TaxTMI 
TaxTMI 
2018 (7) TMI 1461
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....cense fees pertains to the Corporate Unit. The findings of lower authorities that such sub-licensing income of Rs. 8,44,18,024/- pertains to Baddi Unit is opposed to evidences on record. 4) The lower authorities have erred in holding that the depreciation of Rs. 15,00,000/- on technical know-how acquired pertains to and is referable to Baddi Unit. Such findings are opposed to evidences on record. Such conclusion of CIT (Appeals) is erroneous inasmuch as that in subsequent year the CIT (Appeals) holds that depreciation is allowable to Baddi Unit, Jammu Unit and Corporate Office. 5) It is contended that the proportionate administrative expenses of Rs. 42,74,051/- is referable to Corporate Office only. The finding of the lower authorities that such expenses of Rs. 42,74,051/- pertains to Baddi Unit is opposed to evidences on record. 6) It is contended that the interest income of Rs. 8,58,417/- is eligible for relief u/s 80-IC of the IT Act. 7) The provisions of Section 234B of the IT Act are not applicable." 3. Vide application dated 12.12.18, the assessee has also raised an additional ground and the request reads as under: "The permissi....
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....uired to be excluded. In other words, the Assessing Officer ought to have excluded the royalty income net basis, i.e. after reducing the amount received on account of sharing of such technical know-how from the gross payment and then the residual figure should be allocated to the respective units in proportion to their turnover. For this purpose, the assessee relied upon the judgment of Gujarat High Court in CIT vs. Nirma Ltd. in 367 ITR 12." 4. Before proceeding further, let us understand the facts of the case as emanating from the records. The return u/s 139(1) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'. was filed on 31.10.2004 which was revised on 31.03.2006. A search action u/s 132 of the Act took place on 23.2.2006 which means that on the date of search, the revised return filed on 31.03.2006 did not attain finality as the time limit for taking the return for scrutiny assessment u/s 143(2) of the Act was available with the AO. 5. Pursuant to the notice u/s 153A of the Act, the assessee filed its return of income. The assessee declared income of Rs. 6,76,43,647/-. 6. While scrutinising the return of income, the AO noticed that the origina....
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....to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate." 9. It can be seen from the above extracted provisions of section 153A of the Act that pending assessments on the date of search shall get abated. As mentioned elsewhere, since the period of limitation for issuing notice u/s 143(2) of the Act did not expire, the revised return filed on 31.03.2006 did not attain finality and has to be considered as pending assessment which got abated. 10. This means that the return filed pursuant to notice u/s 153A of the Act has to be considered as a fresh return and the assessee is free to return income as per provisions of law and the same has nothing to do with any income returned ....
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....g to Rs. 57,71,051/- resulting into the exclusion of net sub-licence income at Rs. 7,86,43,973/-. 14. Though the AO did not take any adverse view in so far as exclusion of income from sub-licencing fee from the claim of deduction u/s 80IC of the Act, but dismissed the claim of royalty expenditure as appropriated by the assessee. 15. In our understanding of the facts, as discussed hereinabove, we are of the considered opinion that the assessee is very much entitled to deduction of the expenses which have direct nexus with earning of sub licence fees meaning thereby that the assessee is entitled for exclusion of income from licencing of technical know how not on the gross basis but on net basis after adjusting royalty expenses which have direct nexus with the income from sub licence fees. 16. A perusal of the assessment order shows that the AO did not allow claim of netting off of sub licence fees because the assessee in its return filed u/s 139 of the Act had shown the licence fees received from the two parties mentioned elsewhere on gross basis. Further, the AO did not allow the claim of royalty payment to Shri Ashok Chaturvedi since in the profit and loss account filed wi....