2012 (12) TMI 594 - AT - Income Tax

Tribunal denies deduction under Section 80-O, but grants appeal on interest levy under Section 220(2).

M/s Bosch Limited Versus The Dy. Commissioner of Income Tax, Bangalore

M/s Bosch Limited Versus The Dy. Commissioner of Income Tax, Bangalore - TMI Issues Involved:1. Rejection of the Assessee's claim for deduction under Section 80-O of the Income Tax Act.2. Levy of interest under Section 220(2) of the Income Tax Act.Detailed Analysis:1. Rejection of the Assessee's Claim for Deduction under Section 80-O:Background:The Assessee, a company engaged in the manufacture of automotive products, claimed a deduction under Section 80-O of the Income Tax Act for the Assessment Year 2001-02. The Assessee received Rs. 4,85,77,960 from Robert Bosch GmbH, Germany, and claimed that 50% of this amount was eligible for deduction under Section 80-O. The section allows deductions for income received from foreign enterprises for the use outside India of any patent, invention, design, or registered trademark.Agreements and Claims:The Assessee had multiple agreements with Bosch for developing various automotive components. The agreements stipulated that Bosch would provide technical information, and the Assessee would carry out development work. The Assessee argued that the payments received were for the use of patents and designs developed by it.Revenue's Stand:The Assessing Officer (AO) contended that the payments were for technical services rendered and not for the use of any patent or design. The AO emphasized that the Assessee was under Bosch's supervision and the agreements did not explicitly mention the use of patents or designs. The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] both rejected the Assessee's claim.Tribunal's Findings:The Tribunal noted that for claiming deduction under Section 80-O, the Assessee must prove that the consideration was for the use outside India of any patent, invention, design, or registered trademark. The Tribunal found that the Assessee failed to establish ownership of any patent or design during the relevant assessment year. The agreements primarily focused on development work rather than the transfer of intellectual property rights. The evidence provided by the Assessee was deemed insufficient to prove that the payments were for the use of patents or designs.Conclusion:The Tribunal upheld the CIT(A)'s decision, concluding that the Assessee did not meet the conditions for deduction under Section 80-O. The Assessee failed to link the payments received with any specific patent or design used by Bosch outside India.2. Levy of Interest under Section 220(2):Background:The Assessee contested the levy of interest under Section 220(2) on the grounds that the dates used for computation were incorrect and that refunds due to the Assessee were not considered. Additionally, the Assessee argued that no notice of demand under Section 156 was issued, making the levy of interest invalid.CIT(A)'s Decision:The CIT(A) held that the levy of interest under Section 220(2) is mandatory and not subject to appeal.Tribunal's Findings:The Tribunal referred to the Supreme Court's decision in Central Provinces Manganese Ore Co. Vs. CIT, which held that the levy of interest is part of the assessment process and can be disputed in appeal if the Assessee denies liability. The Tribunal directed the AO to reconsider the Assessee's claims regarding the computation of interest and the issuance of notice under Section 156.Conclusion:The Tribunal allowed the appeal on the issue of interest levy for statistical purposes, directing the AO to re-examine the Assessee's claims.Summary:The Tribunal dismissed the Assessee's claim for deduction under Section 80-O, affirming that the Assessee failed to prove the payments were for the use of patents or designs. However, the Tribunal allowed the appeal regarding the levy of interest under Section 220(2) for statistical purposes, directing the AO to reassess the computation and issuance of notice.