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TMI Blog2018 (7) TMI 1461X X X X Extracts X X X X X X X X Extracts X X X X ..... gn exchange fluctuation loss, tours and travelling expenses, deprecation as intangible assets and administrative expenses - Held that:- AO did not allow claim of netting off of sub licence fees because the assessee in its return filed u/s 139 had shown the licence fees received from the two parties mentioned elsewhere on gross basis. AO did not allow the claim of royalty payment to Shri Ashok Chaturvedi since in the profit and loss account filed with the return of income u/s 139 of the Act the assessee had claimed ₹ 2,90,57,352/- which was debited to the profit and loss account. We find that the AO is simply carried away by treating the return filed u/ss 139 and 153A of the Act as separate returns for deciding the claim of the assessee. Since the return filed before the date of search did not attain finality, return filed u/s 153A of the Act has to be treated as having been filed for the first time and claim of deduction has to be considered only and only on the basis of income computed for filing return u/s 153A of the Act. The action of the AO/CIT(A) is not only erroneous but also against the relevant provisions of the law. - Decided in favour of assessee - ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from licensing of technical know-how, i.e. royalty not on the gross basis but on net basis after adjusting the royalty paid for that also. The aforesaid additional ground does not require the elaboration of any new facts other than the facts already available on record. The fact of the case is that the assessee had acquired technical know-how for the manufacture of Slider Zipper assembly and a Zipper Slider assembly with diaphragm for flexible packages products from Mr. Ashok Chaturvedi vide Agreement dated 21st July 2003. As per clause No. 2.2 of the Agreement, the appellant was permitted sub-license know-how and technical knowledge to other parties in India or abroad as per prior consent and consideration for this right to license. Later on, vide Supplementary Agreement dated 25th July 2003, Mr. Ashok Chaturvedi permitted the appellant to sublicense such technical know-how to other parties subject to a minimum payment of ₹ 25 lakhs per month. Thereafter, the appellant shared such technical know-how with other parties, i.e. M/s Flex Industries Ltd., NOIDA and M/s Golden Dirham, UAE. During the year under consideration, the Assessing Officer, while comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further noticed that the revised return filed on 31.03.2006 was at an income of ₹ 7,67,16,085/- after claiming deduction 80IC amounting to ₹ 1,46,53,774/-. The AO found that the revised income was computed by the assessee after excluding the income of ₹ 844,18,024/- received by him on account of licence fees and the same was excluded from the deduction claimed u/s 80IC of the Act. The AO further found that in the return filed u/s 153A of the Act, the assessee has declared income of ₹ 6,76,43,647/- after claiming deduction u/s 80IC amounting to ₹ 2,37,26,211/-. According to the AO, the assessee has increased the amount of deduction claimed u/s 80IC over the earlier figure of ₹ 1,46,53,774/-. The AO was of the firm belief that by doing so, the assessee has manipulated its books of account. The AO was further of the opinion that the assessee again filed a return u/s 153A of the Act showing lesser income than that declared in the return filed u/s 139 of the Act. 7. The first issue needs to be addressed is can the assessee do so what he has done and which is not in accordance with the law as per the AO. 8. The relevant provisions of section 153A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the lower authorities is unlawful and is accordingly set aside. 11. The next bone of contention relates to the exclusion of income received on account of licence fees from the deduction earlier claimed u/s 80IC of the Act along with the exclusion of the expenditure claimed on account of foreign exchange fluctuation loss, tours and travelling expenses, deprecation as intangible assets and administrative expenses. 12. Facts relating to this issue relates to the Memorandum of Agreement between Shri Ashok Chaturvedi and the assessee made on 21/07/2003 which is exhibited at pages 92 to 97 of the paper book wherein it has been mentioned that Shri Ashok Chaturvedi has gained substantial extensive experience in manufacturing of flexible packaging and its related activities and is developing /inventing new technical know-how pertaining to product and is willing and desirous to licence and transfer the technology and know-how for commercial exploitation to the assessee. The consideration was fixed at lumpsum one-time payment of ₹ 60 lakhs by issue and allotment of ₹ 6 lakhs equity shares of ₹ 10 each in the assessee company and royalty payment @ 2.50 per meter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile scrutinising the return filed u/s 153A of the Act, only ₹ 40,57,352/- has been claimed to have been incurred in baddi unit while remaining ₹ 2.50 crores has been shifted to corporate unit and the AO has held that there are no two units and baddi unit and corporate unit are one and the same. The AO further found that the depreciation of ₹ 15 lakhs has been claimed on lumpsum one-time payment of ₹ 60 lakhs for technical know-how and administrative expenses of ₹ 42,74,051/- has been claimed as deduction from sub-licence fee for enhancing the amount of deduction u/s 80IC of the Act over the amount that had already been claimed in the revised return u/s 139 of the Act. 17. We find that the AO is simply carried away by treating the return filed u/ss 139 and 153A of the Act as separate returns for deciding the claim of the assessee. 18. As mentioned elsewhere, since the return filed before the date of search did not attain finality, return filed u/s 153A of the Act has to be treated as having been filed for the first time and claim of deduction has to be considered only and only on the basis of income computed for filing return u/s 153A of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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