TaxTMI 
TaxTMI 
2012 (9) TMI 183
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.... appreciate the rival stands relating to the taxability of a sum of Rs 5,00,000/- received by the assessee, the following factual background is essential. The assessee entered into a Product Support Agreement on 28.11.1989 with M/s Klockner-Humboldt-Deutz of Germany (in short "KHD"). KHD was manufacturing air-cooled Deutz diesel engines under the name Deutz. In terms of the Product Support Agreement, KHD assigned to the assessee the right of selling genuine KHD spare-parts and approved exchange parts and to undertake the general after-sale service of the products, namely, Deutz diesel engines manufactured by KHD or its subsidiary or sold to KHD customers in India. In terms of the said agreement, assessee was to act as an independent merchant and was to render after-sales service on its own behalf and account. The aforesaid features of the said Agreement are emerging from the copy of the Agreement placed in the Paper Book at pages 87 to 101. Subsequently, on 1.7.1999, the Product Support Agreement was agreed to be terminated. The said Agreement is referred to as a non-competition agreement and the relevant clause in terms of which the assessee received the sum of Rs 5,00,000/- re....
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....ed a distributor for sale of products of C, an Indian company who was the importer and sole supplier of the products of a Switzerland company. The distributorship agreement was for specified territories, and the assessee relinquished the distribution arrangement for a few territories in consideration of a compensation. The compensation so received was sought to be taxed by invoking section 10(5A)(d) of the erstwhile Income-tax Act, 1922. In terms of section 10(5A)(d) of the erstwhile Income-tax Act, 1922, tax was payable in respect of any compensation or other payment received by the assessee in connection with the termination of an agency or the modification of the terms and conditions relating thereto. The Hon'ble High Court considered the express terms and conditions of the agreement and noticed that it contemplated alleged agent to act on his own and not on behalf of the principal and, therefore, the relationship of an agency cannot be said to have arisen, though the Agreement may describe it as an agent. Accordingly, the Hon'ble High Court held that the amount received was not compensation paid on termination of an agency within the meaning of section 10(5A)(d) of the Income-t....
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....third Ground, the assessee has contested the disallowance of Rs 75,000/- sustained by the Commissioner of Income-tax (Appeals) representing expenditure for earning dividend which was subject to tax under section 115-O and otherwise exempt under section 10(33) of the Act. This Ground is linked to Ground No. 2 raised by the Revenue in its appeal, wherein the Revenue is aggrieved by the decision of the Commissioner of Income-tax (Appeals) in retaining the addition only to the extent of Rs 75,000/- as against a total disallowance of Rs 35,22,653/- made by the Assessing Officer. Since the two cross-Grounds relate to the same issue, they are considered together for the purpose of adjudication. The Assessing Officer noticed that the assessee had earned dividend income to the extent of Rs 7,04,53,053/- which was exempt under section 10(33) of the Act. The Assessing Officer estimated 5% of such income amounting to Rs 35,22,653/- as expenditure incurred to earn such exempted income and disallowed the same in view of section 14A of the Act. The Commissioner of Income-tax (Appeals), however, found that the disallowance was excessive, but nevertheless according to him, the assessee ought to ....
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..... Ground No. 4 relates to the disallowance out of aircraft expenses amounting to Rs 4,16,271/-. Before us, the learned Counsel for the assessee fairly conceded that this issue stands decided against the assessee by the decision of Pune Bench in the assessee's own case for the assessment year 1039/PN/00 for the assessment year 1995-96 and further that the same issue was not pressed by the assessee in ITA No 45, 892/PN/01 for the assessment year 1997-98. Similar issue was also subject-matter of consideration in the assessee's case for assessment year 1998-99 vide ITA No 257/PN/03 dated 30.8.2011 wherein following the precedents, the issue was decided against the assessee. In view of this admitted position, by following the precedents, we decide the issue against the assessee and in favour of the Revenue. This Ground of appeal is thus dismissed. 13. Ground No. 5 of appeal relates to disallowance out of telephone expenses of Rs 68,144/-. Before us, the learned Counsel for the assessee submitted that identical issue has been decided in favour of the assessee by the Pune Bench of the Tribunal in the assessee's own case for the assessment years 1995-96 vide ITA No 1039/PN/00 and for as....
