TaxTMI 
TaxTMI 
2017 (11) TMI 1632
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....nal markets of South & Central America, Africa, Asia, etc. They have various models currently plying on the Indian roads which shall include Maruti 800, Omni, Esteem, Alto, Gypsy, Zen, Verna, Wagon-R, Vitara and Swift etc. For the AY 2008-09 they have filed their return of income on 29.09.2008 declaring a total income of Rs. 20,92,03,70,320/- and also disclosing long term capital loss of Rs. 15,39,21,183/-. Revised return was filed on 27.03.2010 at an income of Rs. 20,96,66,30,740/-and in that revised return assessee claimed credit of additional TDS of Rs. 25,66,500/- excluding income from the sales tax subsidy being capital receipt and expenditure/loss on Mark-to-market of derivative contracts and including expenditure on lumpsum royalty paid during the year. 2.1 In respect of royalty for use of brand name and AMP services, reference was made to the Transfer Pricing Officer u/s 92CA(1) of the Act and the TPO made the adjustment on account of royalty for use of brand name to a tune of Rs. 2,37,24,42,202/- and in respect of AMP service to a tune of Rs. 1,95,16,00,000/-, thus, totaling to Rs. 4,32,40,42,202/-. Draft assessment order u/s 144C was forwarded to the assessee, vide lette....
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....ssee for deduction, but disallowed by the Assessing Officer: Item No. Item Particulars Amount (Rs.) 1(a) PLA Balance of Excise Duty on Vehicles 28,21,616 1(b) PLA Balance R&D Cess on Vehicles 23,02,815 1(c) PLA Balance Excise Duty on Spare parts 90,04,752 2 Customs Duty paid on import of components for Exports for purposes for which export had not been made by year end 42,961 3 Customs Duty paid on import of components for Exports purposes for which export had been made by year end 12,64,98,615 4 Excise duty on Inputs balance in RG 23A Part-II 18,47,40,688 5a CVD (Modvat) paid on goods in transit to be adjusted against excise duty payable on finished products components 10,73,21,757 5b CVD (Modvat) paid on goods in transit to be adjusted against excise duty payable on finished products Steel Coils 2,78,71,332 6 Customs Duty on Goods in Transit/under inspection 1,93,27,627 7 Customs Duty on Inventory in Closing Stock 18,23,52,893 8 Customs duty paid under protest 92,431 Total 66,23,77,487 3.1 According to the assessee, the assessee, in the return of their income, has claimed deduction of Rs. 66,23,77,487 in respect of the above statu....
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....(Agra), Euro RSCG Advertising (P) Ltd v. ACIT : 154 TTJ 389 (Mum), he submitted that the aggregate amount of Rs. 66,23,77,487 was allowable as deduction to the assessee under section 43B of the Act. Ld. AR further submitted that this issue is, in principle, also covered by the order of the Delhi High Court in assessee's own case for the assessment years 1994-95, 1995-96 and 1996-97, reported in 255 CTR 140. 3.4 In the light of these submissions and detailed explanation offered by both the parties now we shall proceed to deal with the item wise submissions under Ground No.3. 3.5 Adverting to Grounds No 3.1 and 3.1.1, we find in the return of income, the assessee claimed deduction of duty paid amounting to Rs. 1,41,29,183 being closing balance in the PLA, under section 43B of the Act, as under: Item No. Item Particulars Amount (Rs.) 1(a) PLA Balance of Excise Duty on Vehicles 28,21,616 1(b) PLA Balance R&D Cess on Vehicles 23,02,815 1(c) PLA Balance Excise Duty on Spare parts 90,04,752 3.5.1 Ld. AR submitted that the aforesaid amount was paid by the assessee under Rule 4 of the Excise Rules, 2002 in order to cover the duty required to be paid on the goods to be rem....
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....ch is reproduced below: "As is evident from the Budget Speech of the Finance Minister for the year 1983-84 and the Memorandum explaining the provisions in the Finance Bill, 1983 that section 43B was clearly aimed at curbing the activities of those taxpayers, who did not discharge their statutory liability of payment of excise duty, employer's contribution to Provident Fund, etc. for long periods of time but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant Previous Year. It was to stop this mischief that section 43B was inserted..." 3.5.3 According to him, vide para 4.1 on page 3 of its order for A.Y. 2006-07, the coordinate Bench of this Tribunal has, itself agreed that the amounts paid under PLA are nothing but excise duty paid as advance inasmuch as in Indian Molasses Co. (P.) Ltd. 37 ITR 66, the Hon'ble Supreme Court stated that "Spending" in the sense of "paying out or away" of money is the primary meaning of "expenditure and "Expenditure " is what is paid out or away and is gone irretrievably. Basing on this, he argued that the expenditure, which is deductible for inco....
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....h has further clarified that the allowing of deduction on payment basis could not result in double deduction under any circumstance. We thus respectfully following the above decision set aside the matter to the file of the Assessing Officer to decide the issue afresh after affording opportunity of being heard to the assessee as per the decision cited above in the case of assessee itself for the assessment year 2006-07 (supra). Ground Nos. 3, 3.0.1 to 3.1.1 are accordingly allowed for statistical purposes." 3.5.6 There is no change in the circumstances that are discussed in para No 8.5 of the above order so as to enable us to take any contra view. Plea of the Revenue that these are continuous issues forming part of the assessment order for AY 2005-06 and 2006-07 also, and are at present pending adjudication before Hon'ble Delhi High Court is not a ground for us to deviate from the consistent view taken by this Tribunal in assessee's own case for the earlier years. We, therefore, while respectfully following the view taken for the earlier years, set aside the impugned order and direct the A.O. to firstly recast the assessee's profit and loss account on inclusive basis an....
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....t requires the assessee to go a step further and curtail the operation of Section 43B by not claiming the deduction of such duties, etc. in the year of payment but in the year in which such stocks are consumed by the assessee. He submits that even if the said amount has to be added to purchases and closing stock by virtue of Section 145A, thereby being income neutral in so far as the P&L Account is concerned, the said amount will be separately deductible while computing the taxable income u/s 43B of the Act. 3.5.8 He placed reliance on the decision of the Hon'ble Supreme Court, in the case of Berger Paints ltd. v. CIT: 266 ITR 99(SC) in support of his contention that customs and excise duties are allowable in the year of payment u/s 43B, and even if such duties are included in the value of closing stock, they would be separately allowable. He submitted that in that case, the question before the Hon'ble Calcutta High Court for the AY 1984-85 was that, "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the assessee's claim for deduction of the excise and customs duties of Rs. 98,25,833/- paid in the year of account a....
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....closing stock and carried forward to the next year in the form of opening stock. Therefore it cannot be said that the expenditure on account of customs duty stands allowed to the assessee in the year under consideration....Therefore following the decision of the Special Bench, the assessee is entitled to deduction of the aforesaid amount u/s 43B in the year under consideration." 3.7. He brought to our notice that a coordinate Bench of Delhi Tribunal in the case of Purolator India Ltd. v. DCIT: ITA No. 1441/Del/2003 decided similar issue in favour of assessee by accepting the valuation of closing stock on net of MODVAT basis by following the decision of the Supreme Court in the case of CIT v. Indo Nippon Chemicals Ltd.: 261 ITR 275 (SC) wherein the non inclusive method of accounting for MODVAT followed by the assessee was approved by the Apex Court with the observations that, "As agreed by the learned representatives of both sides this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd.: 261 ITR 275 (SC) wherein the non inclusive method of accounting for MODVAT followed by the as....
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....porter-assessee is sanctioned by the custom authorities and also that Duty drawback receivable is separately chargeable to tax as income of the assessee under section 28 of the Act. He explained that the receipt of duty drawback is altogether different from allowability of deduction in respect of which duty paid by the assessee on payment basis under section 43B of the Act. Without prejudice to this contention, he argued that in case the assessing officer's contention were to be accepted, then duty drawback income amounting to Rs. 12,12,31,609/-declared by the assessee for the year under consideration should be directed to be excluded. 3.9 He submitted that apart from a coordinate Bench of this Tribunal deciding the aforesaid issue in favour of assessee in the assessment years 1999-00, 2000-01, 2001-02, 2002-03, 2004-05, 2005-06, AY 2006-07 and 2007-08, the issue stands covered in favour of the assessee, in view of Punjab and Haryana High Court in the cases of CIT v. Manav Tools (India) P. Ltd: 336 ITR 237 (P&H) and CIT v. Sriyansh Knitters P. Ltd. 336 ITR 235 wherein the High Court while affirming the finding of the Tribunal held that duty drawback accrues in the year in whic....
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.... substituted with 'Inclusive method' as mandatorily required u/s 145A. We, therefore, direct the AO to recast Profit and loss account as per 'Inclusive method' as discussed above and then allow deduction in respect of the customs duty paid in accordance with section 43B, if not getting deducted in such recast. Customs duty paid on import of components for which exports had/had not been made by the year end under the inclusive method would now stand included in the value of imports and accordingly get deducted. Customs duty of Rs. 8,65,07,635/- paid on import of components for which exports had been made by the year end would not require any separate deduction as the same will be debited to the Profit and loss account and also get exhausted. As regards the other amount of customs duty for which exports had not been made by the year end would represent the amount though debited to the Profit and loss account by means of increased input cost but not getting exhausted as the same also appearing in the balance sheet through the enhanced value of closing stock. Separate deduction is required to this extent u/s 43B of the Act. At the same time, we also direct the AO to mak....
