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TMI Blog2019 (7) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... logy [P] Ltd Vs. CIT [ 2012 (10) TMI 435 - ITAT PUNE] Treatment of rental income as income from other sources - receipts from its factory building at Gurgaon - whether leave and licence agreement is not similar to lease rental agreement - HELD THAT:- There is no dispute that the factory building owned by the assessee was let out to M/s Anand Engines Component Ltd., for which the assessee earned rental income of ₹ 47.26 lakhs. Whether there existed leave and licence agreement and not rental agreement would not change the colour of receipts in the hands of the assessee. The undeniable fact is that the assessee has earned rental income from letting out its property and the same has to be taxed under the head income from house property eligible for deduction as per the provisions of section 24. We, accordingly, direct the AO to tax rental income under the head income from house property as per provisions of law MAT credit claimed - HELD THAT:- MAT credit has to be allowed to the assessee as per the provisions of law and after considering the provisions and the assessment history of the assessee. We, accordingly, direct the AO to allow MAT credit as per prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter profitability - capital OR revenue expenditure - HELD THAT:- The undisputed fact is that by virtue of agreement with its AEs, the assessee has only acquired limited rights to use the information for the purpose of production of products in India. There is also no dispute that the assessee merely acquired a right to use technical information provided by the owners of the technical know-how. The ownership/proprietary rights in the technical know-how continue to vest in lithe censor and the assessee is not authorised to transfer, assign or convey the know how/technical information to any third party and therefore, the assessee acquired a limited right to use and exploit the know-how. In our considered opinion, payment of royalty was for mere use of technical know-how, not resulting in any enduring benefit in the capital field, the same has to be allowed as revenue expenditure. - ITA No. 314/DEL/2015, ITA No. 6679/DEL/2014 - - - Dated:- 4-7-2019 - Shri N.K. Billaiya, Accountant Member, And Ms. Suchitra Kamble, Judicial Member For the Assessee : Shri Ajay Vohra, Sr. Adv, Shri Anshul Sachar, Adv And Shri Karan Jain, CA For the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit Tax [FBT], therefore, expenditure cannot be disallowed. It is the say of the ld. AR that once a FBT has been paid, no disallowance can be made. 8. On the other hand, the ld. DR strongly supported the findings of the AO. 9. We have given a thoughtful consideration to the orders of the authorities below. The Assessing Officer, at para 11.1 of his order, has himself accepted that 50% of the gift as eligible expenditure and, therefore, we fail to understand why balance 50% has been disallowed. Moreover, there is no dispute that the assessee has paid FBT @ 50%. Now it is a settled position of law that no disallowance can be made once expenses are exigble to FBT. Our view is supported by the decision of the co-ordinate bench in the case of BG Shirke Construction Technology [P] Ltd Vs. CIT ITA No. 1430/PROVISIONS /2010 vide order dated 17/07/2012 wherein it has been held as under: As the CBDT explaining the provisions regarding the FBT makes it clear that FBT is levied on the expenses incurred by the employer irrespective of whether the same are incurred for official or personal purposes. Once FBT is levied on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of the assessee. The undeniable fact is that the assessee has earned rental income from letting out its property and the same has to be taxed under the head income from house property eligible for deduction as per the provisions of section 24 of the Act. We, accordingly, direct the Assessing Officer to tax rental income under the head income from house property as per provisions of law. Ground No. 3 is, accordingly, allowed. 17. Ground No. 4 relates to MAT credit claimed amounting to ₹ 72,30,482/-. 18. We are of the considered opinion that MAT credit has to be allowed to the assessee as per the provisions of law and after considering the provisions and the assessment history of the assessee. We, accordingly, direct the Assessing Officer to allow MAT credit as per provisions of law after considering the provisions and the assessment history of the assessee. Ground No. 4 is allowed for statistical purposes. 