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TMI Blog2020 (1) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... compute the sub-licensing fee by way of excluding on net basis after adjusting the royalty paid against income of sub-licensing. The assessee must provide all the information and the clauses to bifurcate the said sub-license fee from the original royalty payment. Thus, we remand back this issue to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Therefore, additional ground is partly allowed for statistical purpose. Addition u/s 68 being the customers advance received - HELD THAT:- CIT(A) observed that in the end of the year there was some debit balance against which the amount received, which the amount received, which was in excess of the amount due from these customers. Excess amount from the said two parties thereafter in the subsequent years and up till the conclusion of the CIT(A) s proceedings were stated to be outstanding. The CIT(A) held that there was no transaction of sales as well and neither these amounts were refunded to the above parties. The CIT(A) submitted that the assessee failed to submit the confirmation certificate from the said two parties either at the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no need to interfere with the same. Hence, Ground No. 2 of Revenue s appeal is dismissed. Refund of excise duty/Cenvat credit forming part of the manufacturing profit eligible for deduction u/s 80-IB - Whether excise duty refund/Cenvat credit is a capital receipt ? - HELD THAT:- The eligibility of excise duty refund was on account of establishment of new industrial undertaking in the State of Jammu Kashmir as an incentive to promote industrial activity in the State of Jammu Kashmir and is in the nature of capital subsidy not liable to tax. Thus, the said excise duty refund has to be excluded from the computation of Section 115JB of the Act as well as it is capital receipt. The decisions relied by the Ld. AR in case of Shri Balaji Alloys [ 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT is applicable in the present case. Besides in A.Y. 2006-07, this issue is decided in favour of the assessee by the Tribunal and the facts are identical in the present Assessment Year as well - Refund of excise duty/cenvat credit - Whether excise duty refund/cenvat credit is not a capital receipt, but a revenue receipt and liable to tax and consequently also did not exclude such receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of IT Act. 4. The Ld. CIT(A) erred in holding that refund of excise duty being a capital receipt is includible in determination of Book Profit u/s 115JB of the act. 5. The assessee craves the right to add, alter, amend, reduce, delete or withdraw any grounds of appeal arising out of this order. Additional Ground filed by the assessee That the Assessing Officer, while computing the deduction u/s 80-IB/80- IC of the Income-tax Act, 1961, ought to have excluded the income 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. ITA N o.4012/Del/2011 A.Y. 2007-08 (Revenue s appeal) 1. On the fact and in the circumstances of the case, the CIT(A) has erred in law and on facts in allocating expenses of ₹ 10,00,000/- against sub licensing income of ₹ 2,71,00,000/- which is excessive and unjustified. 2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of ₹ 51,52,216/-made by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to add, alter, amend, reduce, delete or withdraw any grounds of appeal arising out of this order. Additional Ground filed by the assessee That the Assessing Officer, while computing the deduction u/s 80-IB/80- IC of the Income-tax Act, 1961, ought to have excluded the income 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. ITA N o.610/Del/2012 A.Y. 2008-09 (Revenue s appeal) 1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in allocating expenses of ₹ 10,00,000/- against sublicensing income of ₹ 2,42,00,000/- which is excessive and unjustified. 2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance of claim for deduction of ₹ 4,11,74,224/- u/s 80-IB on account of Self Cenvat Credit availment. 3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that Excise duty refund is a capital receipt in na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in the circumstances of the case, the CIT(A) has erred in allocating expenses of ₹ 10,00,000/- against sublicensing income is excessive and unjustified. 2. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the disallowance of claim for deduction of ₹ 2,45,48,735/- u/s 80IB on account of self cenvat credit availment. 