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TMI Blog2018 (6) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO to decide the same as directed. Disallowance u/s 40A(2)(b) - Held that:- for making disallowance u/s 40A(2)(b) AO has to demonstrate the excessive or unreasonable payment in the current year also vis a vis the market rate of such services. The AO has failed to prove that payment is unreasonable and excessive and we, therefore, following the co-ordinate bench of the Tribunal and maintaining the consistency with the earlier year, dismiss the ground raised by the Revenue. Disallowance of depreciation on testing equipment provided to laboratories and hospitals free of charge - Held that:- the issue involved is squarely covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in [2014 (2) TMI 978 - ITAT MUMBAI] for A.Y. 2002-03 wherein it has been held that the assessee is entitled to the depreciation on testing equipments provided to the laboratories and hospitals free of charge - thus decided against the revenue. Technical knowhow royalty payment @ 2%/4% instead of 1% - Held that:- the issue is covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in [2014 (2) TMI 978 - ITAT MUMBAI] for A.Y. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) erred in allowing the technical knowhow royalty payment @ 2%/4% instead of 1% as done by the TPO. 8. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition on account of tax and R D cess paid on know-how royalty on traded finished goods and manufactured products. 9. The appellant prays that the order of the ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. 10. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. The issue raised by the Revenue in ground No.1 is against the deletion of addition of ₹ 2,67,88,516/- by the Ld. CIT(A) as made by the AO towards unaccounted production and sale. At the outset, the Ld. Counsel of the assessee submitted before the Bench that the issue is covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in assessee s own case in A.Y. 2002-03. The Ld. Counsel further submitted that the appeal filed by the Revenue in A.Y. 2002-03 against the said order of the Tribunal stands dismissed by the Hon ble Bombay High Court, a copy of which is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication in the light of the provisions of section 145A. The Assessing Officer is also directed to give corresponding benefit in the opening stock in view of the judgment of Jurisdictional High Court in CIT vs. Mahalaxmi Glass Works P. Ltd. (2009) 318 ITR 116 (Bom) and the judgement of Delhi High Court in Mahavir Alluminium Ltd. (2008) 297 ITR 077 (Del). Thus, ground no.2, is allowed for statistical purposes. Respectfully following the decision of the Tribunal, we restore this issue back to the files of the AO. The AO is directed to decide this issue afresh in the light of the direction of the Tribunal mentioned hereinabove. Ground No. 1 to 3 raised by the assessee are allowed for statistical purpose. 7. The Hon ble Bombay High Court has not entertained the appeal raising a substantial question of law filed by the Revenue against the decision of the co-ordinate bench of the Tribunal on this issue. We, therefore, following the decision of the Tribunal, restore this issue back to the file of the AO to decide the same as directed hereinabove. 8. The issue raised in ground No.3 is against the deletion of addition by Ld. CIT(A) relating to the disallowance as made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Jurisdictional High Court stands before the dismissed. 10. The issue raised in ground No.4 is against the decision of Ld. CIT(A) allowing the depreciation on testing equipment provided to laboratories and hospitals free of charge even though such testing instruments were not used by the assessee in his business. 11. We have heard the rival submissions of both the parties and perused the material on record. During the course of hearing both the parties agreed that the issue involved is squarely covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in ITA No.4092/M/2007 for A.Y. 2002-03 order dated 28.08.2013 wherein it has been held that the assessee is entitled to the depreciation on testing equipments provided to the laboratories and hospitals free of charge. The relevant extract is reproduced as under: 82. Ground No. 12 relates to depreciation on testing equipments amounting to ₹ 34,50,441/-. This issue has been considered by the AO at para-14 on page-17 of his order and the Ld. CIT(A) has considered the same at para-20 on page-25 of his order. 