JCIT (OSD) 8(1), V. CHIRAG BEHRING VACINES P. LTD,

MA 63/MUM/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9126 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 08-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Assessment Year: 2002-2003
• Appeal Filed On: 06-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND SONDE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI L BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI B RAMAKOTAIAH, AM & SHRI VIJAY PAL RAO , JM MISCELLANEOUS APPLICATION NOS.63 & 64/MUM/2012 ARISING OUT OF ITA NOS. 3557 & 3647/MUM/2006 (ASST YEAR 2002-03 ) THE JT COMMR OF INCOME TAX (OSD) 8(1), MUMBAI VS M/S CHIRON BEHRING VACCINES P LTD 501 SHREE AMBA SHANTI CHAMBERS ANDHERI-KURLA ROAD ANDHERI (E) MUMBAI 59 (APPLICANT) (RESPONDENT) PAN NO. AAACC6494P ASSESSEE BY SHRI ARVIND SONDE REVENUE BY S/SHRI AJIT KUMAR/N K MEHTA DT.OF HEARING 27 TH JULY 2012 DT OF PRONOUNCEMENT 8 TH , AUG 2012 PER VIJAY PAL RAO, JM THESE MISCELLANEOUS APPLICATIONS BY THE REVENUE AR E DIRECTED AGAINST THE ORDER DATED 25.2.2011 OF THE TRIBUNAL WHEREBY THE C ROSS APPEALS WERE DISPOSED OFF BY THE TRIBUNAL IN ITA NOS.3557/MUM/2006 AND 3647/M UM/2006 FOR THE ASSESSMENT YEAR 2002-02. 2 THESE MISCELLANEOUS APPLICATIONS ARE FILED ON THE GROUND THAT MERE INTER COMPANY AGREEMENT WOULD NOT JUSTIFY THE PAYMENT OF ROYALTY AND THEREFORE, THE TRIBUNAL HAS ERRED IN LAW AND FACTS BY OBSERVING T HAT AS PER THE AGREEMENT, THE PAYMENT OF ROYALTY IS REQUIRED FOR THE USE OF TECH NICAL KNOW-HOW BY THE ASSESSEE. 3 WE HAVE HEARD THE LD CIT-DR AND THE LD AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD CIT-DR HAS REFERRED THE TP ORDER AND MA NOS .63 & 64/MUM/2012 M/S CHIRON BEHRING VACCINES P LTD . 2 SUBMITTED THAT AS PER THE OECD GUIDELINES, THE PURC HASE MADE FROM AE INCLUDES THE ROYALTY AND THEREFORE, NO SEPARATE ROYALTY IS REQUI RED TO BE PAID. 3.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THIS POINT HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL WHILE DECID ING THE ISSUE AND THEREFORE, IN THE PROCEEDINGS U/S 254(2), THE TRIBUNAL HAS NO JUR ISDICTION TO REVIEW ITS OWN ORDER. 4 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND CAREF UL PERUSAL OF THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE TRIBUNAL HAS C ONSIDERED AND ADJUDICATED THIS ISSUE AS RAISED IN THE MISCELLANEOUS APPLICATION IN PARA 6. 9 AS UNDER: 6.9. WE HAVE HEARD THE LEARNED DR AS WELL AS THE L EARNED AR AND PERUSED THE RELEVANT RECORD. SO FAR AS THE QUE STION OF NECESSITY OF PAYMENT OF THE ROYALTY IS CONCERNED, T HE TPO WAS OF THE VIEW THAT THE PRICE OF SEED VIRUS INCLUDES COMP ENSATION TOWARDS USE OF TECHNOLOGY. WHEN THE ASSESSEE PAID T HE CONSIDERATION FOR ACQUISITION OF THE MANUFACTURING FACILITIES, THEN THE SEPARATE PAYMENT FOR ROYALTY IS UNWARRANTED. AFTER CONSIDERING THE RELEVANT RECORD, FACTS AND CIRCUMST ANCES OF THE CASE AS WELL AS RIVAL CONTENTIONS, WE NOTE THAT TH E VACCINE BUSINESS OF HOECHST AG WAS PURCHASED BY CHIRON CORP ORATION, USA AND THE ASSESSEE IS A JOINT VENTURE BETWEEN TH E CHIRON CORPORATION, USA AND AVENTIS PHARMA LIMITED, AND WAS FORMED AS A RESULT OF PURCHASE OF THE SAID