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....that, unutilized MODAT credit is not an allowable deduction, since such credit does not amount to payment of duty, and following this order of the Special Bench, the ITAT in assessee's own case had decided the issue against the assessee till AY 2005-06. However, Supreme Court has allowed the deduction u/s 43B for the amount lying credited in the Modvat account at the end of the accounting year thereby dismissing the SLP (No. 23461/2012) filed by the department against the order of HC in the case of Shri Ram Honda Power Equipment Ltd. : 352 ITR 481 (SC) and while following the this judgment in Shri Ram Honda Power Equipment case, the ITAT in AY 2006-07 and AY 2007-08 decided the aforesaid issue in favour of assessee. 3.15 Per contra, Ld. DR submitted that the coordinate Bench of this Tribunal, vide para 4.16 (reproduced on page 49) of its order for A.Y. 2006-07, has acknowledged that the Special Bench of the Chandigarh Tribunal in Glaxo Smithkline Consumer Healthcare Ltd. [2007] 107 ITD 343 (SB) (Chd.) has held that Modvat credit available to the assessee as on the last date of the previous year does not amount to payment of excise duty and is, hence, not allowable u/s. 43B. Ho....
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....f valuation of stock of inputs, work in progress and finished goods with respect to the inclusion of Modvat credit, the Hon'ble Bombay High Court as well as the Hon'ble Supreme Court made no comments as to the nature allowability of unutilised Modvat credit in Indo Nippon (supra), as such, in view of this situation, unutilised Modvat credit does not amount to actual payment of central excise duty and therefore, cannot attract the provisions of Section 43B. Lastly he submitted that these are continuous issues forming part of the assessment order for AY 2005-06, 2006-07 and 2007-08 also, and are at present pending adjudication before Hon'ble Delhi High Court. 3.17 In the order for the AY 2006-07, this issue was considered and was set aside to the file of the Assessing Officer to decide the issue afresh after affording opportunity of being heard to the assessee and for the AY 2007-08, a coordinate Bench of this Tribunal relied upon the following findings recorded in respect of the AY 2006-07. "4.14. Now, we come to the next item of disallowance, being a sum of Rs. 48.53 crore towards Excise duty on inputs balance in RG 23A. This amount is unutilized Modvat credit availa....
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....annot be treated as tax paid. Accordingly the Special Bench held that the Modvat credit available to the assessee as on the last date of the previous year does not amount to payment of excise duty and is, hence, not allowable u/s 43B. In earlier years, the Tribunal has followed the dictum of this Special Bench verdict and upheld the disallowance. The ld. AR submitted that there has been further articulation of law on this point. Referring to the judgment of the Hon'ble Supreme Court in the case of CIT v. Shri Ram Honda Power Equipment Ltd. [2013] 352 ITR 481 (SC), the ld. AR submitted that the amount lying credited in the Modvat account at the end of the accounting year has now become deductible u/s 43B as per its ratio. We find that the Hon'ble Apex Court in Shriram Honda Power Equipment Ltd. (supra) has held that : 'The Authorities below are right in coming to the conclusion that MODVAT Credit is excise duty paid'. The Hon'ble jurisdictional High Court in the assessee's own case in CIT v. Maruti Suzuki India Ltd. [2013] 255 CTR 140 (Del), after taking note of the judgment of the Hon'ble Supreme Court in the case of Shri Ram Honda Power Equipment Corpor....
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....er se deduction without any further adjustments as per section 145A. It is relevant to note that the Hon'ble Supreme Court in Shri Ram Honda (supra) was dealing with A.Y. 1995-96. While granting deduction for Modvat credit, the Hon'ble Summit Court followed the judgment of the Hon'ble Bombay High Court in CIT v. Indo Nippon Chemical Co. Ltd., [2000] 245 ITR 384 (Bom), as affirmed by the Hon'ble Apex Court in (2003) 261 ITR 275, in holding that the same was squarely applicable and hence the amount was deductible. The assessment year involved in the case of Indo Nippon (supra) was 1989-90, which is again before the insertion of section 145A. It is interesting to note that during the course of arguments before the Hon'ble Bombay High Court, the ld. counsel for the Department brought to the notice of Their Lordships that section 145A stood inserted and, hence, the exclusive (net) method followed by the assessee was impermissible. The Hon'ble High Court considered this aspect in the last para of its judgment and observed that the insertion of section 145A w.e.f. the AY 1999-2000 had no bearing as the assessment year under their consideration was 1989-90. In the l....
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.... Rs. 3 will become opening stock of the succeeding year, thereby obliterating the effect of deduction of Rs. 3. When such goods are sold or utilized and sold in the next year, the sale price will be realized which will be inclusive of Rs. 3 excise duty component also. So in fact, there is no actual deduction of Rs. 3 during the year under consideration because of the increased purchase price getting counterbalanced with the equal amount of loading in the value of closing stock. After having increased the value of purchase and closing stock in terms of section 145A with the amount of Modvat credit, now there is a separate requirement of giving effect to the mandate of section 43B, which requires the granting of deduction of Rs. 10 in the year of payment. A sum of Rs. 7 included in purchase value as a part of Rs. 10, gets eventual deduction because it is exhausted as the same is not taken as an asset to the balance sheet, either directly as Unutilized Modvat, or indirectly as part of closing stock. But in so far as the amount of Rs. 3 is concerned, it does not get final deduction because of the same being a part of assets in balance sheet. Deduction for Modvat credit by means of its ....
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.... of closing stock, which is shown in the credit side of the Profit & Loss Account. Assessee submits that the Custom duty of Rs. 18,23,52,893/- represents custom duty on import of raw material/inputs, which is included in the value of closing stock as per the aforesaid inclusive method of accounting followed by the assessee and such a method is in line with the provisions of section 145A of the Act. Inclusion of custom duty, both in the value of purchase as well as in the value of closing stock, is tax neutral inasmuch as the very same amount is both debited and credited to the Profit & Loss Account, but as per the mandate under section 43B of the Act, the custom duty so actually paid by the assessee is separately claimed as deduction on payment basis in the return of income. It is brought to our notice that in the earlier years, the assessing officer disallowed the aforesaid amount holding the same to merely advance payment, liability in respect of which has not crystallized and therefore, not allowable as deduction under section 43B of the Act. 3.20 While placing reliance on the decision of the Hon'ble Supreme Court, in the case of Berger Paints India Limited v CIT [2004] 266....
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....case, a coordinate Bench of this Tribunal dealt with this aspect in the following manner:- "5.6. The last aspect of disallowance u/s 43B is customs duty included in closing stock amounting to Rs. 22,52,46,693/-. The assessee claimed deduction for this sum, which was denied by the AO. The ld. AR stated that the assessee followed 'Inclusive method' of accounting on this issue. The claim of the assessee is that the amount of Rs. 22.52 crore, being the amount of customs duty paid on the import of raw material/inputs, was included in the cost of material and also as a part of closing stock, thereby levelling both the debit and the credit sides of the Profit & Loss Account. The ld. AR contended that such amount of customs duty is separately deductible in terms of section 43B of the Act. He also submitted that this issue is settled in the assessee's favour in earlier years. 5.7. We have elaborately discussed this aspect supra in the context of excise duty included in the value of closing stock. In principle, we hold that the amount of customs duty of Rs. 22.52 crore is allowable in the year in question, but, the AO is directed to first verify the argument of following the ....
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....05-06, AY 2006-07 and 2007-08 wherein it was held that since the duty is paid, deduction claimed u/s 43B of the Act has to be allowed. 3.26 Per Contra, on these Grounds 3.6 and 3.7, Ld DR submitted that in respect of the amount of Rs. 13,51,93,089/- being customs duty (CVD) paid to be adjusted against excise duty payable on finished products, a coordinate Bench of this Tribunal has also accepted that under the 'Inclusive method' it will be included in purchases, sales, and opening and closing stock of inventories, as a result of which the ultimate impact is revenue neutral and no deduction will be allowable to the assessee under this head. As regards the amount of Rs. 1,93,27,627/-being customs duties on goods in transit/ under inspection, he contends that it is be noted that the duty paid is not tax deductible as goods in transit are not expenditure of the year and are not routed through the P&L account. Further according to him, the liability to pay customs duty is incurred only after the goods have reached the customs barrier and since the assessee has claimed deduction on this account, the onus of proving this fact was on the assessee. He points out that it is not on r....
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....duty. Then the AO will allow separate deduction for the above referred sums to the extent not getting eventually deducted separately by way of increased purchase price, as has been discussed above. At the same time, we also direct the AO to make sure that such amount separately getting deducted in this year does not get deduction once again in the next year. In the like manner, the last year's similar deduction separately allowed should be taxed in the computation of income of the current year." and by following the same for AY 2007-08, vide para 14.1 the matter was set aside to the file of the Assessing Officer to decide the issue afresh as per the above direction of the ITAT in the appeal for the assessment year 2006-07 after affording opportunity of being heard to the assessee. In the absence of any change of circumstances or law, we think it fit to follow the same line of reasoning and set aside to the file of the Assessing Officer to decide the issue afresh as per the above direction in the appeal for the assessment year 2006-07 and 2007-08 after affording opportunity of being heard to the assessee. Ground Nos 3.6 and 3.7 are, accordingly, allowed for statistical purposes....
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....ted 24.8.2015, the following finding was returned by the Tribunal, "5.5. Next item is Customs duty paid under protest amounting to Rs. 1,34,25,787. We have discussed similar issue supra while dealing with 'Excise duty paid under protest' by holding that first the Profit and loss account be recast as per 'Inclusive method' in terms of section 145A and then some adjustments as stated above be separately made. Such directions are fully applicable pro tanto to the customs duty paid under protest. The AO is directed to follow the same." 3.30 While following the same for AY 2007-08, Tribunal set aside the matter to the file of the Assessing Officer to decide it afresh as decided above by the ITAT after affording opportunity of being heard to the assessee. 3.31 Ld. DR fairly concedes that the decision of the Tribunal on the issue of 'Excise duty paid under protest', in A.Y. 2006-07 and 2007- 08 was acceptable to the Revenue, and accordingly, no further appeal was preferred on this issue. In these circumstances, while following the same, we set aside Ground No 3.8 to the file of the Assessing Officer to decide it afresh as decided by the ITAT for the AYs 2006-07....
