TaxTMI 
TaxTMI 
2026 (3) TMI 883
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....tive grounds: "1. That the Commissioner of Income Tax (Appeals) ['CIT(A)'] erred on facts and in law in upholding the validity of the assessment order dated 30.03.2014 passed under section 143(3)/153A of the Income Tax Act, 1961 ('the Act'). 1.1 That the CIT(A) erred on facts and in law in not appreciating that the assessment order having been passed relying upon ex-parte material/evidence collected behind the back of the appellant without confronting the same to the appellant, in gross violation of principles of natural justice, is illegal and bad in law. 2. That the CIT(A) erred on facts and in law in not deleting addition of Rs. 44,60,407/- on account of royalty on brand paid by the appellant. 2.1 That the CIT(A) erred on facts and in law in not appreciating that the aforesaid disallowance of royalty, was made by the assessing officer without providing adequate opportunity of being heard to the appellant. 3. That the CIT(A) erred on facts and in law in not deleting the addition of Rs. 2,41,546 on account of undervaluation of closing stock. 4. That the CIT(A) erred on facts and in law in not deleting addition o....
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....y the AO. In such circumstances, once the use of brand is not disputed, royalty paid for use of the brand cannot be disallowed. More so, when both the companies are in the same tax bracket and the fact that subsequently the brand was sold at a consideration of Rs. 104.50 crore and tax of 23.68 Crores was paid by ACL on it in financial year 2011-12 which highlights the brand value on which the Royalty was paid by the assessee. Thus, the Royalty expenditure was an allowable expenditure. In view of the above, this Grounds of Appeal nos.4 to 4.2 are decided in favour of the appellant." In A.Y 2008-09 I have taken note of the enhanced value of royalty paid, I have also noted that the evidence in the form of revised License Agreements in this regard were submitted before AO in that year vide letter dated 5.10.2010 which I have considered along with the precedent of A.Y 2007-08 on this issue wherein it was held that 'edible oil undertaking' and 'edible oil brands' constituted two separate components of the demerger plan approved by the Hon'ble High Court and also taking note of the fact that the rate of Royalty on edible oil brands as also the fact th....
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....n of the same. Therefore, royalty attributable to logo amounting to Rs. 44,60,407/- has not been justified by the appellant and the same is hereby disallowed. In view of the above, this Grounds of Appeal nos.4 to 4.2 are decided as allowed in part. The expenditure on royalty amounting to 51,66,450/- is allowed following the preceding year precedents while the expenditure payment on 'LOGO' are disallowed for reasons given herein above confirming addition of Rs. 44,60,407/-." 5. The Revenue vehemently supports the impugned royalty disallowance based on the earlier years' findings between the parties going against the assessee. It could hardly dispute that the assessee has raised the impugned claim of royalty payment on "LOGO" and its use which was duly supported by filing the corresponding additional evidence as rejected in the CIT(A)'s lower appellate discussion. We notice that the learned CIT(A) has neither found any specific fault in the assessee's additional evidence comprising of the relevant agreement etc. since he held this royalty claim as not "justifiable" than having concluded the same as not incurred "wholly" and "exclusively" for the purpose of busines....
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....do not find any reason for deviating from the same. The assessee has never included freight charges while valuing its closing stock. Therefore, we do not find any reason for doing the same during the year under consideration. The findings of the ld. CIT(A) are set aside and the Assessing Officer is directed to delete the addition of Rs. 5,19,848/-. Thus, ground is allowed. 10. Second grievance of the assessee relates to the addition on account of subsidy. 11. The peculiar facts in this issue are that during the A.Y 1999-2000, the assessee has received capital subsidy of Rs. 50 lakhs sanctioned by the Director of Industries, Government of Punjab in the year 1995 under Industrial Policy issued by the Government of Punjab. Since the said subsidy was received with a view to promote growth of industry in the State of Punjab and for generation of employment, the subsidy, being on capital account, was directly credited by the assessee to the capital reserve in the books of accounts for the year ending on 31.3.1999 and the same was accepted by the revenue. 12. During the year under consideration, the Assessing Officer took a completely different view, holding tha....
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.... In that case, the assessee had received a capital subsidy, which was claimed as capital receipt, not exigible to Income-tax. The Assessing Officer held that such subsidy is liable to be reduced form the cost of assets, in terms of the provisions of section 43(1) of the Act. The matter travelled upto the Hon'ble Supreme Court and the Hon'ble Supreme Court, inter alia, held as under: "The question in the present context is not whether if a portion of the cost is met directly or indirectly by any other person or authority, it should be deducted or not. Quite obviously, the plain meaning of the section is that it shall be. But the real question is as to the character and nature of a subsidy whether it was really intended to subsidise the cost of the capital or was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost which is the basis for determining the subsidy being only a measure adopted under the scheme to quantify the financial aid. The contention is that it is not a payment, directly or indirectly, to meet any portion of the "actual cost" but intended as an ince....
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....place to mention that even if the action of the Assessing Officer has to be accepted, then the same should have been taken in A.Y 1999-2000. However, we find that no action has been taken from A.Y 1999-2000 to A.Y 2006-07. Therefore, there being no change in the facts, it would be incorrect to take a different stand after a gap of 10 years. Considering the facts of the case in totality, we do not find any merit in the action of the Assessing Officer/ld. CIT(A). We, accordingly, direct the Assessing Officer to delete the impugned addition." 7. The Revenue could not pinpoint any specific distinction on facts or law; as the case may be, that both these issues already stand adjudicated in the assessee's favour. We thus adopt judicial consistency to reverse both the learned lower authorities' findings on these twin issues in very terms. 8. The assessee's fifth substantive ground of section 234B, 234C & 234D interest is treated as consequential in nature. Its instant "lead" appeal ITA No. 3432/Del/2018 partly succeeds in very terms. Same order to follow in the assessee's latter twin appeals ITA Nos.3433 & 3434/Del/2018 for assessment years 2011-12 and 2012-13 raising the legal i....