19. As a result, the appeal filed by the assessee is partly allowed for statistical purposes. ITA No. 6679/DEL/2014 [Revenue s appeal] 20. Representatives of both the sides were h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamation or demerger, whereas the facts of the case in hand show that the manufacturing unit at Parwanoo, HP continued to belong to the assessee and it is only M/s Mahle Filter systems [India] Ltd which amalgamated with the assessee M/s Purolator India Ltd and only the name has been changed to M/s Mahle Filter systems [India] Ltd. Accordingly, even consequent to the amalgamation, the unit at Parwanoo was still owned and managed by the assessee in the same manner as it was managed prior to amalgamation. Considering the correct facts in true perspective, we do not find any error or infirmity in the findings of the CIT(A). Ground Nos. 1 and 4 raised by the revenue stand dismissed. 26. Ground No. 2 relates to the deletion of disallowance of ₹ 64,23,771/- for the purpose of calculating deduction u/s 80IC of the Act. 27. During the course of scrutiny assessment proceedings, on perusal of the profit and loss account of the Purwanoo Unit, the Assessing Officer observed that the assessee has disclosed Other Income of ₹ 64,23,771/- which consisted of rent receipts, interest receipts, scraps as well as discount received and foreign exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al selling price to the Head Office from where the goods were sold to retail customers. The cost incurred by the Head Office in the undertaking such sales were allocated to the Parwanoo unit. While scrutinising the return of income, the Assessing Officer was of the firm belief that the assessee has shifted the profit of the head office to the Parwanoo unit. Since the head office may have incurred such expenses in selling such goods, the Assessing Officer was of the opinion that the stock transfer price is required to be recomputed to derive correct profit from the undertaking as per provisions of section 80IC(7) r.w.s 80IA(10) of the Act. Accordingly, the Assessing Officer recomputed the profit derived from the Parwanoo unit at ₹ 8 crores and recomputed the deduction u/s 80IC of the Act. 32. Before the CIT(A), the assessee strongly contended that the finding of the Assessing Officer regarding net profit earned by the head office is on the basis of assumption that sale is accounted in the head office. It was explained that the head office is only facilitating the sales for respective units. It was further explained that he expenses incurred in the head office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strongly agitated the matter before the CIT(A) and explained that it is engaged in the business of manufacturing and trading of automotive and industrial filters where technology is constantly changing and evolving and for which it entered into Technical Assistance Agreement with Mahle Filter Systems GmbH and Mahle Tennex Corp, Japan for obtaining know-how to manufacture automotive and industrial accessories, for which it paid royalty of ₹ 32,34,071/-. It was explained that pursuant to such agreement, the assessee only acquired limited rights to use the information for the purpose of production of the products in India. It was brought to the Notice of the CIT(A) that grant of license is non transferable and without the right to sublicense. Since the payment of royalty in terms of the agreement was for mere use of the technical know-how, and day to day technical assistance not resulting in any enduring benefit in capital field or acquisition or creation of capital asset, the same was consistently treated as revenue expenditure. 41. After considering the facts and detailed submissions of the assessee and after drawing support from various judicial decisions dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court. On the other hand, the facts of the assessee's case are identical to the facts before the Hon'ble Jurisdictional High Court in the case of Climate Systems India Ltd. (supra) and Sharda Motor Industrial Ltd. (supra) and also the decision of ITAT in assessee's own case cited supra. We, therefore, respectfully following the above decisions of Hon'ble Jurisdictional High Court, hold that the annual payment of royalty was a revenue expenditure. Accordingly, ground No.6 of the assessee's appeal is allowed. 46. This decision of the co-ordinate bench has been upheld by the Hon'ble High Court of Delhi in 372 ITR 481 wherein the Hon'ble High Court has, in detail, considered the decision given in the case of J.K. Synthetics [supra]. Considering the facts of the case in totality, we do not find any reason to interfere with the findings of the CIT(A). However, depreciation allowed by the Assessing Officer has to be withdrawn since the impugned payment is being allowed as revenue expenditure. Ground No. 5 of the revenue stands dismissed. 47. In the result, the appeal of the assessee in ITA No. 314/DEL/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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