2016 (1) TMI 1424 - HC - Income Tax

Payment of royalty and technical guidance fee - Revenue in nature - HELD THAT - Question (1) is concerned, it has been answered in favour of the Assessee in Assessee s own case CIT v. Hero Honda Motors 2015 (2) TMI 368 - DELHI HIGH COURT . The Court, accordingly, declines to frame a question of law on this issue. Addition u/s 40(a) (ia) - export commission is neither royalty nor fee for technical service - HELD THAT - As far as Question (2) is concerned, learned counsel for the Revenue states that he would like to address arguments on the next date.

Summary

Issues:
1. Whether the payment of royalty and technical guidance fee is revenue in nature?
2. Whether the addition under Section 40(a)(ia) of the Income Tax Act, 1961, was rightly deleted by the ITAT, holding that export commission is neither royalty nor fee for technical service?

Analysis:
1. The first issue revolves around the nature of payment of royalty and technical guidance fee. The court refers to a previous case, CIT v. Hero Honda Motors, where it was decided in favor of the Assessee that such payments are revenue in nature. Consequently, the court declines to frame a question of law on this issue, aligning with the precedent set in the mentioned case.

2. The second issue pertains to the deletion of the addition under Section 40(a)(ia) of the Income Tax Act, 1961, by the ITAT. The court notes that the Revenue seeks to address arguments on this matter at a later date. The case is adjourned to allow the Revenue to present their arguments on 8th March 2016, indicating a willingness to consider further submissions before making a final decision on this issue.