Revenue's Appeals Dismissed: Assessee Prevails on Multiple Issues

The Tribunal dismissed all grounds raised by the Revenue, upholding decisions in favor of the assessee on various issues including deletion of additions, grant of credit, allowance of depreciation, adjustment on royalties, remission of sales tax, and refund of amounts. The Tribunal found in line with previous decisions and case law, ultimately dismissing all appeals by the Revenue and deeming the cross objection by the assessee as infructuous.

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Issues Involved:

1. Deletion of addition on account of unaccounted production and sale.
2. Grant of credit in respect of retained MODVAT credit relating to opening stock.
3. Deletion of addition under section 40A(2)(b) for payments made to Crawford Bailey & Co.
4. Allowance of depreciation on testing equipment provided to laboratories and hospitals free of charge.
5. Deletion of adjustment on account of tax on brand usage royalty.
6. Deletion of adjustment on account of payment of royalty on traded finished goods.
7. Allowance of technical knowhow royalty payment at 2%/4% instead of 1%.
8. Deletion of addition on account of tax and R&D cess paid on know-how royalty.
9. Remission of sales tax under the package scheme of incentives of Government of Maharashtra.
10. Refund of amount made to NPPA.
11. Brand usage royalty payment without a formal deed.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Unaccounted Production and Sale:
The Tribunal noted that the issue was covered in favor of the assessee by the decision of the co-ordinate bench in the assessee's own case for A.Y. 2002-03, which was upheld by the Hon’ble Bombay High Court. The Tribunal found no evidence of purchases and sales outside the books of accounts and dismissed the ground raised by the Revenue.

2. Grant of Credit in Respect of Retained MODVAT Credit Relating to Opening Stock:
The Tribunal restored this issue to the AO to decide afresh in light of the provisions of section 145A and the direction of the Tribunal in ITA No.2680/M/2003, following the decision of the co-ordinate bench and the Hon’ble Bombay High Court.

3. Deletion of Addition Under Section 40A(2)(b) for Payments Made to Crawford Bailey & Co.:
The Tribunal found that the AO had not established the excessiveness of the payment and dismissed the ground raised by the Revenue, following the decision of the co-ordinate bench in the assessee's own case for A.Y. 2002-03.

4. Allowance of Depreciation on Testing Equipment Provided to Laboratories and Hospitals Free of Charge:
The Tribunal upheld the decision of the co-ordinate bench in the assessee's own case for A.Y. 2002-03, allowing depreciation on testing equipment provided free of charge, and dismissed the ground raised by the Revenue.

5. Deletion of Adjustment on Account of Tax on Brand Usage Royalty:
The Tribunal found that the royalty was paid net of taxes as per the agreement and RBI approval, following the decision of the co-ordinate bench in the assessee's own case for A.Y. 2002-03, and dismissed the ground raised by the Revenue.

6. Deletion of Adjustment on Account of Payment of Royalty on Traded Finished Goods:
The Tribunal upheld the decision of the co-ordinate bench in the assessee's own case for A.Y. 2002-03, finding no need for paying royalty for technical/marketing know-how, and dismissed the ground raised by the Revenue.

7. Allowance of Technical Knowhow Royalty Payment at 2%/4% Instead of 1%:
The Tribunal upheld the decision of the co-ordinate bench in the assessee's own case for A.Y. 2002-03, finding that the restriction by the TPO to 1% was without basis, and dismissed the ground raised by the Revenue.

8. Deletion of Addition on Account of Tax and R&D Cess Paid on Know-how Royalty:
The Tribunal upheld the decision of the co-ordinate bench in the assessee's own case for A.Y. 2002-03, finding that the payments were made as per the agreement and RBI approval, and dismissed the ground raised by the Revenue.

9. Remission of Sales Tax Under the Package Scheme of Incentives of Government of Maharashtra:
The Tribunal found that the remission of sales tax liability was not chargeable to tax as business income under section 41(1) of the Act, following the decisions of the Hon’ble Bombay High Court in CIT vs. Sulzer India Ltd. and the Apex Court in CIT vs. Balkrishna Industries Ltd., and dismissed the ground raised by the Revenue.

10. Refund of Amount Made to NPPA:
The Tribunal upheld the decision of the co-ordinate bench in the assessee's own case for A.Y. 1999-2000, finding that the payment was a refund of excess price paid and not a violation of any law, and dismissed the ground raised by the Revenue.

11. Brand Usage Royalty Payment Without a Formal Deed:
The Tribunal found that the payment of brand usage royalty at 1% was not disputed by the TPO and was not subject matter before the CIT(A), rendering the ground raised by the Revenue out of context and infructuous, and dismissed the ground.

Conclusion:
Both appeals of the Revenue were dismissed. The cross objection filed by the assessee was also dismissed as infructuous. The Tribunal's order was pronounced in the open court on 18.06.2018.

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