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TMI Blog2018 (5) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... ounded off). Since the expenditure was non-operating in nature, the assessee had disallowed the same while computing the income in order to claim markup on such operating costs. The Tribunal, therefore, was of the opinion that the issue was in tune with Para4 of the Agreement, under which the associate enterprise had agreed to reimburse the assessee the operational costs and besides others, 05% markup on such operational costs. We are partly in agreement with the view of the Tribunal and no question of law arises in this respect and therefore, they are not considered. - R/Tax Appeal No. 243 of 2018 With Civil Application (OJ) NO. 1 of 2018 With R/Tax Appeal No. 239 of 2018 With R/Tax Appeal No. 244 of 2018 With R/Tax Appeal No. 245 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od ? 2(1A) Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts in holding that no markup is required to be charged on the diferred revenue expenditure of ₹ 70.98 lacs ignoring the expressed terms of the agreement between the assessee and its AE by which the cost on which the markup is to be charges includes all the associated costs directly or indirectly including the deferred revenue expenditure ? 2(1B) Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts in holding that the deferred revenue expenditure has no connection with R D activities of the assessee ignoring the terms and conditions of agreement under which even the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred revenue expenditure of ₹ 70,98,036/for the year under consideration. 4. The CIT(A) confirmed the view of the Assessing Officer, upon which the assessee approached the Tribunal. The Tribunal deleted such component by principally holding that the expenditure in question was preoperative expenditure and not operational cost and therefore, was not covered under the said Clause of Para4 of the Agreement. The Tribunal was of the opinion that the assessee had suo motu disallowed such expenditure nor considered any operational cost for receiving 05% markup from the associate enterprise. The Tribunal, in the process, observed as under; 8.16 We notice that assessee started its commercial production in January 2002 and had incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of commercial operation in January 2002 and it was not towards any specific research and development project and has also not been recovered from the AE. It is also relevant to note that as per the agreement entered into by the assessee with AE, it is only entitled to recover the operating cost connected with the research project. The relevant extract of the agreement is reproduced below; 4. Compensation for Research Project: SABIC will reimburse SRTPL for the actual costs of each Research Project according to the following criteria: ( a) Reimbursable Operating Costs : SABIC will reimburse SRTPL for all operating costs incurred and reasonably allocate to each Research Project, in accordance with the following: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. It was accounted as deferred revenue expenditure for the year under consideration, which came to ₹ 70.98 lakhs (rounded off). Since the expenditure was nonoperating in nature, the assessee had disallowed the same while computing the income in order to claim markup on such operating costs. The Tribunal, therefore, was of the opinion that the issue was in tune with Para4 of the Agreement, under which the associate enterprise had agreed to reimburse the assessee the operational costs and besides others, 05% markup on such operational costs. We are partly in agreement with the view of the Tribunal and no question of law arises in this respect and therefore, they are not considered. 6. Learned advocate Mr. B.S. Soparkar waived not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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