AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 799
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....as raised before us the following grounds of appeal: " The Appellant, Hercules Industrial Chemicals Private Limited (since merged with Ashland India Pvt. Limited w.e.f April, 2013), objects to the order dated 25 May, 2016 (received on 15 June, 2016) under section 250 of the Income-tax Act, 1961 ('the Act') passed by the Commissioner of Income-tax (Appeals)-24, Mumbai, for the aforesaid assessment year on the following among other grounds:- 1. Ad-hoc disallowance of employee cost, administrative expenses, depreciation and interest expense aggregating to Rs. 2,54,61,231/-: 1.1 The Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in disallowing on ad-hoc basis the employee cost, administr....
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.... the appeal as it may be advised." 2. Briefly stated, the assessee company which is engaged in the business of providing technical know-how for manufacturing chemical products for pulp & paper products had e-filed its 'return of income' for A.Y 2011-12 on 29.11.2011, declaring income of Rs. 10,93,203/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. On a perusal of the profit & loss account, it was observed by the A.O that the assessee was in receipt of Royalty income of Rs. 2,62,72,942/-; Service fee income of Rs. 3,73,31,027/-; and Other income of Rs. 5,06,36,724/-. It was observed by the A.O that the assessee had debited expenses of Rs. 1,34,62,240/- for earning of royalty ....
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....ith M/s Hercules Asia Pacific Regional Company Limited (for short 'HAP'). In terms of the said agreement, the assessee company which was eligible for a service fee at cost plus 15% mark up had earned 'service income' of Rs. 3,73,31,027/- during the year under consideration. 7. During the course of the assessment proceedings, it was submitted by the assessee that the employee cost of Rs. 4,59,46,708/-, and administrative and other expenses amounting to Rs. 1,90,52,281/- were incurred for the purpose of earning of income from various streams viz. royalty income, service income and undertaking marketing and business development activities. It was the claim of the assessee that out of total employee cost of Rs. 4,59,46,708/-, an amount of Rs. ....
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.... The A.O, while framing the assessment also did not allow credit of TDS of Rs. 28,97,906/- that was deducted in respect of the royalty income of Rs. 2,62,72,942/- that was earned by the assessee from sub-licensing of the technology to M/s Connel Brothers Company (India) Pvt. Ltd. 9. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee, did not find favour with the same. The CIT(A) was of the view, that though an A.O cannot get into the shoes of an assessee, but then the assessee also cannot be allowed to arrange entire expenditure in such a way that the entire royalty income gets wiped off. Thus, the CIT(A) not finding any infirmity in the allocat....
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....rders of the Tribunal in the assesses own case for A.Ys 2009-10 and 2010-11. 11. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We may herein observe that the very basis of recomputing of the cost attributable to the service income by the A.O, does not inspire any confidence. On a perusal of the facts, it emerges that the assessee had earned income from different streams of activities viz. (i). royalty income from sub-licensing of the technology to an unrelated party i.e M/s Connel Brothers Company (India) Pvt. Ltd; (ii). service income as per the agreement entered into with HAP; and (iii). undertaking marketing and business development ac....
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....orities. Still further, we find that as observed by the CIT(A), disallowances of expenses involving identical facts was made by the A.O in the case of the assessee for A.Y 2009-10 and A.Y 2010-11, which were upheld by the CIT(A). Rather, the CIT(A) while disposing off the appeal of the assessee for the year under consideration viz. A.Y 2011-12., has relied on the observations of his predecessor in A.Y 2009-10 and A.Y 2010-11. We find, that the order of the CIT(A) in the said respective years viz. A.Y 2009-10 and A.Y 2010-11 on a further appeal by the assessee had been set aside by the Tribunal and the disallowances of the expenses had been deleted. We thus, in the backdrop of the our aforesaid observations, and the view taken by the Tribuna....