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2014 (9) TMI 891 - DELHI HIGH COURTTaxability of license fee - Whether entire license fee received or paid under the agreement dated 14th July, 1995 is taxable in the year of receipt or it should be spread over three years – Held that:- The students were required to make deposit of the whole fee for the entire course, but it was held that the amount deposited also included “deposit” or “advance” and it cannot be said that the entire fee had become “due” at the time of deposit - The fee was paid in advance presumably as there should not be any default in payment by the students during the term of the course - assessee adopted another line of argument - It was submitted that the appellant-assessee would have been liable for damages in case of defective technology - Therefore the amount received had not accrued or arisen and it would have accrued or arisen only after end of three years - There is no specific stipulation in the agreement relating to damages in case the technology made available between 1991-94 was found to be defective - unknown and off chance claim for damages in the present factual matrix is certainly not equivalent to claim for warranty, which are to be allowed only on the basis of past data, as products sold and consideration are taxable and, therefore, the expenses which have to be incurred to meet the warranty claims computed on scientific and actuarial basis, have a co-relation with the receipt - Contingent liability is not an expenditure and even when an assessee is following mercantile system of accounting, it cannot be allowed as a deduction u/s 37 of the Act - The submission does not have any merit as it relates to unascertained liability, the happening of which was dependent on a doubtful and uncertain contingency in future. The amount received was not an inchoate amount depending upon any contingency before it could be appropriated - The appellant-assessee was not under an obligation to refund the said amount under any of the clauses - Liability to pay damages under the law of contract for breach of a contract does not make the receipt an inchoate receipt - revenue accepts that if ₹ 15,68,50,000 is taxed in the AY 1996-97, then the bifurcated differential amount should not be taxed in the AYs 1997-98 to 1999-2000 – thus, the order of the Tribunal is upheld – Decided against assessee. Levy of penalty for concealment u/s 271(1)(c) – Inaccurate particulars filed or not – Held that:- The assesee had discharged the onus, there is no allegation that full details with regard to the agreement, quantum of receipt, the factum why the payment was made and also the fact that the receipts had been offered for taxation in four separate assessment years, were duly disclosed and stated - assessee had claimed that technical know-how would be used for three years and, therefore, consideration received was relatable to three years - the assessee did not try to draft the agreement in a way, which could have ensured that the amount received was bifurcated/divided as income of four assessment years - in view of the explanation offered by the assessee it is not a fit case, where penalty for concealment of income u/s 271(1)(c) should be imposed - The assessee‘s conduct shows that they had acted in a bona fide manner and also furnished all material facts and particulars – Penalty u/s 271(1)(c) is directed to be set aside – Decided in favour of assessee.
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