The DCIT, Circle-3(1), Visakhapatnam V. M/s L..G.Polymers India Pvt. Ltd., Visakhapatnam

ITA 701/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2115 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 04-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C V S MURTHY
• Assessee Lawyers: I SARISH KUMAR
• Keywords: Transfer pricing; International transaction
• Section: 142(1); 92A

Judgement Text

ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , ' BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NOS.700&701/VIZAG/2013 ( / ASSESSMENT YEARS : 2007-08 & 2008-09) DCIT, CIRCLE-3(1), VISAKHAPATNAM VS. M/S. L.G. POLYMERS INDIA PVT. LTD. VISAKHAPATNAM [ PAN: AAACL8528P] ( / APPELLANT) ( / RESPONDENT ) C.O. NOS.22&23/VIZAG/2014 (ARISING OUT OF I.T.A.NOS.700&701/VIZAG/2013) ( / ASSESSMENT YEARS : 2007-08 & 2008-09) M/S. L.G. POLYMERS INDIA PVT. LTD. VISAKHAPATNAM VS. DCIT CIRCLE - 3(1) VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT ) ! ' / APPELLANT BY : SHRI C.V.S. MURTHY, AR %&! ' / RESPONDENT BY : SHRI I. SARISH KUMAR, DR / DATE OF HEARING : 19.01.2016 ' * / DATE OF PRONOUNCEMENT : 28.01.2016 ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE REVENUE AND CROSS O BJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE, BUT IDENTICAL ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS), VISAKHAPATNAM DATED 27.9.2013 FOR THE ASSESSMENT YEARS 2007-08 & 2008-0 9. SINCE, THE ISSUES INVOLVED IN THESE APPEALS AND CROSS OBJECTIO NS ARE IDENTICAL, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF POLYSTERENE & EXPANDABLE POLYSTERENE, HAS FILED ITS RETURN OF INC OME FOR THE ASSESSMENT YEAR 2007-08 ON 27.10.2007 DECLARING A T OTAL INCOME OF RS.18,85,27,400/-. THE CASE WAS SELECTED FOR SCRUT INY AND ACCORDINGLY, NOTICES U/S 143(2) & 142(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WERE ISSUED. IN RESPONSE TO N OTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND SUBMITTED THE DETAILS CALLED FOR VIDE QUESTIONNAIRE ISSUED IN CONNECTION WITH THE SCRUTINY PROCEEDINGS. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS ENTERED INTO ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 3 INTERNATIONAL TRANSACTIONS OF PAYMENT OF ROYALTY TO ITS ASSOCIATED ENTERPRISES L.G. CHEM LIMITED, KOREA FOR USE OF THE IR TRADE MARK. SINCE, THE INTERNATIONAL TRANSACTION DID NOT EXCEED THE MO NETARY LIMIT OF RS.5 CRORES, NO REFERENCE HAS BEEN MADE TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING ARMS LENGTH PRICE. HOWEVER, FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR 2006-07, THE CASE WAS REF ERRED TO THE TPO FOR DETERMINATION OF ALP OF THE INTERNATIONAL TRANS ACTION. DURING THE PREVIOUS ASSESSMENT YEAR, UNDER