TaxTMI 
TaxTMI 
2017 (4) TMI 118
X X X X Extracts X X X X
X X X X Extracts X X X X
....expenditure amounting to Rs. 22,92,306/-. 3. The short facts of the case are as under: The assessee is engage in business of providing technology know-how for manufacturing chemical products relating to Pulp and Paper products. During the year it had declared royalty income of Rs. 2.09 crore apart from other income of Rs. 2.22 crore and had computed net loss of Rs. 85.13 lacs. The royalty income was mainly derived on account of providing technical know-how which was purchased from the holding company M/s Hercules Inc., U.S. As per the agreement dated 01/01/2008 the assessee needs to pay royalty of 5% net sale value of the product sold apart from wholesome amount of U.S$ 2,00,000/-spread over a period of 10 years. The ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not considered the alternative argument of the assessee that royalty expense has been reversed in subsequent years and has been offered to, and subjected to tax in that year. 5. The Ld. DR submitted that the assessee has not produced the additional agreement which was executed between the assessee and the U.S.A. party. This is new evidence which cannot be allowed. 6. We have heard the rival contention of both the parties looking to the facts and circumstances of the case that we find in the Assessment Order for AY 2008-09 wherein the Assessing Officer has made the addition on account of royalty expenses the A.O. has disallowed. Wherein the A.O. has made disallowance of royalty of Rs. 23,66,000/- has relying upon the ame....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us year 2008-09 relevant to assessment year 2009-10. The assessee has earned the royalty income and income from services. The company has also undertaken the marketing in business development royalty activities during the relevant year. During the year the assessee company earned royalty income amounting to Rs. 2,09,92,115/- from sub licensing of the technology to unrelated party. The said technology has been provided to the assessee by its parent company Hercules Inc on license on payment of royalty. As per the Royalty agreement between Hercules Inc and the assessee company, the assessee company required to make payment of royalty to Hercules Inc @ 5% of the net sale value of product sold by Connell Brothers Company. As per the agreement b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purchase from M/s Hercules USA vide agreement dated 01/01/2003 whom the royalty is paid 5% of net sale value of the product. The assessee has sold this technical know-how to one party Connell Brothers Company (CBC) with which he entered into agreement and as per this said agreement the assessee would receive a royalty payment of 14% on net sales value of the product against which the assessee has to make payment of 5% to Hercules USA. Thus the difference of 9% on the sales value is effected. The assessee has credited in profit and loss account 14% of the royalty income and net sale value was arrived at. After giving 5% to Hercules and considering the same agreement the CIT(A) was of a view that the addition on account of difference is not r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd of appeal is allowed." 13. Moreover the Tribunal in ITA No. 4380/M/2013 has dismissed the appeal of the department by observing as under: 8. Before us, the Ld. A.R. of the assessee submitted that since the above stated product 'Hercon and Impress' were newly added products and that it was a commercial decision of the assessee company to sell the said products on no profit basis so as to attract more customers. It has also been submitted that in the subsequent assessment year 2011-12, the parent company i.e. M/s. Hercules INC, USA has waived off the entire royalty payable by the assessee and that the assessee has not paid any royalty to the parent company and the entire amount has been offered to tax by the assessee company ....