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....see in the earlier year has not been allowed, then on the assessee's suo motu offering of it as an item of income for the current year on the strength of deduction claimed in the earlier year, which finally stands denied, should not be charged to tax. On being called upon to furnish the detail of such amount, it was stated that it, inter alia, includes a sum of Rs. 71,63,89,449, which is subject matter of ground no. 3.5, that we have discussed immediately hereinbefore. We note that apart from the sustenance of disallowance of Rs. 71.63 crore in the preceding year, there is no other disallowance u/s 43B which has been upheld by the Tribunal. It is overt that all other disallowances made by the AO u/s 43B have been deleted by the tribunal. The ld. AR could not furnish any detail of the remaining amount of Rs. 69.96 crore (Rs.141.59 crore minus Rs. 71.63 crore), allegedly finally disallowed u/s 43B of the Act by the tribunal in the preceding year. It is simple and plain that if the tribunal has allowed deduction for the amounts disallowed by the AO in the preceding year, then the same are rightly chargeable to tax in the current year. This ground is, therefore, dismissed, subject ....
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....recorded on actual basis as against consumption of other material being recorded on the basis of standard bills of material and at the year end, actual physical verification of the inventories is carried out by the assessee followed by preparation of stock reconciliation in respect of variation between physical stock and the stock as per computerized books of account. He submitted that for the purposes of financial accounting, the assessee debits to the profit and loss account figure of consumption at the year end, which is derived on the basis of Opening stock (as per physical inventory) enhanced by purchases and reduced by closing stock (as per physical inventory). In this process, for the AY 2008-09, as per stock reconciliation, it was found that the value of items as per stock register was more than physical stock variation by Rs. 1.7045 crores, which merely worked out as 0.013% of total consumption of Rs. 13,034 crores. He submitted that in the assessment order, the assessing officer has accepted the system of accounting being followed by the assessee, as such, since there is no dispute as regards the figure of opening stock, purchases, closing stock and also the sales, in the....
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....d of its being insignificant. He further submitted that the decision of the ITAT for the immediately preceding AY is at present pending adjudication before the Hon'ble High Court. 5.2 There is no denial of the fact that the issue is squarely covered in favour of assessee by ITAT orders for assessment years 1999-2000 to 2002-03, AY 2005-06, 2006-07 and 2007-08. This issue was covered by Grounds Nos. 7 to 7.4 of the assessee's appeal for the AY 2006-07 and vide para 14.1 and 14.2 of its order a coordinate Bench of this Tribunal has held as under: "14.1. Ground nos. 7 to 7.4 are against the addition of Rs. 4.48 crore made by the AO on account of excess consumption of raw material and components. The facts apropos these grounds are that the assessee is following 'Just-in-time ' system for management and reorder of inventory, in which inventories are ordered just in time when their requirement arises. The material so required is delivered straight to the shop floor in the relevant department. As a result of this, though the purchases are recorded as per actual bills upon the arrival of goods in the premises, the inventories are procured by considering the standard con....
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....nly 0.24%, that would be immaterial and correction of the total input is in use. It is, therefore, clear that for the successive AYs 2006-07 and 2007-08, the Assessing Officer was directed to delete the disallowance in respect of the excess consumption by a coordinate Bench of this Tribunal while placing reliance on two factors, namely, that the net difference of stock is negligible in tune with the observations of the Hon'ble Apex Court (supra), and that the Tribunal has taken similar view in the assessee's own case in the earlier assessment years including the immediately preceding year. We, therefore, respectfully following the same direct the Assessing Officer to delete the addition Rs. 1,70,45,000/- on account of alleged excess consumption of raw materials and components. Grounds No 5 to 5.4 are allowed accordingly. Ground No 6.0 to 6.4 disallowance of Rs. 7,43,27,349/- under section 14A of the Act 6. Adverting to the aspect of disallowance u/s 14A of the Act, we find from the record and contentions of the parties that, during the year under consideration, the appellant earned dividend income of Rs. 166,83,50,967/-, which was claimed as exempt from tax under section....
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.... find proximate nexus of expenses with earning of exempt income, before rejecting the claim of assessee and computing disallowance under section 14A of the Act, and the provisions of sub-section (2) and (3) to section 14A, which empowers the assessing officer to compute disallowance as per provisions of Rule 8D of the Rules, w.e.f. assessment year 2008-09, also provides that disallowance as per provisions of Rule 8D can be computed, only if the assessing officer, having regard to the accounts of assessee is not satisfied with the claim of assessee that no expenditure in relation to exempt income has been incurred by assessee. In other words, even from assessment year 2008-09 and onwards, the assessing officer can compute disallowance under section 14A as per the provisions of Rule 8D, only if assessing officer, having regard to accounts of assessee, reaches a finding, that assessee has incurred expenses, having proximate nexus with earning of exempt dividend income. According to the Ld. AR in the absence of such finding, as is held in CIT v. Walfort Share & Stock Brokers: 326 ITR 1 (SC), Godrej & Boyce Mfg. Co. Ltd. v. DCIT : 394 ITR 449 (SC) - affirming Godrej & Boyce Mfg. Co. Ltd....
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....incurred in relation to exempt income. 6.5 Further the assessing officer, in the assessment order, has not pointed out even a single expenditure being incurred by the appellant during the year, having relation/ proximate nexus with exempt dividend income earned during the year. The assessing officer, it is submitted, invoked the provisions of section 14A read with Rule 8D of the Rules in a mechanical manner, which, it is respectfully submitted is beyond jurisdiction. 6.6 For the principle that disallowance under section 14A of the Act cannot be sustain without any satisfaction being recorded by the assessing officer before applying Rule 8D of the Rules, reliance is placed on the decisions reported in Pr.CIT v. U.K. Paints (India) (P.) Ltd.: 244 Taxman 309 (Del.), Joint Investments P. Ltd. v. CIT: 275 CTR 471 (Del.), Minda Investments Ltd. v. DCIT: 138 TTJ 240 ( Del.) , ACIT v. MMTC Limited: ITA No. 724/Del/2014 (Del. Trib.), REI Agro Ltd v. DCIT: 144 ITD 141 (Revenue appeal dismissed by Calcutta High Court in appeal No. GA No.3581 of 2013)., CIT v. Abhishek Industries Ltd - 231 Taxman 85 (P&H), 6.7 Second contention raised on behalf of the assessee is that the assessee is an ope....
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....ficient interest free funds to meet tax free investments, they are presumed to be made from interest free funds and not loaned funds and no disallowance can be made under section 14A of the Act, and the Hon'ble Apex Court has dismissed the revenue's SLP in Civil Appeal No. 468/2014 against the aforesaid decision. 6.10 He contended that in the case of mixed funds, the option is with the assessee to appropriate fund and expenditure in a manner most favorable to the assessee, and by placing reliance on Godrej & Boyce Mfg. Co. Ltd. v. DCIT : 394 ITR 449 (SC), HDFC Bank Ltd v. DCIT: 366 ITR 505 (Bom), HDFC Bank Ltd v. DCIT: 383 ITR 529 (Bom), CIT v. K. Raheja Corporation Pvt. Ltd: ITA No.1260 of 2009 (Bom.), Bright enterprises Pvt Ltd. v. CIT: 381 ITR 107 (P&H), CIT v. Max India Ltd: 388 ITR 81 (P&H), Gurdas Garg v. CIT: ITA No.413 of 2014 (P&H), CIT v. Microlabs Ltd. : 383 ITR 490 (Kar.), Lubi Submersibles Ltd.: ITA No.868 of 2010 (Guj.), CIT v. Gujarat Power Corporation Ltd.: 352 ITR 583 (Guj), Gujarat State Fertilizers and Chemicals Ltd: Tax Appeal No. 82 of 2013 (Guj HC), CIT v. Torrent Power Ltd.: 363 ITR 474 (Guj), CIT v. Suzlon Energy Ltd.: 215 Taxman 272 (Guj), M/s Gogr....
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....ection after reducing the strategic long-term trade investments. 6.13 For the principle that disallowance under section 14A of the Act is only to be made only if there is exempt income and not otherwise, support is derived from the decisions in ACB India Ltd. v. ACIT: 374 6.13. ITR 108 (Del.), Cheminvest Ltd. v. CIT : 379 ITR 33 (Del.), CIT v. Holcim India (P) Ltd.: 272 CTR 282 (Del.), ACIT v. Vireet Investments (P.) Ltd: 165 ITD 27 (Del SB), CIT v. Corrtech Energy Pvt. Ltd.: 372 ITR 97 (Guj.), CIT v. Winsome Textile Industries Ltd.: 319 ITR 204 (P&H), CIT v. M/s Lakhani Marketing: 272 CTR 265 (P&H) , CIT v. M/s. Shivam Motors (P) Ltd.: 272 CTR 277 (All), Interglobe Enterprises v. DCIT: ITA No.1362 & 1032/Del./2013 (Del. Trib.) - affirmed by Delhi High Court in ITA No.456 of 2016, REI Agro Ltd v. DCIT: 144 ITD 141 (Kol. Trib.) - Department appeal dismissed in CIT v. REI Agro Ltd. : I.T.A.T No.220 of 2013 (Cal. HC), DCIT v. Morgan Stanley India Securities Pvt. Ltd. : ITA No. 114/Mum/2013 (Mum.), ACIT v. M. Baskaran: 152 ITD 844 (Chn. Trib.), and it is submitted that the assessing officer erred in considering the entire investments while computing disallowance u/s 14A read with rule....