SIMILAR CIRCUMSTANC ES, THE ROYALTY PAYMENT TO ITS ASSOCIATED ENTERPRISES WAS DISALLOWE D. SINCE, THE ROYALTY PAYMENT WAS DISALLOWED IN THE EARLIER ASSESSMENT YE AR, THE A.O. ISSUED A SHOW-CAUSE NOTICE DATED 18.12.2009 TO THE ASSESSE E COMPANY, REQUIRING IT TO EXPLAIN AS TO WHY ROYALTY PAYMENT T O ITS ASSOCIATED ENTERPRISES I.E. L.G. CHEM LIMITED, KOREA AMOUNTING TO RS.1,43,95,374/- SHOULD NOT BE DISALLOWED. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSES SEE COMPANY FILED A LETTER ON 23.12.2009 AND SUBMITTED THAT IT HAS PA ID 0.2% OF THE TOTAL TURNOVER FOR USAGE OF THEIR ASSOCIATED ENTERPRISES BRAND NAME LG. THE MAIN REASON FOR DISALLOWANCE OF THE ROYALTY PAYMENT IN THE PRECEDING ASSESSMENT YEAR WAS THAT THE A.O. WAS OF THE OPINIO N THAT THE BRAND NAME DID NOT HELP THE COMPANY TO IMPROVE ITS SALES OR PROFITS. BUT, IN ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 4 THIS YEAR THERE HAS BEEN AN INCREASE IN TURNOVER AS WELL AS NET PROFIT. THUS, THE BRAND NAME HAS BENEFITTED THE COMPANY AND THE PAYMENT OF ROYALTY IS WELL WITHIN THE NORMS PRESCRIBED BY THE GOI. HOWEVER, THE A.O. AFTER CONSIDERING THE EXPLANATIONS OFFERED BY THE ASSESSEE DISALLOWED THE PAYMENT OF ROYALTY FOR THE REASON TH AT THE ASSESSEE HAS NOT PROVED THE NECESSITY OF PAYMENT OF ROYALTY TO I TS ASSOCIATED ENTERPRISES AND ALSO THE BENEFITS ACCRUED TO IT BY USING THE SAID BRAND NAME. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON SUCH ROYALTY PAYMENT, THEREFORE, IN CASE THE ADDITION OF ROYALTY MADE AS ABOVE, BASED ON THE FINDINGS OF THE TPO DOES NOT STAND THE TEST OF APPEAL, THEN DISALLOWANCE OF THE SAME UNDER THE PROVISIONS OF THE SECTION 40(A)(I) OF THE ACT SHOUL D BE CONSIDERED. WITH THESE OBSERVATIONS, THE A.O. MADE ADDITIONS OF RS.1 ,43,95,374/- TOWARDS ROYALTY PAYMENT TO ITS ASSOCIATED ENTERPRIS ES. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE ARGUMENTS PUT FORTH BEFORE THE A.O. THE ASSESS EE FURTHER SUBMITTED THAT THE A.O. HAS MADE SIMILAR ADDITION DURING THE PREVIOUS ASSESSMENT YEAR AND THE ISSUE WAS TRAVELLED UPTO THE INCOME TA X APPELLATE TRIBUNAL, WHEREIN THE ITAT HAS SET ASIDE THE ISSUE TO THE FILE OF THE A.O. ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 5 WITH A DIRECTION TO THE A.O. TO OBTAIN THE ALP OF T HE INTERNATIONAL TRANSACTION. IN CASE, THE TPO DETERMINED SEPARATE ALP, WHICH IS DIFFERENT FROM EXPENDITURE CLAIMED, THEN THE SAME S HOULD BE DISALLOWED. FURTHER, THE ITAT HELD THAT THE PAYMENT OF ROYALTY TO ITS ASSOCIATED ENTERPRISES IS NOT A SHAM TRANSACTION AND IT IS WIT HIN THE LIMIT PRESCRIBED BY THE GOVERNMENT OF INDIA. THEREFORE, UNDER SIMIL AR SET OF FACTS, THE A.O. WAS NOT CORRECT IN MAKING ADDITIONS TOWARDS RO YALTY PAYMENT