TaxTMI 
TaxTMI 
2011 (9) TMI 1063
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.... and circumstances of the case and in law, the CIT (Appeals) has erred in deleting the addition of ₹ 80,08,667/- / ₹ 65,43,517/- on account of royalty payment. " 3. The only issue for consideration which is common in both the appeals relates to deleting the addition of ₹ 80,08,667/- in assessment year 2006-07 and ₹ 65,43,517/- on account of royalty paid. The facts of the case stated in brief are that the assessee is a company engaged in the business of manufacturing and trading of piston rings used in automobiles. The assessee claimed royalty expenses of ₹ 1,06,78,222/- in assessment year 2006-07 and ₹ 87,24,684/- in assessment year 2007-08. The said royalty was paid to Telkoku Piston Ring Company Ltd., ....
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....ng officer's reliance on the decision of Hon'ble Supreme Court in the case of Southern Switchgears Ltd. 232 ITR 359 (SC) for disallowance of 25 per cent of royalty as a capital expenditure, it was submitted the reliance placed by assessing officer was wholly misplaced on the ground that the assessee was paying royalty @ 3 per cent of net ex-factory sale price of licensed products exclusive of excise duty as per terms of payment provided in clause 5 of the said agreement. There was no transfer of ownership of technical know-how and technology. Technical know-how and technology remained the property of Telkoku Piston Rings Co. Ltd., Japan (supra). Therefore, decision of Hon'ble Supreme Court in the case of Southern Switchgear Ltd. (supra) for....
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....ld. CIT (A) treated the payment of royalty in the nature of revenue expenditure. He, therefore, held that the expenditure was allowable as business expenditure. 5. Before us the ld. Sr. DR supported the order of the assessing officer relying on the decision of Hon'ble Supreme Court in the case of Southern Switchgear Ltd. (supra). On the other hand, the ld. AR of the assessee submitted that the royalty was based on turnover basis. He placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Sharda Motor Industries Ltd. (supra). 6. We have heard both the parties and gone through the material available on record. As per clause 5 of agreement between the assessee and Telkoku Piston Ring Company Ltd., Japan (supra), th....