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....the investment amount relevant for 8D(iii), on a consideration of the same in the light of the principles of law laid down by the Court, as stated supra, we agree with the submissions made on behalf of the assessee that insofar as the interest expense under Rule 8D(ii) is concerned, it has to be determined after examination of the macro fund/ cash flow position during the year and if the assessee had sufficient surplus funds available, presumption should be drawn in favour of the assessee that surplus funds have been utilized for making investments, and while calculating the disallowance under Rule 8D(iii) has to be calculated in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income after reducing the strategic long-term trade investments. We, therefore, deem it just and proper to set aside the impugned order on this score and send the matter to the file of AO for making disallowance u/s 14A, in accordance with the view taken above. Ground No 7.0 to 7.3 disallowance of deduction under section 35DDA 7. Now turning to ....
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....DDA of the Act. In the Finance Bill, 2001, the deduction u/s. 35DDA was linked to the provisions of Rule 2BA. In other words compliance with Rule 2BA would be mandatory in order to avail deduction u/s. 35DDA. However, when the bill was finally enacted, the link between s. 35DDA and Rule 2BA was deleted. Accordingly, the deletion of conditionalities originally incorporated in the Bill shows that legislative intendment was not to incorporate all the conditions of s. 10(10C) in s. 35DDA. Thus, the legislature has finally left the scheme of voluntary retirement open-ended and did not place any restriction on the scheme..." 7.3 Further, on this issue, a coordinate Bench of this Tribunal while dealing with the same issue for the AY 2006-07 noticed that an identical issue has been decided by the ITAT in the earlier assessment years in the case of assessee itself and lastly in the appeal for the assessment year 2006-07 (supra), held that - "...After making a thorough discussion on the issue, the Tribunal has held that Rule 2BA is relevant only for the purpose of availing exemption u/s 10 by employees and not for the purpose of allowing deduction to the employer u/s 35DDA of the Act. Res....
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....an Express International Banking Corporation v CIT 258 ITR 601 (Bom);, CIT v. Citibank N.A.: 264 ITR 18 (Bom), CIT v. Force Motors Ltd.: ITA No. 5296 of 2010 (Bom), CIT v. Sundharam Industries Ltd 240 ITR 335 (Mad);, Gujarat State Export Corporation Ltd. v. CIT: 209 ITR 649 (Guj.), CIT v. Infosys Technologies Ltd.: 205 Taxman 59 (Kar), Assam Brook Ltd. v CIT: 267 ITR 121 (Cal), DCIT v. Max India Ltd [2007] 112 TTJ (Asr.) 726, this issue is also covered in favour of the assessee by the decisions of the Tribunal in the assessee's own case for the assessment years 2001-02, 2002-03, 2004-05, 2005-06, 2006-07 and 2007-08. 8.1 On this aspect, Ld. DR submitted that in view of the decision of Hon'ble Supreme Court cited above, the decision of the ITAT was accepted and further appeal before the Hon'ble High Court u/s. 260A was not preferred on this issue for AY 2006-07 and 2007-08. In view of this submission of Ld. DR this ground is allowed and the Assessing Officer is directed to allow a sum of Rs. 10,06,470/- being expenditure incurred on account of club membership fees. Ground No 9 to 9.3 disallowance of expenditure of Rs. 192.77 Cr out of the total amount of Rs. 495.15 Cr ....
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.... with the help of the technology that is accessed from SMC. If the payment is for use of technical knowhow, simplicitor, then the payment has to be regarded as revenue, irrespective of the tenure for which permission is granted for such use. Since in the present case, under the License Agreement, the assessee was merely granted permission to access the technical knowhow for the limited purpose of using the technology relating to the new models during the currency of the agreement and the proprietary rights for the know-how and the intellectual property rights in relation thereto continue to be owned by SMC alone, the payment is undoubtedly revenue in nature. 9.3 While placing reliance on Circular No. 21 of 1969 issued by CBDT, he argued that if in terms of the Agreement, only a license is obtained for user of technical knowledge from a foreign participant for a limited period together with or without the right to use the patents and trademarks of the foreign party, the payment would not bring into existence an asset of enduring advantage to the Indian party. He further submitted that while following the aforesaid Circular, the jurisdictional Delhi High Court in case of CIT v Lumax....
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....nology and huge strides made in the field of science, the knowledge may with passage of time become obsolete. Ld. AR disputed the factual correctness of the observation of the assessing officer that the license Agreement led to the assessee setting up a new factory based on new technology, and submitted that no new plant/ factory was setup by the assessee on the basis of the agreement entered into for use of technical knowledge/ information. According to him the assessing officer failed to appreciate that the assessee is engaged in the business of manufacture of automobiles and various models of the cars introduced by the assessee from time to time are nothing but part of the same business of the assessee, as such the mere fact that new models/ variants of car are introduced by the assessee based on the license agreement does not mean that an altogether new product was manufactured. He made a reference to the decisions of the Delhi High Court in case of CIT v. Hero Honda Motors Ltd.: 372 ITR 481 and decision of the Delhi Bench of the Tribunal in the case of Hero Honda Motors Limited v. DCIT: ITA no. 5130/Del/2010 for A.Y. 2006-07, and also to the decision of the Delhi Bench of the ....
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....rmined the value of the ALP of the co-branding done by Suzuki. The value of the same is determined by equating the trade mark royalty Maruti was paying to Suzuki for its brand. The logic is simple if Maruti was paying licensed trade name royalty to Suzuki then Suzuki should also be paying back the trade name royalty to Maruti. Whereas it is a fact that royalty being paid is a composite royalty including the usage of Trademark and technical information. It is Suzuki who has been charging this royalty even if its name was used only on the rear of the vehicle. But now after taking over the management of the company, it has repositioned its name and brand and logo on these vehicles. The question is whether any independent party that had assiduously over the years have built up a name and reputation would have allowed so? And that too absolutely free when the other party had been throughout charging it for whatever it was providing it be it machinery, technology, spare parts, technical assistance, corporate guarantee, trade name, trade mark. That does not seem to be a situation in normal and independent circumstances and this was not appreciated by the Tribunal, as a consequence of whic....
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....essee is for use of licensed information and no part of the same is towards its acquisition as an owner. In the light of the above discussion, it is absolutely clear that the view canvassed by the AO in treating this amount as capital expenditure, is not sustainable. 8.6. Our above finding decides the nature of royalty payment for use of licensed information as revenue expenditure and not its quantum part. We have noticed above that the tribunal in its order for the immediately preceding year has also given some observations, which prima facie indicate that the entire amount of royalty is for the use of licensed information. Since we have held the royalty for use of licensed information as revenue expenditure, the quantification aspect becomes irrelevant. It is so because the TPO has held royalty for use of licensed information at ALP. We, therefore, hold that the amount of royalty considered by the AO as capital expenditure should be allowed as a revenue expenditure. At the same time, depreciation allowed by the AO on this amount should be taken back." 9.8 Following the above decision for AY 2006-07, which is on an identical issue in the case of assessee itself, this Tribunal f....
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.... the assessee on the basis of its decision on Ground No. 9. Since the decision of the ITAT in Ground No. 9 is not acceptable, therefore, its decision on this issue is also not acceptable. It is further averred that these are continuous issues forming part of the assessment order for AY 2006-07 and 2007-08 also, and are at present pending adjudication before Hon'ble Delhi High Court. 10.2 In the Order for the AY 2007-08, a coordinate Bench of this Tribunal found that this issue has been decided in the case of assessee itself in the appeal before the ITAT for the assessment year 2006-07 and in that case it was held that: "9. The next ground is disallowance of R&D cess paid amounting to Rs. 9,68,47,294/-. Relevant discussion has been made by the AO on page 26 of his final order. The assessee treated the amount of royalty and cess on royalty as revenue expenditure. The AO disallowed a sum of Rs. 9.68 crore after proportionately allowing deduction to the extent of depreciation allowed by him on royalty. There is no dispute on the nature of cess, which is on royalty and has been treated both by the assessee as well as the AO as part and parcel of royalty and accordingly claimed/di....
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....hi Achi: 60 ITR 253 (SC), CIT v. Johnson Matthey India Pvt. Ltd. : ITA No. 193/2015 (Del.), Bougainvillea Multiplex Entertainment Centre (P.) Ltd.: 373 ITR 14 (Del), CIT v. National Co-operative Consumer Federation Ltd.: 254 ITR 599 (Del), Shree Balaji Alloys v. CIT: 198 Taxman 122 (J&K) - Revenue's appeal dismissed by the Supreme Court in Civil Appeal No. 10061 of 2011 [287 CTR 459 (SC)], CIT v. Ruby Rubber Works Ltd., 178 ITR 181 (Ker. FB) - affirmed by the Supreme Court in Kalpetta Estates Ltd. v. CIT : 260 ITR 601, CIT v. Sham Lal Bansal in ITA: 472 of 2010 (P&H), CIT v. Siya Ram Garg (HUF): 237 CTR 21 (P&H), CIT v. Talbros Engineering Ltd. : 386 ITR 154 (P&H), Chaphalkar Brothers: 351 ITR 309 (Bom.), Sadichha Chitra v. CIT: 189 ITR 774 (Bom.), CIT vs Rasoi Ltd.: 335 ITR 438 (Cal.), CIT vs. Balarampur Chini Mills Ltd.: 238 ITR 445 (Cal.), CIT v. Madurantakam Co-operative Sugar Mills Ltd.: 263 ITR 388 (Mad), Garden Silk Mills Ltd. v. CIT and Anr. : 394 ITR 192 (Guj.), DCIT v. Inox Leisure Ltd.: 351 ITR 314 (Guj), CIT v. Birla VXL Ltd.: 215 Taxman 117 (Guj.), DCIT v. Munjal Auto Industries Ltd.: 218 Taxman 135 (Guj.), DCIT vs. Reliance Industries Limited: 88 ITD 273 (Mum SB.)....