TO ASSOCIATED ENTERPRISES FOR THE YEAR UNDER CONSIDERA TION. THE ASSESSEE FURTHER SUBMITTED THAT PURSUANT TO THE ITAT ORDER, THE TPO HAS PASSED ORDER U/S 92A (3) OF THE ACT AND ACCEPTED THE ROYAL TY PAYMENT TO BE AT ALP. THEREFORE, THE A.O. WAS ERRED IN DISALLOWING THE ROYALTY PAYMENT WITHOUT CONSIDERING THE FACT THAT THE A.O. HAS ACCE PTED THE ROYALTY PAYMENT IN THE ORDER GIVING EFFECT TO ITAT ORDER FO R A.Y. 2006-07. HOWEVER, THE CIT(A) AFTER CONSIDERING THE EXPLANATI ONS OFFERED BY THE ASSESSEE AND ALSO RELIED UPON THE ITAT ORDER IN ASS ESSEE OWN CASE FOR EARLIER ASSESSMENT YEAR, HELD THE ISSUE IN FAVOUR O F THE ASSESSEE AND DIRECTED THE A.O. TO REFER THE MATTER TO THE TPO AN D OBTAIN A ALP OF THE INTERNATIONAL TRANSACTION. THE CIT(A) FURTHER DIREC TED THE A.O. TO DELETE/MODIFY THE ADDITIONS TOWARDS ROYALTY PAYMENT BASED ON THE FINDINGS OF THE TPO. HOWEVER, THE CIT(A) CONFIRMED THE ADDITIONS MADE BY THE A.O. TOWARDS ROYALTY PAYMENT U/S 40(A)(I) OF THE ACT, BY HOLDING ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 6 THAT THE ASSESSEE HAS FAILED TO DEDUCT TDS ON ROYAL TY PAYMENT, THEREFORE IN VIEW OF THE PROVISIONS OF SECTION 40(A )(I) OF THE ACT, THE A.O. WAS JUSTIFIED IN DISALLOWING THE ROYALTY. AGGRIEVE D BY THE CIT(A) ORDER, THE REVENUE AS WELL AS ASSESSEE ARE IN APPEAL BEFOR E US. 5. THE LD. D.R. SUBMITTED THAT THE CIT(A) WAS NOT C ORRECT IN DELETING THE ADDITIONS TOWARDS ROYALTY PAYMENT BASED ON THE FINDINGS OF THE PREVIOUS ASSESSMENT YEARS. THE LD. D.R. FURTHER AR GUED THAT THE A.O. MADE ADDITIONS NOT ONLY FOR ALP, BUT ALSO HOLD THAT THE TRANSACTION IS A SHAM AND THE ASSESSEE IS TRYING TO SHIFT THE PROFIT OUT OF INDIA IN THE GUISE OF ROYALTY PAYMENT, THEREFORE, THE ADDITIONS MADE BY THE A.O. SHOULD BE UPHELD. AS FAR AS THE DISALLOWANCE U/S 40(A)(I) OF THE ACT IS CONCERNED, THE D.R. SUBMITTED THAT AS PER THE PROVI SIONS OF SECTION 40(A)(I) OF THE ACT, ANY PAYMENT OF ROYALTY OR FEES FOR TECHNICAL SERVICES MADE OUT OF INDIA WITHOUT TAX DEDUCTED AT SOURCE, S UCH PAYMENT SHOULD BE DISALLOWED WHILE COMPUTING THE INCOME OF THE ASS ESSEE. THOUGH, ASSESSEE, DEDUCTED TDS, BUT NOT PAID THE AMOUNT WIT HIN THE DUE DATE SPECIFIED U/S 200(1) OF THE ACT, THEREFORE, THE A.O . HAS RIGHTLY MADE THE DISALLOWANCE AND HIS ORDER SHOULD BE UPHELD. 6. ON THE OTHER HAND, THE LD. A.R. OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A), IN SO FAR AS THE DELETION OF ROYALTY BASED ON THE ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 7 FINDINGS OF THE ASSESSMENT YEAR 2006-07. THE A.R. FURTHER SUBMITTED THAT THE SIMILAR ISSUE HAS COME UP BEFORE THE ITAT, FOR THE PREVIOUS ASSESSMENT YEAR I.E. 2006-07, WHEREIN THE ITAT, HAS SET ASIDE THE ISSUE TO