83. A similar issue came up for hearing before the Tribunal in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance by the assessee on the decision of the Tribunal in the case of Dresser Rand India Pvt. Ltd. in ITA No. 3509/M/08 is well founded. Considering the entire facts in totality in the light of the brand usage agreement and the approval of the RBI, the findings of the Ld. CIT(A) is set aside. The AO is directed to delete the addition of ₹ 60,00,000/-. Ground No. 13 is allowed. 15. Since the issue in hand is identical to one as decided by the co-ordinate bench of the Tribunal, we, therefore, respectfully following the same dismiss the ground raised by the Revenue. 16. The issue raised in ground No.6 is against the deletion of adjustment by the Ld. CIT(A) as made by the AO towards payment of royalty on traded finished goods made by the assessee to J J US. 17. We have heard the rival submissions of both the parties and perused the decisions cited by the Ld. A.R. After perusal of the said order, we find that the issue is covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in ITA No.4092/M/07 for A.Y. 2002-03 order dated 28.08.13 which was conceded by the ld DR. The operative part is reproduced as under: 49. We have considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A). Ground No. 2 is accordingly dismissed. 21. Since the issue in hand is identical to one as decided by the co-ordinate bench of the Tribunal, we, therefore, respectfully following the same dismiss the ground raised by the Revenue. 22. The issue raised in ground No.8 is against the deletion of addition on account of tax and R D cess paid on know-how royalty on traded finished goods and manufactured products. The Ld. A.R. pointed that the issue is covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in ITA No.4092/M/07 for A.Y. 2002-03 order dated 28.08.13 which was fairly conceded by the Ld. D.R. 23. We have perused the said decision which is in favour of the assessee. The operative part is extracted below: 41. Ground No. 16 relates to the disallowance of tax and R D cess paid on technical know-how royalty. 42. The TPO has disallowed the withholding tax and R D Cess and technical knowhow royalty. The Ld. CIT(A) has confirmed the decision of the TPO holding that withholding tax and R D Cess can only be allowed only to the extent they are payable on allowable royalty. As we have already held elsewhere that r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the Government of Maharashtra through the implementing agency Ckom and the assessee. Under the said scheme the assessee repaid the sales tax loan prior to the due dates by making payments at the discounted rate i.e. at net present value. Under the said scheme the net present value of the sales tax liability as repaid till financial year 2003-04 was ₹ 7,72,28,628/- against the outstanding of ₹ 13,41,89,000/-. Thus the difference of liability as on 31.03.03 ₹ 5,69,60,373/- was written back during the year as not being payable anymore. The said amount was not offered to tax by the assessee as the same is a capital receipt. The AO did not find the reply of the assessee satisfactory and added the same to the income of the assessee. The first appellate authority also allowed the appeal of the assessee. The Ld. CIT(A) allowed the appeal of the assessee by holding that the remission of sales tax liability is not chargeable to tax as business income of the assessee under section 41(1) of the Act. We have perused the decision cited before us in the case of CIT vs. Sulzer India Ltd. (supra) wherein the Hon ble Bombay High Court has held that where the assessee has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Raricap tablet at ₹ 16.24. Immediately thereafter, the assessee on 19th August 1996, filed a detail reply that price of ₹ 25, was approved under DPCO, 1987 and, therefore, requested the Government to furnish the cost data so that the revised application can be filed. Subsequently, on 30th March 1997, the assessee discontinued to manufacture Raricap tablet. On 24th September 1998, a notice was issued from NPPA determining the total over charged amount of ₹ 5.32 crores from the period of August 1996 to August 1998. Against the said notice, the assessee filed Writ Petition before the Delhi High Court. The Delhi High Court, vide its judgment dated 23rd November 1998, passed an interim order and directed the assessee to deposit ₹ 1.50 crores with NPPA till the disposal of the Petition. On 10th December 1998, payment of ₹ 1.50 crores was paid to NPPA based on such interim order of the High Court. From the records, it is seen that the assessee has been regularly filing replies to the NPPA for giving justification for reducing the price and the working of the cost. However, without reverting to the assessee's reply on 1st November 2002, a revised order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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