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.... the same time, the collector (i.e the assessee) could retain the amount so collected, undoubtedly was to achieve the larger goal of industrialization. This has been the basis of sales tax subsidy received during the year. In principle there has not been any difference in Haryana sales tax subsidy policy and UP sales tax policy. The Ltd. AR of the assessee has been gas lighting the issues of sales tax subsidy simply bifurcating it in the name of the States. The different forms cannot be taken away the substance from the issues of sales tax subsidy. According to him, the jurisprudence keeps involving, and accordingly, the Delhi High Court has decided the issues of sales tax subsidy as revenue receipts in the case of Bhushan Steel and Stripes Ltd. stating very clearly at page No. 26 of its judgment. 11.5 According to the Ld. DR the assessee's case also encircles the issues of sales tax subsidy in the similar ways, thereby, the sales tax subsidy received in the hands of the assessee needs to be treated as revenue receipts, and the Assessee's reliance on Bougainvillea multiplex Entertainment Centre Pvt. Ltd. 373 ITR 14(Del) and Johnson Matthey India Pvt. Ltd., ITANo. 192/2015(....
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....the first scheme) was already set up. This subsidy scheme had no strings attached. It merely stated that the collection could be retained to the extent of 100% of capital expenditure. Whilst it might be tempting to read the linkage with capital expenditure as not only applying to the limit, but also implying an underlying intention that the capital expenditure would thereby be recouped, the absence of any such condition should restrain the court from so concluding". "26. How a state frames its policy to achieve its objectives and attain larger developmental goals depends upon the experience, vision and genius of its representatives. Therefore, to say that the indication of the limit of subsidy as the capital expended, means that it replenished the capital expenditure and therefore, the subsidy is capital, would not be justified. The specific provision for capital subsidy in the main scheme and the lack of such a subsidy in the supplementary scheme (of 1991) meant that the recipient, i.e. the assessee had the flexibility of using it for any purpose. Unlike in Ponni Sugars (supra), the absence of any condition towards capital utilization meant that the policy makers envisioned grea....
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....the Hon'ble Jurisdictional High Court in the cases of Johnson Matthey (supra) and Bougainvillea Multiplex Entertainment Centre (P) Limited: 373 ITR 14 on one hand and Bhushan Steel (supra) on the other, inasmuch they dealt with two different industrial policies surrounded by different facts and circumstances. However, according to him, even if it is construed that there is a conflict between two judgements of the Division Bench of the jurisdictional High Court, then it has to be seen that the decision of the jurisdictional High Court in the case of Johnson Matthey (supra) having been rendered in the context of the very same scheme, Haryana Industrial Policy, 1999 in the context of which the case of assessee falls, has to be preferred over the decision of the jurisdictional High Court in the case of Bhushan Steels (supra), because it has been rendered in context of an altogether different Industrial Policy. 11.13 Placing reliance on the decisions rendered in Government of Andhra Pradesh and Anr. v. B. Satya Naraina Rao(dead) by LRs. and Others [2000] : 4 SCC 262(SC), A.R. Antuleyvs. R.S.Naik: AIR 1988 SC 1531 (SC), R. Thiruvirkolam v. Presiding Officer and Another : 1 SCC 9 (SC....
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.... an undisputed fact that a coordinate Bench of this Tribunal considered all relevant facts and decided the issue in favour of the assessee in assessee's own cases in ITA No.1927/Del/2010 (AY 2005-06), ITA No.5120/Del/2010 (AY 2006-07), ITA No.5720/Del/2011 (AY 2007-08), submission of the DR that the law is kept on evolving by the Hon'ble jurisdictional High Court, inasmuch as the Hon'ble Court in a subsequent and latest judgement in Bhushan Steels case (supra) held that the subsidy given at post project stage without mandating for any specific use of such subsidy fund, is only a revenue receipt, necessitates this Bench to look afresh at the issue in the light of the march of law. For proper appreciation of the contentions of the parties, it is but necessary to find out the principles of law laid down in these decisions. 11.16. In Sahney Steel and Press Works Ltd ( supra) facts involve the notification issued by the Andhra Pradesh Government where under certain facilities and incentives were to be given to all the new industrial undertakings which commenced production on or after 1st Jan., 1969 with investment capital (excluding working capital) not exceeding Rs. 5 cror....
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....oduction, various incentives were given for the limited period of five years. The Hon'ble Court further observed that that the endeavour of the State was to provide the newly set up industries a helping hand for 5 years to enable them to be viable and competitive, sales-tax refund and the relief on account of water rate, land revenue as well as electricity charges were all intended to enable the assessee to run the business more profitably, as such the amount paid to the assessee was in the nature of subsidy from public funds to assist it in carrying on its trade or business. Having regard to the scheme of the Notification, it was held that there can be little doubt that the object of various assistances under the subsidy scheme was to enable the assessee to run the business more profitably, since the payments were made only after the industries have been set up. Payments are not being made for the purpose of setting up of the industries. But the package of incentives was given to the industries to run more profitably for a period of five years from the date of the commencement of production. In other words, a helping hand was being provided to the industries during the early d....
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.... note that the Madhya Pradesh High Court in the case of CIT v. Dusad Industries [1986] 51 CTR (MP) 217 : (1986) 162 ITR 784 (MP) : TC 13R.622, dealt with a case where Government had framed a scheme for granting sales-tax subsidies to industries set up in backward areas took the view that the object of the scheme was not to supplement the profits made by industries. In that view of the matter, the High Court held that the subsidies given under the said scheme by the Government to newly set up industries were capital receipts in the hands of the industries and could not be taxed as revenue receipts. In that case, 75 per cent of the sales-tax paid in a year for a period of five years from the day of starting of production was to be given back by the Government to the industry concerned. The High Court was of the view that obviously the subsidy was given by way of an incentive for capital investment and not by way of addition to the profits of the assessee as was clear from the facts and circumstances of the case. While referring to these facts, Hon'ble Apex Court held that the Madhya Pradesh High Court, however, failed to notice the significant fact that under the scheme framed by....
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.... sugar industries are parties to the Scheme in the sense that but for the Scheme the financial institutions would not have given term loans to set up new units/expansion of the existing units. Keeping in mind the object behind the payment of the incentive subsidy such payment received by the assessee under the Scheme was not in the course of a trade but was of capital nature, while reiterating the principle of purposive test enunciated in Sahney Steel & Press Works Ltd., Hon'ble Apex Court held, that the receipt of the subsidy by the assessee in that case was capital in nature as the assessee was obliged to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business. 11.21 In Bougainville case (supra), facts submitted to the Court are that against the backdrop of steep decline of viewership due to various reasons including onslaught of cable television leading to erosion in entertainment tax collections and with a view to encourage setting up of multiplex cinema halls and malls, in order to promote the viewership in cinema halls, various State Governments, being aware that setting up an operation of su....
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....re, the amounts received are to be treated as capital and not revenue. This Court too had the occasion to deal with the issues in CIT v. Bougainvillea Multiplex Entertainment Centre Pvt. Ltd. (ITA 586/2013, decided on 30.01.2015) where the decision in Ponni Sugars (supra) and previous authorities were discussed and applied in given facts of the case. We are of the opinion that the impugned order of the ITAT does not disclose any infirmity. No substantial question of law arises. It is accordingly dismissed." 11.23 Recently the Hon'ble Delhi High Court in the case of CIT v. Bhushan Steel and Stripes Ltd., dt. 13.7.2017, ITA No. 315/03,316/03,317/03,349/03 and 434/05 after considering all the decisions specially Sahnev Steel and Ponni Sugars and Chemicals Ltd. of Hon'ble Supreme Court, and Bougainville case (supra) of High Court, reached a conclusion that the Sales Tax subsidy received by the assessee as revenue receipt. 11.24 In this case, the Hon'ble Court observed that the object of providing subsidy by way of permission to not deposit amounts collected (as sales tax liability)- which meant that the customer or servicer user concerned had to pay sales tax, but at th....
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....not be justified. The specific provision for capital subsidy in the main scheme and the lack of such a subsidy in the supplementary scheme (of 1991) meant that the recipient, i.e. the assessee had the flexibility of using it for any purpose. Unlike in Ponni Sugars (supra), the absence of any condition towards capital utilization meant that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialization of the state, ensuring greater employment. Clearly, the subsidy was revenue in nature. 11.26 A reading of all these decisions, therefore, makes the golden principle that runs through them very clear. While framing its policy to achieve its objectives and attain larger developmental goals, depending upon the experience, vision and genius of its representatives, it is always open for the State to provide incentives, which results in capital and revenue receipts in the hands of the receiver, depending upon the purpose for which they are given. If any subsidy is given, the character of the subsidy in the hands of the recipient-whether revenue or capital-will have to be determined by having regard to the purpose for which the ....
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....ector by 20% in the next five years; to attain sustainable economic development through catalysis of investments in all sectors of the economy; to achieve larger value addition within the State thereby contributing to a higher quality of life etc. According to the assessee, a perusal of the aforesaid indicates that the objectives of the Policy inter-alia, included growth of existing industry and increasing the employment opportunities. For achieving the aforesaid objective, the stated approach, inter alia, was to rationalize the package of incentives making it more effective and meaningful for speedy development of the State. The Policy specifically provided for customised package of incentives and concessions for prestigious projects to be decided by a high power committee. 11.28 Policy document says, "SCHEME OF INCENTIVES CUSTOMISED PACKAGE OF INCENTIVES Customised package of incentives and concessions will be provided for prestigious projects having investment of Rs. 30 crores and above. A High Powered Committee will be constituted under the chairmanship of the Chief Minister to decide the package in individual cases" 11.29 Accordingly, sales tax concessions were to be ....
