2016 (3) TMI 237

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....7-08. 2. The assessee has raised the following effective ground: "2. The Commissioner of Income-tax(Appeals) erred in holding that the Assessing Officer s justified in treating the royalty payments of ` 9,39,000/- being 3% of the sales of the year, as capital expenditure and disallowing 75% of the same after allowing depreciation @ 25%. The action of the Assessing Officer is as per law and confirmed." 3. The facts of this issue are that during the financial year 2006-07, relevant to assessment year 2007-08, the assessee-company debited in its Profit & Loss Account a sum of ` 9,39,000/- under the head 'royalty' paid to M/s Kokusan Denki Co. Ltd, Japan. The Assessing Officer, by relying on the decision of the Supreme Court in t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....the material available on record. We have carefully gone through the judgment of the jurisdictional High Court in the case of Southern Switch Gear Ltd (supra). In that case the foreign company was required to maintain the assessee's factory in India. Being so, it was held that the assessee got the enduring benefit and it is a capital expenditure. However, in the present case, though the agreement was for 10 years, the royalty is based on the quantum of sales made by the assessee only. Being so, the above judgment cannot be straightly applied to the facts of the present case. Considering the facts of the case, in our opinion, the judgment of the jurisdictional High Court in the case of CIT vs Hitech Arai Ltd, 368 ITR 577, is applicable. In t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....39;ble Madras High Court relied on by the CIT(A) in the case of M/s Simpson & Co. Ltd vs DCIT in TCA No.2621 of 2006 dated 15.10.2012 has not been accepted by the Department and SLP has been filed before the Hon'ble Apex Court and the issue has not reached finality." 8. The facts of the issue are that the assessee-company is found to have invested an amount of ` 85,45,95,000/- in shares as on 31.3.2007 as could be seen from the investments of the Balance Sheet and earned a dividend income of ` 3,49,79,000/- during the financial year 2006-07. However, the assessee has not segregated any expenditure attributable to such investments and earning of dividend income which is exempt from tax. Hence, the Assessing Officer invoked the provisi....