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TMI Blog2016 (5) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... delete the disallowance made by the Assessing Officer by capitalizing 25% of the royalty expenditure. - ITA Nos. 973/Del/2010, 2382/Del/2013, 3506/Del/2010 & 5375/Del/2013 - - - Dated:- 10-5-2016 - Shri G. D. Agrawal, Vice President And Shri Sudhanshu Srivastava, Judicial Member For the Appellant : Shri Anil Bhalla, CA. For the Respondent : Shri Sarabjeet Singh, DR. ORDER Per G. D. Agrawal, VP ITA No.973/Del/2010 Assessee s appeal for AY 2006-07 :- This appeal by the assessee for the assessment year 2006-07 is directed against the order of learned CIT(A)-VI, New Delhi dated 10th December, 2009. 2. The first ground of the assessee s appeal reads as under:- The learned Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company held on 15.09.2004. The Annual General Meeting approved the remuneration package of (1) Mr. H.L. Khushalani (2) Mr. Vivek Khushalani and (3) Mrs. Raksha Walia w.e.f. 01.04.2004. 10. The approval was granted in accordance with the provisions of Sections 198, 269, 309, 310 and Schedule XIII of the Companies Act 1956. 11. Perusal of the resolution demonstrate that the commission in question is nothing but another form of salary which is paid for service rendered. Thus, the order of the ld.CIT(A) has to be upheld. 12. The issue is also covered in the decision of the jurisdictional High Court in the case of CIT-1 Vs. Convertech Equipments Pvt.Ltd. 2012-TIOL-1002-HC-DEL-IT where it is held as follows :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remuneration was paid to the directors as approved at the annual general meeting of the company. They have also relied upon the decision of Hon'ble Jurisdictional High Court in the case of Convertech Equipments Pvt.Ltd. (supra). Admittedly, the facts of the year under appeal are identical. In view of the above, we, respectfully following the above decision of ITAT in assessee s own case, hold that the disallowance of remuneration paid to the directors u/s 36(1)(ii) was not justified. The same is deleted. 5. Ground No.2 of the assessee s appeal reads as under:- The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the action of the learned Assessing Officer in disallowing 25% of ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 113 (Delhi). (iii) Alembic Chemical Works Co.Ltd. Vs. CIT, Gujarat [1989] 177 ITR 377 (SC). 7. The learned counsel further submitted that the royalty is being paid by the assessee from assessment year 2004-05 onwards and, in the preceding two years, though the assessment was completed u/s 143(3), the payment of royalty was not disallowed. Thus, when in the initial years the payment of royalty is treated as revenue expenditure, in the subsequent year, on identical facts, the Revenue cannot take a different view. In support of this contention, he relied upon the decision of Hon ble Apex Court in the case of Radhasoami Satsang Vs. CIT [1992] 193 ITR 321 (SC). 8. Learned DR, on the other hand, relied upon the orders of aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2002-03, the assessee paid to the foreign collaborators royalty calculated at 3 per cent of domestic sales and at 5 per cent of export sales and claimed deduction thereof as business expenditure. The Assessing Officer disallowed it as being of capital nature and this was confirmed by the Commissioner (Appeals) as did the Income-tax Appellate Tribunal on the grounds, inter alia, (a) that even after termination of the agreement the assessee could continue to use technical information in production of licensed products and hence the assessee obtained enduring benefit, and (b) that there was nothing to show that any specified interval and thus it was a case of outright transfer of technical know-how. 10. On these facts, their Lor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for assessment year 2007- 08 and delete the disallowance made by the Assessing Officer out of commission paid to the directors as well as royalty expenditure. ITA Nos.2386/Del/2013 973/Del/2010 Assessee s appeal for AY 2006- 07 2007-08 :- 13. Both these appeals for assessment year 2006-07 and 2007-08 respectively are against the penalty levied u/s 271(1)(c) of the Incometax Act, 1961. The Assessing Officer had levied the penalty u/s 271(1)(c) in respect of disallowance of commission paid to the directors as well as 25% capitalization of royalty expenses. Both these additions have been deleted by us while deciding the assessee s appeal in quantum. Since the addition itself has been deleted, the penalty based upon such addition ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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