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....actors like employment generation, impact on overall industrial growth, etc. According to the Ld. AR assessee in this case falls in the category of 'prestigious unit'. He emphasized that the underlying objective of conferring the benefit under Rule 28C, clearly proves beyond any doubt the fact that the avowed intent/ purpose of granting the concession is industrial development of the State and employment generation. 11.31 In this background, the assessee had undertaken industrial expansion in terms of the Rule 28C of Haryana General Sales Tax Rules, 1975. The High Powered Committee, thereafter, in its meeting held on 14.06.2001 granted sales tax concession to the assessee, whereby the assessee was required to pay 50% of the sales tax collected on sales of finished products from expanded unit and, retain balance 50% of the tax so collected, subject to maximum permissible benefit of Rs. 564.35 crores. The letter/ communication received from Director of Industries, Haryana intimating the aforesaid decision, clearly referred to concession being granted "only in respect of vehicles rolled out of production capacity of 70,000 vehicles added as a result of first expansion". Pursu....
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....4.90 and the facility of subsidy shall not be admissible in the district under the scheme, where any unit of the capital investment of Rs. 25 crore has already been established prior to 1.4.90. "SCHEME OF INCENTIVES" CUSTOMISED PACKAGE OF INCENTIVES Customised package of incentives and concessions will be provided for prestigious projects having investment of Rs. 30 crores and above. A High Powered Committee will be constituted under the chairmanship of the Chief Minister to decide the package in individual cases" "Rule 28-C ......... (3)(c)"eligible industrial unit" means- (1) a new industrial unit or a unit undertaking expansion or diversification which, on the date of commercial production of new/expanded/diversified unit, fulfills the following conditions......" ................ (f) "expansion" means an industrial capacity set up or installed during the operative period which creates additional production facilities for manufacture of the same product (s) as of the unit before expansion in which the additional fixed capital investment in plant and machinery made during the operating period in one go, not exceeding the period of one year, exceeds 25% of the fixed capital invest....
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....se, the existence or otherwise of provisions for capital subsidy does make any difference in the nature of subsidy funds in the hands of the assessee insofar as they are allowed only after the completion of the formation of capital asset and the absence of any condition towards capital utilization meant that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialization of the state, ensuring greater employment which fact distinguishes the present case from the facts of Ponni Sugar's case. When the purpose of the subsidy is clearly revenue in nature, end use of the funds by the assessee to liquidate the cost incurred in the expansion activity remains irrelevant having regard to the fact that the subsidy was not expressly for meeting the capital expenses either in the presenti or of past as was the case in Ponni Sugar's case. Though the case in Bougainville was referred to in the case of Johnson Matthey, the Hon'ble Court noticed the said case in Bougainville while rendering the decision in Bhushan Steels case also. Though the findings of the Tribunal in Johnson Matthey's case were upheld by the Hon'b....
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....see had accounted for liability on account foreseen price increase (FPI) on an estimate basis, this FPI of Rs. 32,11,63,153 was debited to consumption of raw material and components in the profit and loss account in accordance with mercantile system of accounting and the same was claimed as business deduction in the computation of income. Grievance of the assessee is that the assessing officer however, disallowed the aforesaid claim of the assessee on the ground that assessee has quantified the liability without acknowledging the quantified liability to the creditors. However, according to the assessee the change in price of the components takes place to give effect to the increase in the cost of the inputs required for manufacturing of the components. The same is, as per the agreement with the suppliers, to ensure uninterrupted supply of components, even when their cost has increased. According to the assessee FPI is an existing liability as per the understanding arrived at with the suppliers of the components, who are original manufacturers of the components. It is submitted on behalf of the assessee that the liability of FPI was estimated by the purchase department with substant....
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....), Metal Box India (P) Limited (1969): 73 ITR 53 (SC) , United Commercial Bank v. CIT 240 ITR 355 (SC), Bharat Earth Movers: 245 ITR 428 (SC) , CIT v Vinitec Corpn. (P) Ltd.: 278 ITR 337 (Delhi), National Mineral Development Corporation Ltd. v JCIT: 98 ITD 278 (Hyd. ITAT), Ld. AR argued that that liability which has arisen in the relevant accounting year is an allowable deduction even though its actual quantification and discharge is deferred to a future date. In respect of the vendor-wise and item-wise details of total provision of Rs. 32,11,63,153 made during the relevant year in the paper book, it is submitted that the said details contain name of the vendor, the amount of additional value in respect of the component, the invoices, raised by the suppliers, were provisional and each invoice was liable to be reviewed/ amended once the quantum is determined and that this quantum of increase would apply to re-compute the prices payable by assessee on all supplies made by the suppliers during the year, and the liability for FPI was provided in the books of accounts on a scientific analysis of increase in price of components due to change in input cost, representing additional purchas....
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....as been no change in method of accounting or estimation. It is submitted that this method of accounting regularly and consistently followed does not lead to any loss of revenue, whatsoever and the liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit & loss account, whereby the income as well as the charge on settlement in the subsequent year is brought to the income or expenses statement of the assessee company to the extent of variation from the actual FPI liability. Ld. AR argued that it is well settled that mere timing difference should not be used to disturb the method of accounting and books of accounts of a tax payer consistently maintained and accepted year after year. In support of his argument that while the principle of res judicata does not apply to the income-tax proceedings, the Courts have emphasized there must be consistency in the position that the Revenue takes on an issue in different assessment years, Ld. AR cited the decisions reported in CIT v. Excel Industries (P) Limited: 358 ITR 295 (SC), Radhasoami Satsang v. CIT 193 ITR 321(SC), DIT (E) v. Apparel Export Promotion Council: 244 ITR 734 (Del), CIT v. Ne....
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....lar disallowance was deleted by the first appellate authority and revenue did not prefer any appeal thereon, and the Tribunal observed as follows: "26.5 Considering the above submissions, we find that similar disallowance was made in the assessment year 2003-04 and the first appellate order had deleted the disallowance while deciding the issue in favour of the assessee against which Revenue did not prefer any appeal before the ITAT. Thereafter, only during the year under consideration, such disallowance has been made. Of course, principles of res-judicata is not application in the income-tax matters but rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. It is an established proposition of law that a method of accounting regularly and consistently followed does not lead to any loss of Revenue, whatsoever. The liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit and loss account. We thus set aside the matter to the file of the Assessing Officer with direction to decide the issue afresh after affording opportun....
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.... Act. 13.1 Ld. AR submits that the issue is also covered in favour of the assessee by the orders of the Tribunal in the assessee's own case for AYs 2000-01, 2001-02, AY 2002-03 and AY 2007-08. 13.2 Per contra, it is the argument of the Ld. DR that this issue is related to the disallowance u/s. 43B for the year immediately preceding the previous year, and the ITAT has allowed this expenditure following the same principle laid down earlier to allow relief to the assessee on the issue of excise duty and customs duty. According to the Ld. DR, if this proposition is accepted in the current year, it shall defeat the very purpose of making the disallowance in the previous year and moreover, Revenue has not accepted the proposition of ITAT in allowing relief to the assessee and in that sense is a live issue. Accepting the decision of tribunal on this issue shall give finality to this issue for that particular year only. It is further averred that these are continuous issues forming part of the assessment order for AY 2005-06, 2006-07 and 2007-08 also, and are at present pending adjudication before Hon'ble Delhi High Court. 13.3 On a perusal of the decision, we find that this iss....
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....equent year in the absence of any change of circumstances, as such by respectfully following the same, we direct the Assessing Officer to allow the deduction of Rs. 58,61,136/- representing the excise duty paid by the appellant during the relevant previous year. Grounds No 13 to 13.3 are allowed accordingly. Grounds No 14 to 14.4 Sharing of resources with other Group Companies/ Subsidiary Companies 14. Succinctly stated facts relating to this ground are that during FY 2007-08, the subsidiary companies of MSIL were operating as Corporate Insurance agents of different Insurance companies, and in an era of increasing competition and consumer expectations, it was the endeavour of MSIL to provide maximum services to its customers under one-roof to improve customer experience and delight with company products. The company transformed it's dealerships to one-stop shop for sale of its products and providing all related facilities of financing, insurance, auto-card, purchase and sale of used cars, etc. Assessee submits that all these added facilities are integrally linked to the main business of the company to sell passenger cars and although the earnings from these activities per-se....
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.... title ; it may also comprehend payment of statutory dues and taxes imposed as a pre condition to commence or for carrying on of a business ; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. It cannot include sums spent by the assessee as agent of a third party, whether the origin of the agency is voluntary or statutory; in that event, he pays the amount on behalf of another and for a purpose unconnected with the business" (emphasis supplied) 14.3 He submitted that the said approach is reiterated by the Hon'ble Apex Court in CIT v. Birla Cotton Spinning. & Weaving Mills Ltd.: 82 ITR 166 (SC) and Madhav Prasad Jatia v. CIT : 118 ITR 200 (SC) also. 14.4 By placing reliance on the decisions in Sassoon J. David and Co. P. Ltd. v. CIT : 118 ITR 261 (SC); , CIT v Nestle India Ltd. 337 ITR ITR 103 (Del. HC) (affirmed by the Supreme Court), CIT v. Adid....
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....ests of MSIL to do so for maximizing their profits, as such the related cost is allowable business expenditure for the company. It also further goes undisputed that this being the business expenditure will have to be allowed as deduction under section 37(1) of the Act, either in the hands of the appellant company or to the group companies. In these circumstances, while respectfully following the decisions of the Hon'ble Apex Court and the jurisdictional High Court, we find that the addition on this score cannot be sustained. Accordingly, while along ground Nos 14 to 14.4, we direct the Ld. AO to delete the same. Grounds No 15.1 to 15.1.37 Adjustment on account of allegedly excessive AMP expenses 15. On the aspect of Adjustment on account of allegedly excessive AMP expenses relevant for Ground Nos 15.1 to 15.1.37, case of the assessee is that Maruti Suzuki India Limited ('appellant' or 'MSIL' or 'the Company') was incorporated in February 1981 and is engaged in the manufacture of passenger cars in India. MSIL is the subsidiary Suzuki Motor Corporation ('SMC' or 'the associated enterprises'). During the relevant previous year the appella....