3. The Order of the CIT(A) is erroneous and is not tenable on facts and in law. 4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. ITA N o.4357/Del/2013 A.Y. 2010-11 (Assessee s appeal) 1. The Lower authorities have erred in holding that the minimum royalty payment of ₹ 3,00,00,000/- (Rupees Three Crores only) is not allocable for the sub licensing rights. 2. The lower authorities have erred in holding that minimum royalty of ₹ 3,00,00,000/- (Rupees Three Crores only) being a part of total royalty paid of ₹ 7,87,93,921/- is to be allocated to Jammu and Baddi manufacturing units. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs against earning of sub licensing fee and other corporate incomes. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in holding the income of ₹ 61,08,667/- on account of self cenvat credit as profit derived from the business of the industrial undertaking eligible for deduction us/ 80IB. 3. The order of the CIT(A) is erroneous and is not tenable on facts and in law. 4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. ITA N o.1327/Del/2015 A.Y. 2011-12 (Revenue s appeal) 1. The Lower authorities have erred in holding that the minimum royalty payment of ₹ 3,00,00,000/- (Rupees Three Crores only) is not allocable for the sub- licensing rights acquired as a result of such payment. 2. It is contended that the minimum royalty payment of ₹ 3,00,00,000/- (Rupees Three Crore only) was incurred in connection with the earning of sub- licensing rights. 3. The lower authorities have erred in holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the profits of Jammu and Baddi units for working out the eligible profits available for deduction u/s 80- IB/80-IC of IT Act. In the additional ground, the assessee admitted that the sub-licensing income is not income derived from the manufacturing activity of Jammu and Baddi unit, but while excluding the same from the profits of Jammu and Baddi unit, the same should not be excluded on gross basis but should be excluded after netting of the royalty paid because the sub-licensing income as received by the assessee on account of sharing of technology received from Mr. Ashok Chaturvedi is inextricably linked with the technology received from Mr. Ashok Chaturvedi. Had Mr. Ashok Chaturvedi not agreed to provide the technology, the assessee would not have been in a position to receive the sub-licensing income. Hence while excluding the sub-licensing income, it should be done on net basis. The Ld. AR also submitted that in case if additional ground is accepted, then there is no need to decide grounds No. 1 and 2 of the grounds of appeal. The Ld. AR submitted that in AYs 2004-05, 2005-06 and 2006-07, the assessee also raised such an additional ground and the same had been accepted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on net basis after adjusting the royalty paid against income of sub-licensing. The assessee must provide all the information and the clauses to bifurcate the said sub-license fee from the original royalty payment. Thus, we remand back this issue to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Therefore, additional ground is partly allowed for statistical purpose. 8. As regards to Ground No.3 relating to addition u/s 68 of IT Act being the customers advance received ₹ 4,31,376/-, the Ld. AR submitted that during the year under consideration, the assessee had received an amount of ₹ 55,83,993/- from five parties, the details whereof have been given in paragraph 17 of the Assessment Order. Out of the said amount, the CIT (Appeals) had given a relief amounting to ₹ 51,52,647/- being the amount of three parties because in subsequent year, such advances have been adjusted against the supplies made in subsequent years. The Ld. AR further submitted that however, in respect of the following two parties, the CIT (Appeals) had sustained the addition because no su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellate stage. Thus, the CIT(A) confirmed the additions to the extent of ₹ 4,31,376/-. From the perusal of the submissions made by the Assessee it can be found that the said sum amounting to ₹ 4,31,376/- has already been offered by the assessee in A.Y. 2011-12 and the same has already been assessed to tax. Since the assessee has already paid tax on the said amount in subsequent year, this addition does not survive. Hence, Ground No. 3 is allowed. 11. As regards to Ground No. 4 relating to exclusion of refund of excise duty/cenvat credit and being a capital receipt not includible while computing profit u/s 115-JB of IT Act, the Ld. AR submitted that the said ground has already been considered and disposed of in earlier year by Tribunal in ITA No. 901/Del/2009 and ITA No. 2179/Del/2009 vide its order dated 9.1.2019 for AYs 2005-06 and 2006-07 respectively in favour of the assessee. 12. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 13. We have heard both the parties and perused the material available on record. It is pertinent to note that the Tribunal in A.Y. 2005-06 and 2006-07 held that si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such parties are regular clients and advances so received have been adjusted against the supplies made in subsequent years and then had deleted the addition. However, such issue has arisen in the associate concern M/s Montage Enterprises Pvt. Ltd. in AY 2005-06 and AY 2006-07. The Hon ble Delhi High Court in the case of Montage Enterprises, after noticing such factual position, did not admit the grounds of appeal relating to the issues in appeal filed by the Department, and the SLP filed by the Department before the Hon ble Supreme Court has also been dismissed. 18. The Ld. DR relied upon the Assessment Order. 19. We have heard both the parties and perused all the relevant material available on record. From the perusal of the order of the CIT(A), it can be seen that the CIT(A) observed that the assessee had received such advances from three parties for the supplies to be effected in subsequent years. This facts is not denied by the Ld. DR. The CIT (Appeals), after verification from the account of subsequent years of such parties that such parties are regular clients and advances so received have been adjusted against the supplies m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is not liable to tax and even for the purpose of Section 115-JB of the Act has to be excluded. 24. The Ld. DR relied upon the Assessment Order and could not controvert the decision of the Tribunal in assessee s own case for A.Y. 2006-07. 25. We have heard both the parties and perused all the relevant material available on record. The eligibility of excise duty refund was on account of establishment of new industrial undertaking in the State of Jammu Kashmir as an incentive to promote industrial activity in the State of Jammu Kashmir and is in the nature of capital subsidy not liable to tax. Thus, the said excise duty refund has to be excluded from the computation of Section 115JB of the Act as well as it is capital receipt. The decisions relied by the Ld. AR in case of Shri Balaji Alloys (supra) is applicable in the present case. Besides in A.Y. 2006-07, this issue is decided in favour of the assessee by the Tribunal and the facts are identical in the present Assessment Year as well. Therefore, Ground No. 4 and 5 of the Revenue s appeal are dismissed. 26. In result, appeal filed by the Revenue being ITA No. 4012/Del/2011 A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Order and could not controvert the facts of the present assessment year with that of earlier assessment year. 32. We have heard both the parties and perused all the material available on record. It is pertinent to note that the Tribunal in A.Y. 2005-06 and 2006-07 held that similar issue has come up before the Tribunal in case of Montage Enterprises and the Tribunal decided this issue in favour of the assessee therein. The issue is identical to that of A.Y. 2007-08 which is decided by us hereinabove. There are no distinguishing facts mentioned by the Ld. DR in the present case (i.e. A.Y. 2008-09). Hence, Ground No. 5 of the assessee s appeal is allowed. 33. In result, appeal of the assessee being ITA No. 375/Del/2012 for A.Y. 2008-09 is partly allowed for statistical purpose. ITA NO. 610/DEL/2012 (DEPARTMENT APPEAL) AY 2008-09 34. As regards to Ground No. 1 of Revenue s appeal, the Ld. AR submitted that as explained in ground No. 1 of Revenue s appeal in Assessment Year 2007-08 (ITA No. 4012/Del/2011), the issue is identical in the present assessment year as well. The Ld. DR relied upon the Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3373/Del/2011). The Ld. DR relied upon the Assessment Order and order of the CIT(A), but could not controvert the identical issues to that of A.Y. 2007-08. 42. We have heard both the parties and perused all the relevant material available on record. The additional grounds taken by the Ld. AR is identical to that of A.Y. 2005-06 wherein the Tribunal admitted the said ground (order dated 20.03.2019). The issue herein is also identical to that of A.Y. 2007-08 which is decided hereinabove by us. In the present Assessment Year as well (A.Y. 2009-10) also the facts remains the same. Thus, we direct the Assessing Officer to compute the sub-licensing fee by way of excluding on net basis after adjusting the royalty paid against income of sub-licensing. The assessee must provide all the information and the clauses to bifurcate the said sub-license fee from the original royalty payment. Thus, we remand back this issue to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Therefore, additional ground is partly allowed for statistical purpose. 