THE FILE OF THE A.O. AND DIRECTED THE A.O. TO RE FER THE MATTER TO THE TPO AND OBTAIN THE ALP OF THE INTERNATIONAL TRANSAC TION. IN CASE THE TPO DETERMINED THE ALP OF INTERNATIONAL TRANSACTION WHICH IS DIFFERENT FROM THE ACTUAL PAYMENT, THEN THE SAME SHOULD BE AD OPTED WHILE COMPUTING THE INCOME OF THE ASSESSEE. AS FAR AS TH E GENUINENESS OF THE ROYALTY PAYMENT IS CONCERNED, THE ITAT HELD THAT TH E ROYALTY PAYMENT TO ITS ASSOCIATED ENTERPRISES IS WITHIN THE LIMIT PRES CRIBED BY THE GOI AND IT IS NOT A SHAM TRANSACTION. THE A.R. FURTHER SUBMIT TED THAT DURING THE YEAR UNDER CONSIDERATION, THERE IS NO CHANGE IN THE FACTS WITH REGARD TO THE PAYMENT OF ROYALTY. THEREFORE, BASED ON THE FI NDINGS OF THE PREVIOUS ASSESSMENT YEAR, THE ADDITIONS MADE BY THE A.O. SHOULD BE DELETED. THE LD. A.R. FURTHER SUBMITTED THAT AS FA R AS THE DISALLOWANCE U/S 40(A)(I) OF THE ACT IS CONCERNED, THE A.O. WAS NOT CORRECT IN DISALLOWING THE ROYALTY PAYMENT U/S 40(A)(I) OF THE ACT, AS THE ASSESSEE HAS DEDUCTED TDS AND REMITTED TO GOVT. ACCOUNT WITH IN THE DUE DATE OF FURNISHING RETURN OF INCOME UNDER SEC. 139(1). THE A.R. FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(I) A ND 40(A)(IA) OF THE ACT ARE SIMILAR IN SO FAR AS THE ALLOWABILITY OF EXPEND ITURE IS CONCERNED. THE ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 8 ITAT, IN THE CASE OF CIT VS. VIRGIN CREATIONS IN IT A NO.302/2011 HAS HELD THAT THE AMENDMENT TO SECTION 40(A)(I) OF THE ACT ARE APPLICABLE RETROSPECTIVELY. THE HONBLE KOLKATA HIGH COURT HEL D THAT THE AMENDMENT OF THE FINANCE ACT, 2010 IS REMEDIAL IN N ATURE AND THEREFORE AMENDMENT HAS TO BE TREATED AS RETROSPECTIVE W.E.F. 1.4.2005. THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF RAJA MAHEN DRI SHIPPING AND OIL FIELD SERVICES VS. ACIT 20 TAXMAN.COM 474 BY FO LLOWING THE JUDGMENT OF KOLKATA HIGH COURT, HELD THAT THE AMEND MENT BROUGHT TO SECTION 40(A)(I) OF THE ACT BY FINANCE ACT, 2010 IS RETROSPECTIVE IN NATURE. THEREFORE, IF THE TDS WAS REMITTED TO THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME U/S 139(1) OF THE ACT, EVEN AS PER THE PROVISIONS OF SECTION 40(A)(I) OF T HE ACT, THE EXPENDITURE IS ALLOWABLE IN THE YEAR IN WHICH IT WAS INCURRED. THE A.R. FURTHER SUBMITTED THAT ALTERNATIVELY, IF THE BENCH IS NOT I NCLINED TO ACCEPT THE ABOVE SUBMISSIONS REGARDING RETROSPECTIVE NATURE OF THE AMENDMENT, THE ROYALTY EXPENDITURE MAY BE DIRECTED TO BE ALLOW ED IN THE YEAR IN WHICH THE TDS WAS REMITTED I.E. FOR THE ASSESSMENT YEAR 2008-09. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. DISALLOWED THE ROYALTY PAYMENT ON THE GROUND T HAT THE ASSESSEE ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 9 HAS NOT PROVED THE NECESSITY OF INCURRING ROYALTY P AYMENT TO ITS ASSOCIATED ENTERPRISES, AS THERE WAS NO BENEFIT BY THE USE OF THE BRAND NAME. THE ASSESSEES CONTENTION IS THAT ROYALTY PA YMENT TO ITS ASSOCIATED ENTERPRISES IS 0.2% OF THE TOTAL TURNOVE R WHICH IS WITHIN THE PRESCRIBED LIMIT OF THE GOVERNMENT OF INDIA. THE A SSESSEE FURTHER CONTENDED THAT SIMILAR ADDITION WAS MADE BY THE A.O . FOR THE EARLIER ASSESSMENT YEAR ON THE SAME GROUND, WHICH WAS LATER DELETED BY THE A.O. BASED ON THE FINDINGS OF THE ITAT. DURING THE COURSE OF HEARING, THE A.R. OF THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE ITAT, VISAKHAPATNAM BENCH, FOR THE ASSESSMENT YEAR 2006-0 7 HAS CONSIDERED THE ISSUE OF PAYMENT OF ROYALTY AND HELD THAT THE P AYMENT IS NOT SHAM TRANSACTION. HOWEVER, THE ITAT, SET ASIDE THE ISSUE TO THE FILE OF THE A.O., WITH A DIRECTION TO REFER THE MATTER TO THE T PO TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTION AND TO DEAL AC CORDINGLY. THE A.O., AS PER THE DIRECTIONS OF THE ITAT, REFERRED THE MAT TER TO THE TPO. THE TPO HAS PASSED ORDER U/S 92C(3) OF THE ACT AND HELD THAT THE ROYALTY PAYMENT OF THE ASSESSEE TO ITS ASSOCIATED ENTERPRIS ES LG CHEMICAL LIMITED, KOREA IS HELD TO BE WITHIN ALP. THE A.O., THEREAFTER, PASSED CONSEQUENTIAL ORDER GIVING EFFECT TO THE ITAT ORDER AND DELETED THE ADDITIONS. DURING THE YEAR UNDER CONSIDERATION, THE RE IS NO CHANGE IN FACTS. THEREFORE, THE ADDITIONS MADE BY THE A.O. SH OULD BE DELETED. ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 10 8. WE HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSES SEE, ORDERS OF THE ITAT, TPO ORDERS AND CONSEQUENTIAL ORDER OF A.O . THE TPO HAS DETERMINED THE ALP OF THE INTERNATIONAL TRANSACTION FOR THE ASSESSMENT YEAR 2006-07 AND HAS ACCEPTED THE PAYMENT OF ROYALT Y TO ITS ASSOCIATED ENTERPRISES IS HELD TO BE WITHIN THE ALP. DURING TH E YEAR UNDER CONSIDERATION, ON THE DIRECTIONS OF THE CIT(A), THE A.O. HAS REFERRED THE MATTER TO THE TPO. THE TPO HAS PASSED HIS ORDER U/S 92CA(3) OF THE ACT ON 30.6.2014 AND HELD THAT THE INTERNATIONAL TRANSA CTION BEING ROYALTY PAYMENT OF THE ASSESSEE TO ITS ASSOCIATED ENTERPRIS ES IS HELD TO BE WITHIN THE ARMS LENGTH PRICE. AS REGARDS TO GENUIN ENESS AND NECESSITY OF ROYALTY PAYMENT IS CONCERNED, THE A.O. WAS OF TH E OPINION THAT THE ASSESSEE HAS NOT PROVED THE NECESSITY OF ROYALTY PA YMENT. WE DO NOT SEE ANY MERITS IN THE CONTENTION OF THE A.O. FOR TH E REASON THAT, THE ASSESSEE HAS FURNISHED COPIES OF INVOICES AND BANK REMITTANCE CHALLANS. THE PAYMENT WAS MADE THROUGH BANKING CHANNEL AND WH ICH WAS SUPPORTED BY BILLS AND AGREEMENTS. THE TPO AS WELL AS AO HAS ACCEPTED THE PAYMENT OF ROYALTY AS GENUINE AND NOT SHAM TRAN SACTION IN THE PREVIOUS ASSESSMENT YEAR. THE FACT REMAINS SAME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE REVENUE HAS FAILED TO SUBSTANTIATE ITS ARGUMENTS WITH ANY EVIDENCES TO SHOW THAT THE ROYAL TY PAYMENT IS NOT GENUINE. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS NOT RIGHT IN ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 11 DISALLOWING THE ROYALTY PAYMENT. THE CIT(A) HAS RIG HTLY DELETED THE ADDITIONS AND HIS ORDER DOES NOT REQUIRE ANY INTERF ERENCE. HENCE, WE INCLINED TO UPHELD THE ORDER OF THE CIT(A) AND REJE CT THE GROUND RAISED BY THE REVENUE. 9. THE NEXT ISSUE EMANATES FROM THE ASSESSEE CROSS OBJECTION IS DISALLOWANCE OF ROYALTY PAYMENT U/S 40(A)(I) OF THE ACT. THE A.O. DISALLOWED THE ROYALTY PAYMENT U/S 40(A)(I) OF THE ACT FOR THE REASON THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON ROYALTY P AYMENT AS PER SECTION 195 OF THE ACT. THE CONTENTION OF THE ASSES SEE WAS THAT IT HAS DEDUCTED TDS ON ROYALTY AND REMITTED THE PAYMENT TO THE GOVERNMENT ACCOUNT WITHIN THE DUE DATE SPECIFIED U/S 139(1) OF THE ACT. THE ASSESSEE FURTHER CONTENDED THAT THE JUDICIAL FORUMS IN THIS COUNTRY, CONSISTENTLY HELD THAT SECTION 40(A)(I) & 40(A)(IA) OF THE ACT ARE SIMILAR IN SO FAR AS ALLOWABILITY OF THE EXPENDITURE IS CON CERNED. IN VIEW OF THE JUDGMENTS OF VARIOUS COURTS AND TRIBUNALS, WHEREIN IT WAS HELD THAT THE AMENDMENT BROUGHT BY FINANCE ACT, 2010 TO SECTION 4 0(A)(IA) OF THE ACT IS RETROSPECTIVE IN NATURE, THEREFORE, THE SIMILAR BENEFIT SHOULD BE GIVEN TO PAYMENT COVERED U/S 40(A)(I) OF THE ACT. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESS EE. WE ALSO GONE THROUGH THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT AND FINDS THAT ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 12 THERE IS NO MERIT IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT SUB-CLAUSE (I) OF SECTION 40(A) OF THE ACT, MANDATE S THAT IN THE CASE OF ANY ASSESSEE MAKES ANY PAYMENT IN RESPECT OF ANY IN TEREST, ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT, WHICH IS PAYABLE OUTSIDE INDIA OR IN INDIA TO NON-RESIDEN T, NOT BEING A COMPANY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DE DUCTIBLE AT SOURCE UNDER CHAPTER XVIIB AND SUCH TAX HAS NOT BEEN DEDUC TED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YE AR OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESC RIBED UNDER SUB SECTION 1 OF SECTION 200, THEN THE AMOUNT SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROF ITS & GAINS OF BUSINESS OR PROFESSION. A CAREFUL STUDY OF THE PROV ISIONS OF SECTION 40(A)(I) OF THE ACT, IT WAS CLEAR THAT ANY PAYMENTS REFERRED TO IN THE SAID SECTION, WHICH IS PAYABLE OUTSIDE INDIA OR IN INDI A TO A NON-RESIDENT ON