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.... TPO without first establishing the existence of an international transaction is bad in law and is liable to be deleted. In this respect, Ld. AR submitted that the onus is on the revenue to demonstrate the existence of an international transaction on the basis of tangible material or evidence and the existence of such a transaction cannot be a matter of inference. It is submitted that in the absence of an international transaction between the applicant and the associated enterprise, there is no question of undertaking a benchmarking analysis to determine the arm's length price. He submitted that for construing transaction of rendering service, it needs to be demonstrated with evidence that there was an offer and acceptance for such transaction of rendering service i.e., the service must be shown to have been rendered at the instance of the AE and such AMP expenses have been incurred on behalf of the AE requiring compensation by the AE to the Indian assessee, and the TPO has not established existence of any mutual agreement or arrangement for allocation of apportionment of such AMP expenses incurred by the appellant for benefit of the associated enterprise. 15.2 By placing reli....
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....ment for the use of the trademark "Maruti Suzuki' in India, which clearly evidences the fact that the economic benefit arising out of the alleged promotion of the AE's logo is being enjoyed by the appellant. According to him the economic ownership of the trademark 'Maruti Suzuki' rests with the appellant, and the Hon'ble High Court in the case of Sony Ericsson Mobile Communications India Pvt Ltd vs CIT (supra) disagreed with the finding of the Special Bench that the concept of economic ownership is not recognized under the Act. He submitted that the Hon'ble Delhi High Court in the case of the appellant for AY 2005-06 & 2006-07 accepted the contention of the appellant that it has been using the brand 'Maruti Suzuki' for a long period of time and the said brand is neither owned nor could be used by SMC. Basing on this, he submitted that the economic ownership of the brand rests with the appellant and accordingly, the appellant cannot be expected to seek compensation for the expenditure incurred on the asset economically owned by it. 15.5 Next contention of the assessee is that the expenditure on AMP was incurred wholly and exclusively for business of ....
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.... to unusual and absurd results. Reliance is also placed in this regard on the decision of the Hon'ble Pune Bench of the Tribunal in the case of Demag Cranes & Components (India) Pvt. Ltd. v. DCIT and Cummins India Ltd v Addl CIT (ITA No 1616/PN/2011) wherein the Tribunal upheld the aggregation of closely linked transactions. 15.8 It is submitted on behalf of the assessee that in the present case, the operating profit margin of the appellant at 13.17% is higher than that of the comparable companies at 0.36% and TNMM has undisputedly been satisfied and accepted by the TPO, and since the operating margins of the appellant are in excess of the selected comparable companies, no adjustment on account of AMP expenses is warranted in the case of the appellant. 15.9 Per contra, while place heavy reliance on the comments of the TPO on this issue for AY 2007-08, which are as hereunder, "4.2 Issue of AMP 4.2.1 As per clause 5.01 and 5.02 of the agreement, the assessee was responsible to develop, promote and expand the sale of product and parts manufactured by the AE within India. The responsibility to promote trade mark, and to develop and expand market for sale of Motor car and its....
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....with license to sale and after sale service to the assessee. It had also granted license to use trade mark "SUZUKI " and "MARUTI-SUZUKI" to the assessee. The responsibility to promote trade mark, and to develop and expand market for sale of Motor car and its parts was on the assessee as per agreement. The assessee had developed market and promoted the trade mark of the AE which has a controlling interest in the assessee company at huge economic cost and the risk. It is evident that the assessee had developed local marketing intangible for its AE in India by incurring huge advertisement expenditure on promotion of cobranded trade mark, development of huge network of dealers and after sale service. Admittedly, the assessee had also incurred a considerable amount as advertisement expenditure on promotion of the "SUZUKI" brand name in European market even when the assessee was a contract manufacturer to the AE and had exported "SUZUKI" branded car in that capacity. In the year under consideration the assessee had incurred advertisement expenditure on market and promotion of cobranded trademark including promotion of "SUZUKI " trade mark. It is evident from audited accounts that the AE ....
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....e. One relatively dear case is where a distributor acts merely as an agent, being reimbursed for its promotional expenditures by the owner of the marketing intangible. In that case, the distributor would be entitled to compensation appropriate to its agency activities alone and would not be entitled to share in any return attributable to the marketing intangible." 4.2.6 It is seen from the combined reading of the above two paras of OECD Guidelines that the word 'distributor' has been used (as emphasised above) only to explain one particular situation/example. In fact, the general term used in the above guidelines is 'Marketer'. This term does not distinguish between the 'manufacturer' or the 'distributor ' as such. If an example of the distributor' has been used in the guidelines, it does not mean that the 'manufacturers' are excluded /exempted from the term 'marketer'. These portions of the guidelines are directed towards the issue of creation and valuation of marketing intangibles. They are not meant for placing limits, where or by whom the intangibles will be created. Any person incurring expenditure for brand promotion may ....
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....go on the back side of the cars manufactured by it in a big way only after financial year 2003-04, the process of impairment of "Maruti" trade mark and reinforcement of brand value of "Suzuki " trade mark has taken place effectively in a big way only after financial year 2003-04. 4.2.11 It is evident that both the processes of piggybacking of "Maruti" trade mark by the "Suzuki " trade mark and co-branding of "Maruti " logo along with "Suzuki " logo has resulted in impairment of "Maruti" brand value and reinforcement of value of "Suzuki" brand of the AE in a big way from F.Y. 2003-04. Impairment of "Maruti " or "M" brand has started because "Maruti " was super brand in India in its own right as compared to "Suzuki" trademark and was developed by incurring several thousand crores of expenditure on advertisement and marketing for a period of two decades. The process of reinforcement of value of "Suzuki " brand has started because "Suzuki " being a very low value brand in Indian market was used along with "Maruti " trade mark in cobranding process. This resulted in migration of intangible embedded in "Maruti" brand to "Suzuki" brand due to association of both the brands together. ....
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...., customer relationships, reputational characteristics and goodwill. In para 6.7 of the Action 8-10 report, it has been observed by BEPS as under:- 6.7 Intangibles that are important to consider for transfer pricing purposes are not always recognised as intangible assets for accounting purposes. For example, costs associated with developing intangibles inleinally through expenditures such as research and development and advertising are sometimes expensed rather than capitalised for accounting purposes and the intangibles resulting from such expenditures therefore are not always reflected on the balance sheet. Such intangibles may nevertheless be used to generate significant economic value and may need to he considered for transfer pricing purposes Furthermore, the enhancement o value that may arise from the complementary nature of a collection of intangibles when exploited together is no: ahvavs reflected on the balance sheet. Accordingly, whether ail item should be considered to be an intangible for transfer pricing purposes under Article 9 of the OECD Model Tax Convention can be informed by7 its characterisation for accounting purposes, but will not be determined by such ch....
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.... the returns derived by the MNE group from the exploitation of intangibles, and the ultimate allocation of costs and other burdens related to intangibles among members of the MNE group, is accomplished by compensating members of the MNE group for functions performed, assets used, and risks assumed in the development, enhancement, maintenance, protection and exploitation of intangibles according to the principles described in Chapters I-III. 6.48 In identifying arm's length prices tor transactions among associated enterprises, the contributions of members of the group related to the creation of intangible value should be considered and appropriately rewarded The arm's length principle and the principles of Chapters I-III require that ail members of the group receive appropriate compensation for any functions they perform, assets they use. and risks they assume in connection with the development, enhancement, maintenance, protection, and exploitation of intangibles, it is therefore necessary to determine, by means of a functional analysis, winch member(s) perform and exercise control over development, enhancement, maintenance, protection, and exploitation functions, which ....
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....independent domestic entity would have incurred ". 7. On the issue of AMP, the Department in AY 2006-07 is already before the Hon 'ble Apex Court, wherein, the following Substantial Question of Law has been taken:- i. Whether the Hon 'ble High Court was right in holding that AMP expenses does not constitute an international transaction and hence, it does not lead to the creation of marketing intangibles? ii. Whether the Hon'ble High Court was right in law in stating that the existence of an international transaction cannot be arrived at form the clauses of the intercompany arrangement? iii. Whether the Hon 'ble High Court was right in law in holding that the IT Act does not have machinery provision to benchmark the international transaction arising from AMP expenses? iv. Whether the Hon'ble High Court was right in rejecting the BLP to benchmark the AMP transactions? v. Whether the Hon 'ble High Court was right in law in observing that the benefit to the AE due to AMP expenditure in only incidental and not intentional? vi. Whether the Hon 'ble High Court was right in law in observing that if no application of TNMM the transactions are....
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....p; ... ... ... 37. The provisions under Chapter X do envisage a 'separate entity concept'. In other words, there cannot be a presumption that in the present case since WOIL is a subsidiary of Whirlpool USA, all the activities of WOIL are in fact dictated by Whirlpool USA. Merely because Whirlpool USA has a financial interest, it cannot be presumed that AMP expense incurred by the WOIL are at the instance or on behalf of Whirlpool USA. There is merit in the contention of the Assessee that the initial onus is on the Revenue to demonstrate through some tangible material that the two parties acted in concert and further that there was an agreement to enter into an international transaction concerning AMP expenses. ... ... ... 39. It is in this context that it is submitted, and rightly, by the Assessee that there must be a machinery provision in the Act to bring an internation....
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.... ... ... ... ... ... ... 51. The result of the above discussion is that in the considered view of the Court the Revenue has failed to demonstrate the existence of an international transaction only on account of the quantum of AMP expenditure by MSIL. Secondly, the Court is of the view that the decision in Sony Ericsson holding that there is an international transaction as a result of the AMP expenses cannot be held to have answered the issue as far as the present Assessee MSIL is concerned since finding in Sony Ericsson to the above effect is in the context of those Assessees whose cases have been disposed of by that judgment and who did not dispute the existence of an international transaction regarding AMP expenses. ... ...  ....