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....y as also the auditors under the Income-tax Act, following the parity of reasoning laid down by the Hon'ble High Court in the case of Kirloskar Ferrous Industries Ltd. (supra). In this view of the matter, we set aside the orders of the lower authorities on this aspect and the Assessing Officer is directed to delete the ad hoc disallowance of Rs 2,00,000/- made on this count. This Ground of appeal is accordingly allowed." Following the precedent, we set aside the orders of the lower authorities on this aspect and direct the Assessing Officer to delete the disallowance made out of miscellaneous expenses. This Ground of appeal of the assessee is allowed. 17. Ground No. 8 relates to disallowance out of interest claimed of Rs 68,58,000/-. We find that similar issue was subject-matter of consideration by our co-ordinate Bench in assessee's case for assessment year 1998-99 vide ITA No 257/PN/03 (supra), wherein the issue has been restored back to the file of the Assessing Officer for fresh adjudication in line with the directions given therein. For the sake of brevity, we extract below the relevant findings of the Tribunal: "3. Before us, the learned Counsel for the assessee subm....
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....th the view of the assessing Officer. Being aggrieved, assessee is in appeal before us. 19. The leaned Counsel for the assessee submitted that similar issue had come up for consideration before our co-ordinate Bench in the case of Kirloskar Ferrous Industries, Pune and the Tribunal vide order dated 22.6.2009 in ITA No 316/PN/07 has allowed the assessee's claim. We have considered the rival submissions and have also perused the order of coordinate Bench in the case of Kirloskar Ferrous Industries Ltd. (supra). We find that the Tribunal has upheld the claim of the assessee by following the judgment of the Hon'ble Gujarat High Court in the case of Saurashtra Cement & Chemical Industries Ltd 213 ITR 523. Following the precedent, we set aside the order of the Commissioner of Income-tax (Appeals) and the Assessing Officer is directed to allow the claim of the assessee. The assessee succeeds on this Ground. 20. In the result, the appeal of the assessee is partly allowed. 21. We now take up Revenue's appeal, vide ITA No 503/PN/04. 22. In the first Ground, the Revenue is aggrieved by the action of the Commissioner of Income-tax (Appeals) in directing to consider the additional c....
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....therefore, contended that there was no error in the order of the Commissioner of Income-tax (Appeals) and for that matter, the Commissioner of Income-tax (Appeals) rightly entertained the claim and directed the Assessing Officer to consider the same on merits. It was also contended that the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd (supra) was not applicable to the facts of the present case. 26. We have carefully considered the rival submissions. In this case, the assessee did not make a claim in the return of income for a loss claimed to have been suffered on the sale of units of mutual funds amounting to Rs 64,24,236/-. The said claim was made only during the course of assessment proceedings and not by way of a revised return. The Commissioner of Income-tax (Appeals) has admitted the claim and required the Assessing Officer to consider the same while giving effect to his order. In our view, the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd (supra) pressed into service by the learned Departmental Representative to assail the order of the Commissioner of Income-tax (Appeals) is misdirected, inasmuch as the said judgment doe....
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....der section 35(1)(iv) was that the same should be incurred on a scientific research related to the business carried on by the assessee and there was no condition that the fruits of such research should be available in the same year. In the face of the aforesaid submissions, the Commissioner of Income-tax (Appeals) allowed the claim of the assessee by making following discussion: "5.3 The submissions have been considered. The Director's report as well as the renewal application for R & D have also been perused. It is observed that the R & D unit of the appellant has been recognized by the Ministry of Science for past many years. The renewal application clearly shows the research activities carried out in past and the proposed activities to be carried out in future. I agree with the AR's contention that research a continuous activity and its fruits may not be visible in a given year. Also there is no condition in section 35(1)(iv) that the fruits of the scientific research carried out should be available in the same year. The only condition is that the expenditure should be on research related to the business of the assessee. From the activities mentioned in the renewal applica....
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....ng original was developed by the assessee. The aforesaid observations of the Assessing Officer are based on the Directors' report annexed to the financial statements of the assessee for the year under consideration. In our considered opinion, the order of the Commissioner of Income-tax (Appeals) has comprehensively dealt with the issue by apprising the activities carried out by the assessee on the basis of detailed applications made by the R & D unit to seek recognition from the Ministry of Science & Technology. Factually speaking, the findings of the Commissioner of Incometax (Appeals) which we have extracted above have not been negated by the Revenue before us and, therefore, we are inclined to accept the same. Even otherwise, we find that with regard to the assessee's claim of expenditure on scientific research (other than capital expenditure) of Rs 3,69,75,949/- there is no adverse view taken by the Assessing Officer, though he has noted such a claim. In fact, with regard to the capital expenditure in question the nature of such expenditure has not been examined by the Assessing Officer on the basis of the details of expenditure but merely on the basis of the Directors' report ....