WHICH TAX IS DEDUCTIBLE UNDER CHAPTER XVIIB AND SUC H TAX IS NOT DEDUCTED OR, AFTER DEDUCTION HAS NOT BEEN PAID WITH IN THE DUE DATES UNDER SEC. 200(1) OF THE ACT, THEN SUCH PAYMENT IS NOT ALLOWED IN COMPUTING THE INCOME FROM BUSINESS OR PROFESSION. IN THE PRESENT CASE ON HAND, THOUGH ASSESSEE DEDUCTED TAX AT SOURCE, IT HAS DEDUCTED TAX IN SUBSEQUENT YEAR, BUT FAILED TO DEPOSIT THE SAME WIT HIN THE DUE DATE SPECIFIED UNDER SEC. 200(1) OF THE ACT. THEREFORE, WE ARE OF THE OPINION ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 13 THAT THE A.O. HAS RIGHTLY DISALLOWED THE ROYALTY PA YMENT UNDER SEC. 40(A)(I) OF THE ACT. 11. COMING TO THE ALTERNATIVE PLEA OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT IT HAS DEDUCTED TDS AND REMITTED TH E SAME INTO GOVT. ACCOUNT IN SUBSEQUENT YEAR, THEREFORE, AS PER THE P ROVISO TO SECTION 40(A)(I), THE ROYALTY AMOUNT MAY BE DIRECTED TO BE ALLOWED IN THE YEAR IN WHICH THE TDS WAS MADE. WE HAVE CONSIDERED THE SU BMISSIONS AND GONE THROUGH THE PROVISIONS OF THE ACT. A CAREFUL S TUDY OF PROVISIONS OF SECTION 40(A)(I) OF THE ACT AND PROVISO PROVIDED TH EREIN, IT IS CLEAR THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDU CTED IN ANY SUBSEQUENT YEAR OR HAS BEEN DEDUCTED IN THE PREVIOU S YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PR ESCRIBED UNDER SUB SECTION 1 OF SECTION 200, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. IN THE PRESENT CASE ON HAND, THE ASSESSEE HA S DEDUCTED TDS ON ROYALTY PAYMENT AND PAID THE AMOUNT INTO THE GOVERN MENT ACCOUNT IN THE FINANCIAL YEAR 2007-08, RELEVANT TO THE ASSESSM ENT YEAR 2008-09. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION TOWARDS ROYALTY PAYMENT, IN THE YEAR IN W HICH THE TDS IS DEDUCTED AND REMITTED INTO TO THE GOVT. ACCOUNT, I. E. FOR THE ASSESSMENT ITA NOS.700&701/VIZAG/2013 & CO 22&23/VIZAG/2014 M/S. L.G. POLYMERS INDIA (PVT) LTD., VISAKHAPATNAM 14 YEAR 2008-09. ACCORDINGLY, WE DIRECT THE A.O. TO A LLOW THE DEDUCTION FOR THE ASSESSMENT YEAR 2008-09. 12. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE PARTLY A LLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28 TH JAN16. SD/- SD/- (. ) ( . ) ( V. DURGA RAO ) ( G. MANJUNATHA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER , /VISAKHAPATNAM: 0 / DATED : 28.01.2016 VG/SPS ' % 2, 3,/ COPY OF THE ORDER FORWARDED TO :- 1. ! / THE APPELLANT THE DCIT, CIRCLE-3(1), VISAKHAPATNAM 2. %&! / THE RESPONDENT M/S. L.G. POLYMERS INDIA PVT. LTD., P.R. VENKATA PURAM POST, VISAKHAPATNAM 3. 6 / THE CIT, VISAKHAPATNAM 4. 6 () / THE CIT (A), VISAKHAPATNAM 5. , % ;, * ; , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // @A ; ( SR.PRIVATE SECRETARY ) * ; , , / ITAT, VISAKHAPATNAM