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....swered in the negative i.e. in favour of the Assessee and against the Revenue. In other words, it is held that AMP expenses incurred by MSIL cannot be treated and categorised as an international transaction under Section 92B of the Act. ... ... ... "Economic ownership of the brand 77. The next issue is concerning the economic ownership and legal ownership of the brand. According to the Revenue, viewing legal ownership as something distinct from economic ownership "may not be the right way of looking at things." 78. It is necessary at this juncture to examine the history of the relationship between MSIL and SMC. When the licence agreements were originally entered in 1982, MSIL was known as Maruti Udyog Limited ('MUL') and SMC did not hold a single share in MUL. In 2003 SMC acquired the controlling interest in MSIL. There are various models of Suzuki motor cars manufactured by MSIL and each model is covered by a separate licence agreement. Under these agreements SMC grants license to MSIL to manufacture that particula....
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....the assessee and the associated enterprise with regard to development of brand, it cannot be inferred that there exists an international transaction between the assessee and the associated enterprise and therefore, the question of determination of ALP does not arise. wherein it has been reiterated by the Court that the Revenue needs to establish on the basis of some tangible material or evidence that there exists an international transaction of provision of brand building service between the assessee and the associated enterprise and in the absence of any transaction, there is no question of undertaking any benchmarking analysis with respect to AMP expenses. 15.14 In the case of Loreal India Private Limited v. DCIT (ITA No. 7714/mum/2012, the Hon'ble Mumbai Bench of the Tribunal, rejected the claim of the revenue to set aside the matter to the file of the TPO for finding the existence of an international transaction, holding as under: "With regard to the submissions of the AR that the issue of AMP should be restored back to the file of the AO, we want to mention that law as a concept is supposed to evolve with passage of time-it cannot be static always. Non availability of a....
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....nsideration for the right to manufacture and sell various models of motor cars. TNMM was applied to benchmark the aforesaid transaction of payment of royalty and OP/Sales was considered as the profit level indicator. Since the operating profit margin (OP/Sales) of the appellant at 13.17% was higher than the average of the operating profit ratio of comparable companies, at 6.60% the international transactions entered into by the appellant were considered as having been entered at arm's length price, applying TNMM. The TPO, however, disregarded the benchmarking analysis undertaken by the assessee and held that the international transaction of payment of royalty does not satisfy the arm's length principle, that the appellant was not justified in paying any royalty to SMC towards use of SMC's trademark, and allocated the royalty paid by the appellant in the ratio of R&D and AMP expenses incurred by the associated enterprise. The TPO accordingly held that 48% of the total royalty paid by the appellant is towards use of trademark. The TPO accordingly made an adjustment of Rs. 237.24 crores being 48% of the total royalty paid by the appellant. In this regard Ld. AR submitted t....
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....ding year, prayed to delete the similar Transfer Pricing adjustment allegedly on account of brand royalty, amounting to Rs. 237.24 crores. 15.19 Per contra, Ld. DR placed reliance on the following comments of TPO on this issue for AY 2007-08 and adopted the same line of arguments before us. "4 TPO Comments: 4.1. ISSUE OF ROYALTY 4.1.1 The brief facts are that Maruti Suzuki India Limited (earlier also known by the name of Maruti Udyog limited) is a well known small and medium sized passenger cars/vehicles in India. It basically caters to the consumer segment placed in the middle income group and upper middle income group. 4.1.2 The assessee, M/s Maruti Suzuki India Limited, is engaged in the manufacture of passenger cars in India, and is the subsidiary of Japan-based Suzuki Motor Corporation (SMC). The assessee had started its business in 1982 as a 100% Government of India owned company and is a licensee manufacturer in India. As on 31.3.2005, SMC held 54.21% share in MSIL and approx. 18.30% was held by the GOI and the balance was held by Indian public and others. 4.1.3 The company Maruti Udyog limited came into existence in Feb 1981. It was then a 100% government ....
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....e, sale and export of product or parts of other competitors (refer 5.01 (a) and 5,03 of the agreement). 4.18 The clause 5.02 stipulates that all products and parts manufactured in India shall bear trademark of "MARUTI-SUZUKI" whether for sale in territory or for export. It is important to clarify here that ' MARUTI' or 'M' are registered trademarks of the assessee and "SUZUKI" is registered trade mark of the AE, SMC. It is a fact that "MARUTI-SUZUKI" is not a registered combined trademark. 4.19 This agreement is only related to licensed trademark of SUZUKI and it does not provide any protection and compensation to trademark of MARUTI even though as per agreement both the trademarks were used together under cobranded trademark. 4.1.10 The brand development was the responsibility of the Maruti without any compensation. In fact royalty was being paid for using and promoting brand "Suzuki " owned by the AE. 4.1.11 The terms and conditions of the agreement clearly stipulate that all the functions of production, manufacturing, sale, export of products and parts, modification, improvement of product and technology, localization and absorption of technology, bra....
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....or the technological development and sales of products and parts within the territory and outside the territory. Thus the constituents of royalty are two. though, the payment being made is composite. 4.1.17 The responsibility of doing the marketing part was however given to Maruti not SUZUKI as being local they understood the Indian customer and it's psyche. MARUTI shall use its best efforts to develop, promote and expand and the sale of products and parts within the territory." 4.1.18 Thus the understanding of the agreement shows that it was SUZUKI that was to provide licensed technology and licensed trademarks and Maruti was to make efforts to develop, promote and expand the sale. The purchases were also to be from SUZUKI, SUZUKI was also assured of its royalty on these sales in addition to the lump sum royalty and was also entitled to the dividend on its capital contribution. The marketing part on the other hand was the mandate of the Maruti. The reason being it being local, it is aware of the market and can accordingly develop strategy and design to penetrate the market. And this proved successful also. The logo was also very much Indian with wings attached to the a....
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....using its logo and trademark on the basis of an agreement that was signed when SMC was a minor share holder in Maruti. 4.1.22 It may be noted that over the years the share of Suzuki has increased in Maruti. The name has changed from Maruti Udyog to Maruti Suzuki. The brand Maruti has been assiduously built over the years since its inception by the local strategist and marketing professionals. That involved understanding of the local psyche, beliefs and sentiments, the customer profiles in terms of disposable incomes, future incomes and family values and then formulating a policy to get a brand name etched in the niche segment of the customers. Though the technology may be coming from Japan but the product was to reach the Indian customer as an Indian product Maruti - something locally made and marketed. 4.1.23 Suzuki when it started acquiring Maruti knew the reach of the brand, the potential of the brand. SUZUKI may be known world over as an automotive giant but was not known in Indian markets as Maruti was a known brand, it was content playing second fiddle to Maruti as a major brand name and 'M' being the logo. The existence of a brand in a market is the function of....
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....o be a situation in normal and independent circumstances. This has not been appreciated by the Hon 'ble ITAT". 15.20 He lastly submitted that the TPO in its comments has recommended for filing of further appeal u/s. 260A before the Hon'ble High Court for AY 2007-08, and these are continuous issues forming part of the assessment order for AY 2006-07 and 2007-08 also, and are at present pending adjudication before Hon'ble Delhi High Court. 15.21 This issue was dealt with by a coordinate Bench of this Tribunal in the AY 2006-07. On a perusal of record we find that for the AY 2006-07 a coordinate Bench of this Tribunal in the order dated 24.08.2015 held as follows: "7.6. Thus it is manifest that the tribunal in the immediately preceding year has held two things. First that the payment of royalty under the Agreement is both for the use of licensed information and licensed trademark and there can be no division of royalty payment; and second that brand Suzuki is valuable and not worthless as was held by the TPO. In so far as the first aspect of bifurcation of royalty payment into two parts is concerned, although we find that the arguments put forth by the ld. DR are not ....
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....rtificates, which the assessee claimed through the revised return and during the course of assessment proceedings, it is prayed on behalf of the assessee to direct the Assessing Officer to allow the credit of additional TDS certificates claimed through the revised return of Rs. 19,43,693/-whereas the total TDS Claimed is Rs. 32,53,79,843/-. Ld. AR further prayed to direct the Assessing Officer to allow credit of additional TDS certificates received amounting to Rs. 12,62,180/- (Rs.11,31,295 + Rs. 1,30,885). 17. On this issue, Ld. DR fairly conceded that a coordinate Bench of this Tribunal in its order for AY 2007-08, set aside the matter to the file of the Assessing Officer to consider the claimed TDS credit on the basis of revised return after affording opportunity of being heard to the assessee, and it being a consequential ground, the decision of ITAT for the earlier year was acceptable on this issue for AY 2007-08 and further appeal was not recommended and preferred. Recording the same we allow Ground No. 17 for statistical purpose by setting aside the matter to the file of the Assessing Officer to consider the claimed TDS credit on the basis of revised return after affording ....
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.... 140A provides that in case payment made under the said section falls short of the tax payable including interest under the said section then the tax so paid shall be first attributed towards the interest and the balance amount shall be adjusted against the tax payable. In this case, the tax payable under section 140A also included interest payable under section 234B. The issue is whether the interest payable under section 234B which has to be first adjusted against the payment made under section 140A has to be calculated with respect to total income as declared in the return or total income determined in the regular assessment. We find that the section 140(1B) provides that interest payable under section 234B, has to be computed on the amount by which the advance paid falls short of assessed tax and the assessed tax for the purpose of this sub-section has been defined in the Explanation to mean the tax on total income as declared in the return as reduced by tax deducted/collected at source etc. Therefore, we agree with the submission made by ld. A.R that the interest payable under section 234 B for the purpose of adjustment against the tax paid under section 140A has to be compute....