VACCINE BUSIN ESS OF HOECHST AG BY THE CHIRON CORPORATION, USA. IN THE YEAR, 1996, THE JOINT VENTURE COMPANY WAS FORMED BETWEEN CHIRON CORPORATI ON, U.S.A. AND CHIRON BEHRING GMBH AND CO, KG FOR ACQ UIRING THE VACCINE BUSINESS OF BEHRING GMBH KG. AS A RESULT OF THIS CHIRON BEHRING GMBH AND CO BECAME THE OWNER OF ALL TRADE M ARK, PATENT AND TECHNICAL KNOW FOR MANUFACTURING OF THE VACCINE AVENTIS INDIA HAD TO PAY ROYALTY AT 5% OF THE LOC AL SALE FOR THE USE OF IMPORTED TECHNICAL KNOW HOW. FOR THIS PURPO SE THE RBI GRANTED APPROVAL VIDE LETTER DATED 19.4.1997 FOR P AYMENT OF ROYALTY BY AVENTIS PHARMA LIMITED TO CHIRON BEHR ING GMBH AND CO AT THE RATE OF 5% OF THE LOCAL SALE. IN THE YEA R 1998, THE ASSESSEE JOINT VENTURE WAS FORMED BY THE AVENTIS PHARMA LIMITED AND CHIRON CORPORATION, USA. THE ASSESSEE JOINT VENTURE PURCHASED THE VACCINE BUSINESS OF THE AVENTIS PHARM A LIMITED. ACCORDING TO THE EXISTING CONTRACT/AGREEMENT BETWE EN THE AVENTIS PHARMA LIMITED AND CHIRON BEHRING GMBH I TS CELL CULTURE RABIES VACCINE BUSINESS STOOD TRANSFER IN T HE NAME OF THE ASSESSEE JOINT VENTURE. CONSEQUENTLY, THE PAYMENT OF ROYALTY BY THE ASSESSEE TO CHIRON BEHRING GMBH CONTINUED AFT ER TAKING THE NECESSARY APPROVAL FROM THE RBI. THUS, IT IS CLE AR THAT THE PURCHASING OF THE BUSINESS OF THE AVENTIS PHARMA L IMITED BY THE JOINT VENTURE AS PER THE TERMS AND CONDITIONS BETW EEN THE MA NOS .63 & 64/MUM/2012 M/S CHIRON BEHRING VACCINES P LTD . 3 PARTIES DOES NOT ACQUIRE THE TECHNOLOGY FOR MANUFAC TURING OF THE VACCINE WHICH WAS IN THE POSSESSION OF CHIRON BEHR ING GMBH. THEREFORE, AS PER THE AGREEMENT THE PAYMENT OF ROYA LTY IS REQUIRED FOR THE USE OF TECHNICAL KNOW-HOW BY THE A SSESSEE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT(A) TO THE EXTENT THAT THE ROYALT Y FOR USE OF TECHNICAL KNOW-HOW IS REQUIRED TO BE PAID BY THE AS SESSEE. HOWEVER, ON THE ISSUE OF ALP, SINCE WE HAVE ALREAD Y REMITTED THE ISSUE OF ALP OF EXPORT TO THE AO, ACCORDINGLY, THE ALP OF ROYALTY IS ALSO REQUIRED TO BE DETERMINED AFTER DUE CONSIDERATION AND AS PER THE PROVISIONS OF LAW. HENCE, THE ISSU E OF ALP IN RESPECT OF ROYALTY IS SET ASIDE TO THE FILE OF THE AO IN TERMS OF THE ABOVE ORDER IN RESPECT ETC TO THE AE. 4.1 IT IS MANIFEST AND EVIDENT FROM THE IMPUGNED OR DER OF THE TRIBUNAL THAT THE CONTENTION OF THE REVENUE WITH REGARD TO THE NECESS ITY OF PAYMENT OF ROYALTY HAS BEEN DULY CONSIDERED AND THEREAFTER, A FINDING HAS BEEN GIVEN. ONCE THE POINT WHICH HAS BEEN RAISED IN THE MISCELLANEOUS APPLICAT ION HAS ALREADY BEEN CONSIDERED IN THE IMPUGNED ORDER, THEN IN THE PROCE EDINGS U/S 254(2), THE TRIBUNAL HAS NO JURISDICTIONAL TO RE-APPRECIATE THE EVIDENCE , FACTS OR CONTENTION. ACCORDINGLY, WE FIND THAT THE REVENUE HAS FAILED TO MAKE OUT ANY APPARENT ERROR OR MISTAKE IN THE IMPUGNED ORDER OF THE TRIBUNAL. 5 IN THE RESULT, THE MISCELLANEOUS APPLICATIONS FIL ED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 8 TH ,DAY OF AUG 2012. SD/- SD/- ( B RAMAKOTAIAH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 8 TH , AUG 2012 RAJ* MA NOS .63 & 64/MUM/2012 M/S CHIRON BEHRING VACCINES P LTD . 4 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI