2024 (6) TMI 68

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....ore it against the order dated 30.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as 'the Act'), by the ACIT, Circle-10(2), New Delhi (hereinafter referred to as the Ld. AO). 2. Heard and perused the records. 3. The first issue is out of addition of Rs. 58,03,650/- on account of disallowance of royalty payment. Ld. Counsel has submitted that the issue is squarely covered by the order of the Tribunal in the assessee's own case. It comes up from records that in the present case, the AO made the addition of Rs. 58,03,650/-on account of disallowance of royalty payment made by assessee. CIT (A) has deleted the said addition by relying upon the order passed in the assessee's own case for preceding years. The simi....

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....mark 'Macnaught' on its products. The royalty was payable per unit of the product and, therefore, was clearly linked to sales. There was also no doubt that such payment was in fact made by the Assessee to MPL. It is also not in doubt that MPL was not related to the Assessee in any manner. In the circumstances, there should have been some reasonable basis for the CIT(A) to simply conclude that this was a sham transaction and proceed to enhance the disallowance. The interpretation of the agreement by the ITAT appears to be plausible. The Court is not persuaded to hold that the impugned order of the ITAT is perverse" 4.1 In view of the above narrated reasoning and undisputed fact of issue being repeatedly settled in favour of assess....

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....curred any expense to earn the exempt income. Before CIT(A), assessee reiterated the submissions made before the AO and CIT(A) considering the submissions made by the assessee, deleted the addition of Rs. 4,56,145/- made under section 14A r.w.r 8D(ii) holding that assessee own funds are adequate enough for making investment capable of earning tax free income. CIT(A) also restricted the disallowance under section 14A r.w.r 8D(iii) to Rs. 5,41,887/- holding that no dividend income is earned by assessee in investment made in equity share of Reliance power and Yadu steel and power Ltd. However, exempt income of Rs. 1,61,45,211/- has been received as profit of share of M/s AP Tools. 7. Now, Revenue is in appeal against the deletion made by th....

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....4A r.w.r 8D(iii) to Rs. Rs. 5,41,887/- holding that exempt income of Rs. 1,61,45,211/- has been received as profit of share of M/s AP Tools. In this regard Ld. Counsel has submitted that the partnership firm is an independent entity and requires to run its affairs separately. It is further submitted that no expenditure has been incurred by the assessee to earn the exempt income of Rs. Rs. 1,61,45,211/- i.e., share in profit of share of M/s AP Tools. In this regards, it is also submitted that it is settled position in law that investment in partnership firm would not attract disallowance under section 14A unless it is shown by the AO that certain expenses, howsoever small have been incurred for the purpose of partnership firm and claimed as ....

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....rm and unless the partners are shown to be drawing remuneration from the assessee concern and at the same time investing its attention in the partnership firm, there is no perceptible reason to disbelieve the assessee for not incurring in expenditure. We, thus, find no reason to thrust mechanical application of Rule 8D(2)(iii) of the Act in the given facts. The order of the CIT(A) is consequently set aside and the AO is directed to reverse the disallowance made in Rule 8D(2)(iii) r.w.s 14A of the Act." 7.3 Further reliance is placed on the following judicial pronouncements- * VALLABHBHAI HIRALAL KOTHARI VERSUS 1-2. THE ITO WARD-6 (1) (3) AHMEDABAD, 2019 (12) TMI 676 - ITAT AHMEDABAD, Dated.- December 6, 2019 * M/S. VIKA....