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TMI Blog2023 (7) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the contention raised by the appellant before him and distinguishing the citations relied upon in support thereof. In our view, such a cryptic and non-speaking order of the CIT(A) is against the principles of natural justice and bad in law. We consider it deem fit to restore back the matter to the file of the Ld. CIT(A) to adjudicate the appeal afresh on the issue of claim of royalty expense after considering the written submission and evidences filed on record and may be filed before him during the fresh proceedings after granting sufficient opportunity of being heard to the assessee - I.T.A. No. 84/Asr/2023 - - - Dated:- 12-5-2023 - Dr. M. L. Meena, Accountant Member And Sh. Anikesh Banerjee, Judicial Member For the Appellant : Sh. P. N. Arora, Adv. For the Respondent : Sh. Radhey Shyam Jaiswal, Sr. DR ORDER PER DR. M. L. MEENA, AM: This appeal has been filed by the assessee against the order of the Ld. CIT(A) National Faceless Appeal Centre (NFAC), Delhi dated 31.01.2023 in respect of Assessment Year: 2014-15. 2. The assessee has raised the following grounds of appeal: 1. That the Assessing Officer as well as CIT (A) failed to pass a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as under: 5. DECISION: I have gone through the submission of the appellant. Here, Ld. PCIT, Jalandhar has passed order u/s 263 of the Income Tax Act where proper reply of royalty charges worth Rs. 27,04,192/- was not investigated by the Assessing Officer. Hence, the order of the Assessing Officer was clearly erroneous and prejudicial to the interest of revenue. 5.1 Hence, both the limbs of Malabar Industrial Co. Vs. CIT 243 ITR 83 (S.C.) are satisfied. Hence, the Assessing Officer is justified in making addition on the basis of judgment of Hon ble Supreme Court in the case of Southern Switch Gear 232 ITR 359 (S.C.). 5.2 Hence, the order of the Assessing Officer is confirmed and the appeal of the appellant is dismissed. 6. The Ld. Counsel for the appellant reiterated the submissions made before the Ld. CIT(A) as under: That during the year we have paid the royalty to M/s Kamdhenu Ispat Ltd to the tune of Rs 2704192/- for the use of trade mark @ 1% of sales or minimum of Rs 200000/- per month, as per annexture-1 of the License user Agreement. That the relevant extract of the Annexure -1 to the agreement is as under: 1) The Second Party shall use the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been settled that if the right to use the trade mark terminates after the expiry of the agreement in those cases royalty should be allowed as revenue expenses, but the A.O without appreciating the case laws brought to his knowledge made the addition with is bad in law and should be quashed That the facts of the case followed by the Pr Commissioner of Income Tax U/s 263 as well s by the Assessing officer in 143(3)/263 Proceedings are as under: M/s Southern Switch Gear Ltd (232 ITR 359) The assessee-company entered into a collaboration agreement with a foreign company by names Messrs. Brush Electrical Engineering Co. Ltd., U.K., December 12, 1963. Under the said agreement, The foreign company agreed to provide the assessee-company a) Technical information in the manufacture of low tension switchgear, high tendon switchgear, etc., b) The right to sell such products. a) The foreign company also agreed to keep the Indian company posted with the latest and modern developments in the field of manufacture of switchgears and transformers b) And to trains the necessary personnel at the U.K. factory, etc. Under the said agreement, the assessee-company ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is requested your good self that the addition made by the A.O should be deleted. Now coming to application of Sec 263 and making the proceedings under section 143(3)/263 of Income Tax Act. It is held by various courts that an order is not erroneous if it is not a case of no inquiry If an order is passed after making inquiry on an issue and after having examined the replies of the Assessee with due application of mind, it is not the case where no inquiry was made. Therefore, such a case cannot be treated as a case of no inquiry and thus proceedings u/s 263 of the Act cannot be initiated in such a case. Further, an assessment order should not be subject to revision u/s 263 merely because another view is possible on the issue decided by the AO. I would like to draw your kind attention to following judgments including that of the Supreme Court has decided this issue in favour of Assessee: Supreme Court in the case of Greenworld Corporation - [200G] 181 Taxman 111 (SC) Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. - [2012] 28 taxmann.com 273 Delhi High Court in the case of CIT v. Anil Kumar Sharma - [2010] 194 Taxman 504 (Delhi) La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the appellant before him. The Grievance of the assessee has been pertaining to its claim of royalty as revenue expense but the Ld. CIT(A) has not even touched the word of royalty and thus, the issue of royalty claimed as a revenue expenditure, the peculiar fact of the instant case remain unaddressed by the Ld. CIT(A). It is noted that the CIT(A) has merely stated in its judgment that hence, both the limbs of Malabar Industrial Co. Vs. CIT 243 ITR 83 (S.C.) are satisfied. Hence, the Assessing Officer is justified in making addition on the basis of judgment of Hon ble Supreme Court in the case of Southern Switch Gear 232 ITR 359 (S.C.). However, the CIT(A) is liable to pass a speaking order on merits by rebutting the contention raised by the appellant before him and distinguishing the citations relied upon in support thereof. In our view, such a cryptic and non-speaking order of the CIT(A) is against the principles of natural justice and bad in law. 9. In the above view, we consider it deem fit to restore back the matter to the file of the Ld. CIT(A) to adjudicate the appeal afresh on the issue of claim of royalty expense after considering the written submission and evi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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