43. As regards to Grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see s contention that the sub-licensing income needs to be excluded on net basis after adjusting the royalty paid, therefore, this ground No. 1 of Revenue s appeal does not survive, hence dismissed. 49. As regards to Grounds No. 2 of revenue s appeal, the Ld. AR submitted that in grounds No. 4 and 5 of Revenue s appeal Assessment Year 2007-08 in ITA No. 4012/Del/2011 the issue is identical in the present assessment year as well. The Ld. DR relied upon the Assessment Order and could not controvert the facts of the present assessment year with that of earlier assessment year. 50. We have heard both the parties and perused all the relevant material available on record. The issue is identical to that of A.Y. 2007-08 which is decided by us hereinabove. There are no distinguishing facts mentioned by the Ld. DR in the present case (i.e. A.Y. 2009-10). Hence Ground No. 2 of Revenue s appeal is dismissed. 51. In result, appeal of the Revenue being ITA No. 471/Del/2012 for A.Y. 2009-10 is dismissed. ITA NO. 4357/DEL/2013 (ASSESSEE S APPEAL) AY 2010-11 52. The assessee company is engaged in the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts while computing the income u/s 115-JB of IT Act. This issue has already been decided by the Tribunal in assessee s own case in AY 2006-07 in ITA No. 2199/Del/2009 vide its order dated 20th March 2019. 57. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 58. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the eligibility of excise duty refund was on account of establishment of new industrial undertaking in the State of Jammu Kashmir as an incentive to promote industrial activity in the State of Jammu Kashmir and is in the nature of capital subsidy not liable to tax. Thus, the said excise duty refund has to be excluded from the computation of Section 115JB of the Act as well as it is capital receipt. The decisions relied by the Ld. AR in case of Shri Balaji Alloys (supra) is applicable in the present case. Besides in A.Y. 2006-07 as well as in A.Ys. 2007-08 and 2009-10 hereinabove, this issue is decided in favour of the assessee by the Tribunal and the facts are identical in the present Assessment Year as well. Therefore, Ground No. 4 and 5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions. 66. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 67. The Ld. AR submitted that Ground No.1 to 3 are identical to that of Ground No. 1 to 3 and additional grounds of assessee s appeal in AY 2007-08. The Ld. DR relied upon the Assessment Order and the order of the CIT(A), but could not distinguish the facts of the present case from that of A.Y. 2007-08. 68. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note here that the proposition of the Ld. AR that the sub-licensing fee, if any, ought to have been excluded on net basis after adjusting the royalty paid against income of sub-licensing because the sub-licensing income and royalty payment both have direct nexus with the know-how agreement, but excluding the direct nexus of sub-licensing to the manufacturing activity of the assessee. Thus, the Tribunal observed in A.Y. 2005-06 that the decision of Tribunal for A.Y. 2004-05 will not be applicable as from the beginning the sub-licensing fee is not directl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present Assessment Year as well. Therefore, Ground No. 4 and 5 of the assessee s appeal are allowed. 72. In result, appeal of the assessee being ITA No. 1856/Del/2015 for A.Y. 2011-12 is partly allowed for statistical purpose. ITA No.1327/Del/2015(DEPARTMENT APPEAL) AY 2011-12 73. As regards to Ground No.1 of Revenue s appeal, the Ld. AR submitted that as explained in ground No. 1 of Revenue s appeal in Assessment Year 2007-08 (ITA No. 4012/Del/2011), the issue is identical in the present assessment year as well. The Ld. DR relied upon the Assessment Order and could not controvert the facts of the present assessment year with that of earlier assessment year. 74. We have heard both the parties and perused all the relevant material available on record. The additional ground filed by the assessee is admitted by us, while accepting the assessee s contention that the sub-licensing income needs to be excluded on net basis after adjusting the royalty paid, therefore, this ground No. 1 of Revenue s appeal does not survive, hence dismissed. 75. As regards to Grounds No. 2 of revenue s appeal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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