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of <h1>Revenue's Appeal Dismissed in Royalty Calculation Dispute</h1> <h3>CIT Versus FEDERAL MOGUL TPR INDIA LTD </h3> CIT Versus FEDERAL MOGUL TPR INDIA LTD - TMI Issues:1. Appeal against the order of the Income Tax Appellate Tribunal (ITAT) dismissal.2. Calculation of royalty as 3% of net ex-factory sale price.3. Interpretation of agreements regarding technical knowledge transfer.4. Determination of revenue expenditure nature of royalty payments.Analysis:1. The Revenue appealed against the ITAT's order dated September 30, 2011, which dismissed their appeal against the order of the Ld. CIT (Appeals)-XIII, New Delhi.2. The ITAT upheld the view of the CIT (Appeals) regarding the calculation of royalty at 3% of the net ex-factory sale price paid to Telkoku Piston Ring Company Ltd. as per the agreement.3. The Tribunal distinguished a Supreme Court decision disallowing 25% of royalty paid, citing decisions of the Delhi High Court in cases of CIT v. Sharda Motor Industries Ltd. and CIT v. J.K. Synthetics Ltd. regarding technical knowledge transfer agreements.4. The Tribunal, in its reasoning, highlighted that the agreement specified royalty payment at 3% of the sale price, emphasizing the non-transferable and confidential nature of technical information provided, leading to the conclusion that the payments were revenue expenditure based on previous Delhi High Court judgments.5. The Tribunal concluded that the royalty payments for technical knowledge transfer were deductible as revenue expenditure based on the nature of the agreement and the purpose of the payments, dismissing the appeal as no question of law was found to arise for consideration.
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