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TMI Blog2008 (12) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee submitted that an identical issue on identical facts as involved in ground no.1 of the appeal of the assessee came up for consideration before the Tribunal in the case of this very assessee and the ITAT Delhi Bench 'C' in ACIT vs Sierra Industrial Enterprises P.Ltd. in ITA no. 1509/Del/04 for A.Y. 2000-2001 restored the issue to the file of the AO by making following observations in para 10 to 13 of the order as under. 10. Nextly, the AO has also not given any justification for taking the value of the defective goods at 30% or 40% discount. Thus the approach of the AO is not found to be justifiable. 11. The issue relating to the customers' claim and defects needed proper probe because it is not convincing that entire defective material worth ₹ 31 lacs was destroyed. The assessee had not been able to prove that the defective shoes which were replaced, were shredded or destroyed. It was explained before the ld CIT(A) by the assessee that no shredding machine was needed because defective pieces were cut into parts and were destroyed. Such version does not appear to be convincing because even defective material or even the waste is sold to kabaries for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue except placing reliance on the reasoning given in the order of AO was not able to controvert the above submissions. 5.2 We find that the facts and issue involved in ground no.1 of the appeal of the Revenue are identical to the facts and issue decided by the Tribunal in the decision (supra). Hence in order to maintain consistency in the approach of the judicial propriety and discipline demands that we should follow the decisions (supra) of the Tribunal. Hence respectfully following the decisions (supra) of the Coordinate Benches of the Tribunal we set aside the orders of tax authorities below in this regard and restore the issue to the file of AO for complying with the directions of the Tribunal in the orders (supra) and decide the same afresh after affording reasonable opportunity of being heard to the assesee. Ground no. 1 of the appeal by the Revenue stands allowed for statistical purposes. 6. Now, we shall deal with ground no.2 of the Revenue in which the grievance of the Revenue is that the CIT(A) has wrongly deleted the disallowance of ₹ 8,12,110 made by the AO by restricting the claim for depreciation on the last and moulds from 40% to 25%. 6.1 The ld.A.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of Revenue is rejected. 9. Now, we shall deal with ground no.3 of the appeal of the Revenue involving the issue relating to the estimate of royalty paid by the assessee to Nike International Ltd. 9.1 Briefly stated the facts relating to the issue involved in this ground of appeal are that during the course of assessment proceedings the AO noticed that the assessee had debited a sum of ₹ 1,39,66,487/- under the head 'Royalty and consultancy' charges. From the details filed it was noted that the amount included a sum of ₹ 1,11,53,967/- on account of royalty paid to M/s Nike International Ltd. The assessee was asked to explain as to why the royalty should not be treated as capital expenditure. The reply was filed by letter dt. 21.11.2006 wherein it was submitted that the assessee had obtained license from Nike company for sourcing, marketing and sale of Nike brand of footwear and apparel in India. As per the license agreement which has been approved by RBI royalty @ 5% of domestic sale was to be paid for use of trade market 'Nike'. Since this payment was related to the sale of products made during the relevant year it did not provide any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I were submitted before the AO and these documents were also submitted in appeal as well. It was contended that as per license the assessee company received from Nike the technical know-how. designs and specifications for production of the Nike brand products. The products manufactured with the help of technical know-how so, obtained were sold by the assessee in India by using trade mark Nike. The payment of 5% royalty was made with reference to the sales of Nike products during the relevant year. 11. He further contended that the assessee did not acquire any rights over the trade mark Nike or the technical information, designs, specifications etc. supplied by Nike. These would remain the ownership property of Nike company at all times. The assessee was authorized only to use the technical information and Nike brand to source and market the products in India and royalty payable was determined at 5% of the domestic sale during the relevant year. This itself indicate that the expenditure was annual payment related to the sales for the year and accordingly of revenue nature. As per the terms of agreement the assessee company was supposed to stop use and return to Nike company, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vent termination of agreement the licensee (i.e. the assessee ) was supposed to deliver within 20 days of termination notice all the goods and items bearing trade mark, the confidential information in the form of drawings, designs including the copies made to the license. It was made clear that the assessee would not have any right whatsoever to use the technical information and the trade mark for termination of the agreement. 14. The ld. D.R. for the Revenue except placing reliance on the reasoning given in the order of AO was not able to controvert the factual observations made in the order of CIT. Whereas on The other hand the ld. A.R. for the assesee placing reliance on the reasoning given in the order of ld CIT(A) submitted that he had rightly deleted the impugned addition. 15. On considering the submissions of both the parties, perusing relevant material available on record and carefully going through the orders of tax authorities below, we are of the view that since the findings of CIT(A), wherein he observed that From the terms of agreement it is quite clear that the assessee was granted non transferable license to use the trade mark Nike in connection with sourcin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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