TaxTMI 
TaxTMI 
2013 (2) TMI 716
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....ors having credit balance totaling to ₹ 6,10,880/-, remained constant since last three years. Assessee was required to explain why these amounts were not settled despite being due for long. Explanation of the assessee was that it was in the process of reconciliation of those amounts not claimed by the creditor. Assessing Officer was of the opinion that such amounts were appearing in assessee's books for a period exceeding five years and the amounts were not repayable. He applied provisions of Section 41(1) of the Act and made addition of those amounts. 4. In its appeal before CIT(Appeals), argument of the assessee was that it had transactions with several creditors mentioned in the list and those accounts which had no movement were offered for income under Section 41(1) of the Act for assessment year 2011-12. Ld. CIT(Appeals) was appreciative of this contention of the assessee. According to him, insofar as credit totalling to ₹ 2,32,334/- in respect of three parties were concerned, assessee had shown it has income in its return for assessment year 2011-12. Thus he scaled down the addition by ₹ 2,32,334/- and sustained ₹ 3,78,466/- only. 5. Now before us, l....
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....period starting from January, 2008 to March, 2008 only. The agreement would imply that M/s UBL had started rendering advisory services to assessee only from January, 2008. As per the agreement, M/s UBL was to provide advisory services to the assessee and such services were given both in India and outside India, in the premises of the assessee. 11. Assessee was required to explain why the whole of the sum of ₹ 4 Crores paid as technical and management fee should not be disallowed. As per A.O., this was not for any business purpose. Assessee produced a confirmation letter from M/s UBL in which, the said company acknowledged receipt of ₹ 4 Crores paid by the assessee towards technical, advisory and management fees. However, the Assessing Officer once again raised a query as to the commercial expediency in making such payment to M/s UBL. To this, a reply was given by the assessee on 21.12.2010, which read as under:- (a) "UBL is having dedicated R&D and Quality team and highly trained engineering team who gives valuable advice to the assessee company in respect of ensuring quality, in selection of plant and machineries, their upkeep etc., for the efficient handling and op....
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....ed on account of the efforts of M/s UBL. As per the assessee, it could not have existed without the services of M/s UBL. Assessee was using the dedicated R&D team and highly trained engineers of M/s UBL. Just because the agreement was entered with M/s UBL on 27.12.2007, would not mean that services were not made available by the said company from 1.4.2007 itself. As per the assessee, such services were rendered by M/s UBL even before the commencement of relevant previous year. Reliance was placed on the decision of Hon'ble Apex Court in the case of S.A. Builders Ltd. v. CIT (288 ITR 1). 14. Ld. CIT(Appeals) was appreciative of the contentions of the assessee. According to him, the foreign partner, namely, Scottish & Newcastle PLC held 50% shares of the assessee-company and this by itself showed that the transactions were at arm's length. CIT(Appeals) also noted that M/s UBL had declared income of ₹ 80,19,22,970/- and paid taxes of ₹ 28,34,38,164/- at maximum marginal rate. Had the assessee not paid such amount, income of M/s UBL would have gone down by such amount. Therefore, according to CIT(Appeals), the transaction was revenue neutral. The transaction could not ....
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.... purpose of business nor for commercial expediency. Reliance was placed on the decision of Hon'ble Calcutta High Court in the case of Jayshree Tea & Industries Ltd. v. CIT (272 ITR 193). 16. Per contra, learned A.R., supporting the order of CIT(Appeals), submitted that Revenue could not judge the business purpose by sitting in an arm chair of a businessman. As per learned A.R., no businessman could be compelled to maximize his profits. Assessee here had declared a loss of ₹ 1,08,02,529/- in its return of income. If it had not made the claim of ₹ 4 Crores paid by it to M/s UBL, the effective tax payment if both assessee and M/s UBL were considered together would have been only lesser. If the sum of ₹ 4 Crores was not paid by the assessee, then it would have had a profit of ₹ 2.92 Crores, against the loss of ₹ 1.08 Crores returned. As against this, income of M/s UBL would have gone down by ₹ 4 Crores. M/s UBL was paying tax at maximum marginal rate and Revenue would have been only at a disadvantage. Assessee had received a number of tangible and intangible benefits through its association with M/s UBL. Assessee also availed the services of employe....
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....icer as to why such amounts were paid to M/s UBL, but in our opinion, a mere suspicion without further evidence would not be a ground for disallowing a claim where actual payments were indeed effected. Further, ld. CIT(Appeals) has given a clear finding that the transaction was revenue neutral. M/s UBL had a returned interest income of ₹ 80,19,22,970/- on which it had paid tax at maximum marginal rate, as noted by the CIT(Appeals). If the sum of ₹ 4 Crores was not received by it, tax payable by the said company would have only gone down. As against this, assessee had returned loss of ₹ 1.08 Crores and therefore, there is much strength in the argument of learned A.R. that if the transaction had not gone through, revenue would only have been at a disadvantage. We cannot say that the reply given by the assessee to the queries made by the Assessing Officer which has been produced at para 11 above, were such that, it called for a disallowance of the amount. Fact of the matter is that assessee paid the sum as per agreement and receipt thereof was acknowledged by M/s UBL. Such payments were also acknowledged by the recipient as received for the technical, advisory and ma....
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....Rs 3785.26 lakhs Thus, assessee had acquired all the operating assets of the said company and the agreement came into effect on 28th February, 2002. 16. Second agreement, copy of which is placed at paper-book pages 55 to 69, gave the licencee a non-exclusive right to use the trademark 'marco polo'. The relevant para of the said agreement, which is also dated 28.2.2002 is reproduced hereunder:- "1. The Licensor grants unto the Licensee a non-exclusive, non-transferable and indivisible right to use the trade mark "MARCOPOLO" in respect of the non-beer products as set out in Schedule I hereto (hereinafter referred to as "the said Trade Mark" and "the Products") to be manufactured by the Licensee for the limited period of 9 (nine) months from the date hereof. The Licensee has provided to the Licensor its estimated production of various non-beer products to which the licensee shall apply and details whereof are set out in Schedule II to this Agreement." Now, we have to see who is the licencee and who is the licensor. This appears at preamble of the agreement which reads as under:- "THIS AGREEMENT made at Chennai this 28th day of February, 2002 BETWEEN EMPEE BREWERIES LIMITED a co....
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....ced the bills for addition to fixed assets, copy of agreement between M/s Empee Distilleries and M/s Mc Dowell. After verifying the details filed the assessment is completed as under" Thus, assessee had produced all bills for addition to its fixed assets and copies of agreement it had entered with M/s Empee Distilleries Ltd. before the Assessing Officer. Assessment for an assessment year as early as 2003-04 was itself completed after verifying such details. It is not a case where such depreciation was granted by the Assessing Officer first time for the impugned Assessment Year. For the relevant assessment year, assessee was claiming depreciation only on Written Down Value of the intangible assets. From assessment year 2003-04 onwards, obviously, assessee has been granted depreciation on such intangible assets. Therefore, we cannot say that Assessing Officer had completed the assessment for impugned assessment year oblivious of this. Assessing Officer was very well aware that there was a claim for depreciation on intangible assets comprising of trademarks and licences and this was already granted. 18. In any case, assessee was eligible for claiming such depreciation. At no point o....