2018 (6) TMI 1389

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.... the PCIT grossly erred in assuming jurisdiction u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short. 3. The representatives of both the sides were heard at length. The case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon were carefully perused. 4. Briefly stated, the facts of the case are that assessment was completed u/s 143(3) of the Act vide order dated 04.01.2016. The ld. PCIT called for assessment records and examined the same. On perusal of the records, the ld. PCIT noticed that the assessee has debited a sum of....

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.... 6. Aggrieved by this, the assessee is before us. The ld. AR vehemently contended that the ld. PCIT wrongly assumed jurisdiction u/s 263 of the Act on wrong assumption of facts and without understanding the facts of the case of sister concern, Honda SIEL. 7. It is the say of the ld. AR that in the case of Honda SIEL, the Hon'ble High Court came to the conclusion that royalty was for enduring benefit for business. It was not only for running business but for bringing business into existence and then for running and sustaining it. The ld. AR vehemently stated that in that case, a new unit was brought into existence. The ld. AR pointed out that in that case, the Tribunal has decided the issue on wrong facts which has been corrected by ....

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.... the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law:- "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 10. And the Hon'ble High Court, after considering the facts, held as under:- ....

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....tion by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneou....

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....t between the two companies was to set up a joint venture company with aim and objective to establish a unit for manufacture of automobiles and part thereof. As a result of this agreement, assessee company was incorporated which entered into TCA in question for technical collaboration. This technical collaboration included not only transfer of technical information, but, complete assistance, actual, factual and on the spot, for establishment of plant, machinery etc. so as to bring in existence manufacturing unit for the products. Thus, a new business was set up with the technical know-how provided by HMCL, Japan and lumpsum royalty, though in five instalments, was paid therefor." 14. And in the same breath the Hon'ble Supreme Court e....

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....eme Court that in case of sister concern, the issue went in favour of the Revenue because the assessee was not in existence at all and it came into existence as a result of joint venture of HMCL, Japan and HSCIL, India. The very purpose of agreement was to set up a joint venture company to establish a unit for manufacture of automobiles and as a result of this, Honda SIEL was incorporated. 16. The facts of the case in hand and as mentioned elsewhere, do not support the findings of the Hon'ble Supreme Court in the case of sister concern. As mentioned elsewhere the assessee is in existence since the year 2000 and has been paying royalty since past 11 years. Considering the facts of the case in hand, vis a vis the decisions considered b....