TaxTMI 
TaxTMI 
2022 (2) TMI 589
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....llowing grounds of appeal:- "1. The Ld. CIT(A) erred in facts and law in deleting the addition made amounting to Rs. 7,95,13,858/- on account of unaccounted royalty. 2. The Ld CIT (A) erred in applying royalty @ 2.5% on profit making models alone, whereas the Assessing Officer has correctly computing Royalty at 2.5% on the revenue base as per clause V(A)(1) of the agreement. 3. The CIT(A) erred in computing royalty @2.5% on the profit making models ignoring Clause V(A)(2) of the agreement which states that Royalty should be paid @ 5% on the revenue base from the sale of vehicle assembled by or for FILP. 4. The CIT(A) erred in allowing the expenses with respect to two loss makings models (New Fiesta And En....
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.... charges royalty for aforementioned services. The assessee had entered into a license agreement with M/s. Ford India Private Limited, the Indian subsidiary of Ford Motor Company, USA, effective from 1st April 2012. As per agreement between the parties, clause V(A) & (B) of agreement specifies minimum royalty of 2.5% on sale of vehicles assembled in India, if its financial shows loss or minimum royalty of 5% on sale of vehicles assembled India, if its financial shows profit. During the financial year relevant to assessment year 2014-15, the assessee company had shown royalty income of Rs. 92,69,83,597/- from M/s. Ford India Private Limited. During the course of assessment proceedings, the Assessing Officer on the basis of Notes to financial ....
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....assenger vehicle models, including passenger vehicle models which has negative revenue base, which resulted in lesser royalty computation, when compared to royalty income computed by the assessee. The assessee further contended that in case, the Assessing Officer wants to take revenue base of all passenger vehicle models, then cost associated with those models which has negative base also needs to be considered. 5. The learned CIT(A), after considering relevant submissions of the assessee and also taken note of reconciliation filed by the assessee explaining difference between royalty income computed by the assessee as well as royalty income computed by the Assessing Officer, has deleted additions made by the Assessing Officer by holding....
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....t the assessee has received royalty only on those passenger vehicle models which has positive revenue base, whereas the Assessing Officer has considered passenger vehicle models, which has negative revenue base, however, failed to consider cost associated with those models which has negative revenue base. The learned AR further referring to paper book filed by the assessee submitted that the assessee has filed reconciliation, which is available at page 40 of paper book filed by the assessee, as per which correct amount of royalty receivable by the assessee as per approach of the Assessing Officer is at Rs. 91.68 crores, which is lesser than the amount of royalty income considered by the assessee at Rs. 92.74 crores. The learned CIT(A), afte....
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.....98 crores and on which he has computed 2.5% royalty which works out to Rs. 100.65 crores. It was the explanation of the assessee that the appellant has received royalty only on those passenger vehicle models which has positive revenue base. The assessee further contended that in case, passenger vehicle models which has negative revenue base is also considered for computing royalty, then cost associated with those models also needs to be considered to arrive at net sales value. According to the assessee, if methodology adopted by the Assessing Officer is considered, then royalty income receivable by the assessee from M/s. Ford India Private Limited, shall work out at Rs. 91.68 crores, which is lesser than amount of royalty income of Rs. 92.....
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....ncome computed by the assessee and determined by the Assessing Officer, which is available at page 40 of the paper book filed by the assessee. According to the reconciliation statement filed by the assessee, if methodology considered by the Assessing Officer is adopted for computing royalty, then royalty income receivable by the assessee from M/s. Ford India Private Limited, shall work out to Rs. 91.68 crores, which is lesser than the amount of royalty income received by the assessee at Rs. 92.74 crores. The facts with regard to consideration of cost associated with those passenger vehicle models which has negative revenue base by the Assessing Officer is not forthcoming from records. Further, reconciliation statement filed by the assessee ....