE SSMENT YEARS RESPECTIVELY ON IDENTICAL GROUNDS EXCEPT FOR THE DIFFERENCE IN AMOUNTS. FOR READY - REFERENCE WE REPRODUCED THE GROUNDS AS UNDER: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.27,70,798/ - (RS. 19,43,143/ - IN ITA NO. - 5275/DEL/2013 ) MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF PAYMENT FOR ROYALTY; 1.1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ABOVE ADDITIONS TREATING THE SAME AS REVENUE EXPENDITURE; 1.2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION RELYING UPON THE DECISION IF THE HON BLE ITAT GIVEN IN EARLIER YEARS IN THE ASSESSEE S OWN CASE WITHOUT APPRECIATING THE FACT THAT THE REVENUE HAS FILED A REVIEW PETITION AGAINST THESE D ECISIONS AND THUS ISSUE HAS NOT ATTAINED ITS FINALITY. 2. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUND OF APPEAL AND/ OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 2. IT IS A COMMON STAND OF THE PARTIES BEFORE THE BENCH THAT THE ISSUE RAIS ED IN THE PRESENT APPEAL IS COVERED BY THE ORDERS OF THE CO - ORDINATE BENCH IN ASSESSEE S 2 I.T.A .NO. - 5276 & 5275 /DEL/201 3 OWN CASE. COPIES OF THE SAME WERE FILED IN THE BENCH HOWEVER FOR THE RECORD THE LD. SR. DR PLACES RELIANCE UPON THE ASSESSMENT ORDER. THE RELEVANT FACTS OF THE CASE AS ARE EMERGING FROM THE MATERIAL AVAILABLE ON RECORD ARE THAT THE ASSESSEE IN THE PRESENT PROCEEDINGS WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PVC PROFILES ENTERED INTO AN AGREEMENT WITH M/S TOKAI KAGYO CO. LTD., JAPAN TO PROCURE TECHNICAL ASS ISTANCE RELATING TO KNOWHOW , TRAINING, EDUCATION AND UPGRADATION OF TECHNOLOGY USED BY THE ASSESSEE COMPANY. AN AGREEMENT WAS EXECUTED ON 01.11.2000 WHICH WAS EFFECTIVE UPTO 31.10.2005. THE SAID AGREEMENT CONTAINED SPECIFIC TERMS THAT AFTER THE EXPIRY O F THE AGREEMENT THE ASSESSEE WOULD NOT BE ENTITLED TO USE THE TECHNOLOGY. THE ASSESSEE WAS REQUIRED IN TERMS OF THE SAID AGRE EMENT TO PAY ROYALTY COMPUTED AT THE RATE OF 2% NET EX - FACTORY SALES PRICE FOR 5 YEARS FROM THE DATE OF COMMERCIAL PRODUCTION. HOWEVER THE AO FOLLOWING HIS PAST PRACTICE DISALLOWED 25% OF THE SUCH ROYALTY PAYMENT HOLDING THE SAME AS CAPITAL IN NATURE. THE CIT(A) IN APPEAL FOLLOWING THE ORDERS OF THE TRIBUNAL DATED 30.04.2010 IN ITA NO - 374/DEL/2009 FOR 2005 - 06 ASSESSMENT YEAR AN D ORDER DATED 12.10.2012 WHICH FOLLOWED THE EARLIER ORDER IN ITA NO - 4257 & 4258/DEL/2012 FOR 2006 - 07 & 2008 - 09 ASSESSMENT YEARS ALLOWED THE APPEAL OF THE ASSESSEE. 3. AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE TAKEN OURSELV ES THROUGH THE ORDERS OF THE C O - ORDINATE BENCH WHICH HAVE BEEN FILED AND SEEN THAT THE FINDING GIVEN IN THE LEAD ORDER FOR 2005 - 06 ASSESSMENT YEAR, HAS BEEN FOLLOWED IN 2006 - 07 AND 2008 - 09 ASSESSMENT YEAR S . THE RELEVANT FINDING IS EXTRACTED HEREUNDER : - WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE TERMS AND CONDITIONS OF THE AGREEMENT INTO BY THE ASSESSEE. WE FOUND THAT ASSESSEE WAS REQUIRED TO PAY ANNUALLY ROYALTY AT THE RATE OF 2% OF THE ITEMS MANUFACTURED UNDER THIS AGREEMENT AND SOL D DURING THE TERM OF THE SAID AGREEMENT. SUCH ROYALTY TO BE COMPUTED ON HALF YEARLY BASIS. AS THE ROYALTY PAYMENT IS DETERMINED ANNUALLY ON THE BASIS OF QUANTITY AND VALUE OF PRODUCTION, THE EXPENDITURE SO INCURRED BY THE ASSESSEE IS ESSENTIALLY RECURRI NG AND REVENUE IN NATURE. HOWEVER, THE AO HAS TREATED 25% OF SUCH PAYMENT AS CAPITAL IN NATURE. THE EXPENDITURE SO CLAIMED IS CHARGED ON THE PRODUCTS MANUFACTURED BY THE ASSESSEE COMPANY AND THE SAME IS NOT INCURRED FOR ACQUIRING A PROCESS OR DESIGN OR T ECHNOLOGY WHICH CAN BE UTILIZED BY THE ASSESSEE FOR YEARS TO COME 3 I.T.A .NO. - 5276 & 5275 /DEL/201 3 SO AS TO CATEGORIZE SUCH EXPENDITURE, AS CAPITAL IN NATURE. NOTHING WAS BROUGHT ON RECORD BY THE LEARNED DR TO CONTROVERT THE FINDINGS OF THE CIT(A) RECORDED AT PAGES 5 & 6 OF APPELLATE ORD ER. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR ALLOWING THE ENTIRE PAYMENT OF ROYALTY AS REVENUE EXPENDITURE. 4.1. CONSIDERING THE FACT THAT IDENTICAL ISSUE IN 2005 - 06, 2006 - 07 & 2008 - 09 ASSESSMENT YEARS HAVE BEEN FOLLOW ED AND THE YEARS UNDER CONSIDERATIO N ARE INTERVENING YEARS AND NOT ING THAT THERE IS NO CHANGE IN FACTS, C IRCUMSTANCES OR POSITION OF LAW, W E HOLD THAT THE DEPARTMENTAL APPEALS HAVE NO MERIT. THE SAME ARE ACCORDINGLY DISMISSED. THE SAID ORDER WAS PRONOUNC ED IN THE PRESENCE OF THE PARTIES. 5. IN THE RESULT THE APPEALS OF THE REVENUE ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 TH OF OCTOBER 2014. SD/ - SD/ - ( B.C.MEENA ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10/10 /2014 *AMIT KUMAR* *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI