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TMI Blog2017 (4) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... to Hercules USA. Thus the difference of 9% on the sales value is effected. The assessee has credited in profit and loss account 14% of the royalty income and net sale value was arrived at. After giving 5% to Hercules and considering the same agreement the CIT(A) was of a view that the addition on account of difference is not required therefore, same was deleted by CIT(A) and the matter went to the Tribunal and the Tribunal has confirmed the same. Therefore, this issue is covered in the favour of the assessee. - I.T.A. Nos. 2848 & 2849/Mum/2015 - - - Dated:- 29-3-2017 - SHRI D.T. GARASIA, JM AND SHRI ASAWANAI TANEJA, AM For The Appellant : Shri Ketan Ved, AR For The Respondent : Shri M.C. Omi Ningshen ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 1,79,27,533/-. The assessee claimed expenses of ₹ 2.48 crore towards employees cost and travelling in total amounting to 3.03 crore against the cost attributed to service income of ₹ 1.79 crore. We find the agreement was entered with M/s Connell Brothers Company and A.O. analysed the agreement and the AO ascertained that the royalty received was 14% on the net sales value of product whereas the assessee was making payment of only to 5% to the parent company towards royalty .Therefore, according to the AO the net margin on sale value was 9%. The royalty income offered by the assessee was @14% of the sales. The assessee has projected sale at ₹ 20,32,90,295/-. The royalty expenses was 7.16% of the sale, therefore, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce for the year under consideration and we decide the appeal on merit. 7. The Ld. AR submitted that the assessee is engaged in business of providing technology know-how for manufacturing chemical product relating to Pulp and Paper product. The assessee has arrived royalty income on account of providing technical know-how purchase from holding compay M/s Hercules U.S. As per agreement the assessee needs to pay royalty of 5% on net sale value of product sold apart from wholesome amount of US$ 2,00,000/- spread over a period of 10 years. The assessee entered into service agreement dated 01/07/2007 with M/s Hercules Asia Pacific Shanghai Regional Company Ltd. and as per the agreement the assessee needs to receive service fee at cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the CIT(A) has held that the assessee is earning income of 5% and 14% on other product and he worked out notional margin of 9%. 9. The Ld. AR submitted that the similar disallowance was made in AY 2008-09 which were deleted by Commissioner of Income Tax (Appeals) speaking order and which were confirmed by the Tribunal. Therefore, this appeal may be allowed. 10. The Ld. DR submitted that the CIT(A) has verified Clause 7 was asked agreement wherein it is indicated that CBC will pay the assessee of 5% of net value of Hercon Product manufacturing and sold. The licensee will pay the royalty to licensor. The copy of the agreement did not find a place product Hercon and Impress. Therefore, considering the same the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in AY 2008-09 by the AO has disallowed the royalty income of ₹ 23,66,000/- and when the matter travelled to CIT(A) and CIT(A) has deleted this addition by observing as under: 6. I have gone through the Remand report and also the submissions made by the appellant. It is seen that the appellant has entered into original agreement in the year 2003 and the subsequent amendments were entered into in the year 2005 which has been placed on record. The said agreements clearly states that on products Hercon and impress, royalty is 5% and for other products it is 14%. Regarding the tow agreements not being registered, I agree with the appellant s contention that registration of the agreement is not necessary and the amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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