DCIT, New Delhi v. M/s. Samtel Glass Ltd., New Delhi

ITA 2352/DEL/2010 | 2004-2005
Pronouncement Date: 25-03-2011 | Result: Dismissed

Appeal Details

RSA Number 235220114 RSA 2010
Assessee PAN AAACS2730C
Bench Delhi
Appeal Number ITA 2352/DEL/2010
Duration Of Justice 10 month(s) 7 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Samtel Glass Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 25-03-2011
Date Of Final Hearing 25-03-2011
Next Hearing Date 25-03-2011
Assessment Year 2004-2005
Appeal Filed On 18-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO.2351 TO 2353/DEL/2010 ASSESSMENT YEARS : 2003-04 2004-05 & 2006-07 DCIT CIRCLE 7(1) ROOM NO.312 3 RD FLOOR CR BUILDING IP ESTATE NEW DELHI. VS. SAMTEL GLASS LTD. (EARLIER KNOWN AS SAMCOR GLASS LTD.) 52 COMMUNITY CENTRE NEW FRIENDS COLONY NEW DELHI. PAN : AAACS2730C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.C. GARG CA REVENUE BY : SHRI GAJANAND MEENA CIT DR & SHRI AMRITH KUMAR DR ORDER PER I.P. BANSAL JUDICIAL MEMBER ALL THESE APPEALS ARE FILED BY THE REVENUE. THEY AR E DIRECTED AGAINST THE THREE SEPARATE ORDERS PASSED BY THE CIT (A) DATED 9 TH FEBRUARY 2010 FOR ASSESSMENT YEARS 2003-04 2004-05 AND 2006-07. 2. THE GROUNDS OF APPEAL FOR ALL THE YEARS ARE IDENTI CAL EXCEPT DIFFERENCE IN FIGURES. THE GROUNDS OF APPEAL FOR ASSESSM ENT YEAR 2003- 04 READ AS UNDER:- 1. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELE TING THE ADDITION OF RS.2 23 32 882/- MADE BY THE A.O. ON ACCOUNT OF ROYALTY PAID TO SAMSUNG CORNING CO. LTD. 2. THE APPELLANT CRAVES TO AMEND MODIFY ALTER ADD O R FOREGO ANY GROU ND OF APPEAL AT ANY TIME BEFORE OR DURING ITA NO.2351 TO 2353/DEL/2010 2 FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DUR ING THE HEARING OF THIS APPEAL. 3. THE FIGURES FOR OTHER ASSESSMENT YEARS AS EXISTING IN TH E GROUNDS OF APPEAL ARE AS UNDER: ASSESSMENT YEAR AMOUNT 2004-05.1.1 ` 2 27 36 933/- 2006-07.1.1 ` 1 45 38 867/- 4. AT THE OUTSET IT WAS SUBMITTED BY LEARNED AR THAT THE ISSUE IN THE PRESENT APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE B Y THE EARLIER DECISIONS OF THE TRIBUNAL. REFERENCE IN THIS REGARD W AS MADE TO THE ORDER OF THE TRIBUNAL DATED 24 TH JULY 2009 IN ITA NOS.3327/DEL/2004 AND 1750/DEL/2005 FOR ASSESSMENT YEARS 1999-2000 AND 200 0-01 RESPECTIVELY (ASSESSEES APPEALS) AND ITA NO.3226/DEL/2004 AND 2244/DEL/2005 FOR ASSESSMENT YEARS 1999-2000 AND 2000-01 (DEPARTMENTS APPEALS). IT WAS FURTHER SUBMITTED THAT THE VIEW TAKEN BY THE TRIBUNAL HAS ALSO BEEN CONFIRMED BY THE HONBL E DELHI HIGH COURT VIDE ORDER DATED 26 TH NOVEMBER 2010. COPY OF BOTH THESE ORDERS ARE PLACED ON RECORD AND WERE ALSO GIVEN TO LE ARNED DR. 5. TO APPRECIATE THE CONTROVERSY AND FACTS REFERENCE CAN BE MADE TO THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2003-04. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS INCURRED A N EXPENDITURE OF ` 2 23 32 882/- ON ACCOUNT OF ROYALT Y PAYMENT TO SAMSUNG CORNING CO. LTD. THE ASSESSEE CLAIMED THE SAID SU M AS ROYALTY PAID DURING THE PREVIOUS YEAR AS PERCENTAGE O F SALES AS PROVIDED IN THE AGREEMENT ON THE BASIS OF THAT IT IS A REVENUE EXPENDITURE. ACCORDING TO THE ASSESSING OFFICER SUCH P AYMENT HAS GIVEN THE ENDURING BENEFIT TO THE ASSESSEE. THE ASSESSING OFFICER MADE REFERENCE TO EARLIER ASSESSMENT YEARS WHERE SIMILAR ADDITIONS WERE MADE BY THE ASSESSING OFFICER. HE ALSO OBSERVED THA T THE CIT (A) ITA NO.2351 TO 2353/DEL/2010 3 HAS DELETED SUCH ADDITION AND THE DEPARTMENT HAS PREFE RRED APPEALS BEFORE ITAT AND SINCE HE COULD NOT DIFFER WITH THE E ARLIER OBSERVATIONS OF THE ASSESSING OFFICER THEREFORE HE MADE SUCH ADDITI ON. BEFORE CIT (A) IT WAS SUBMITTED THAT SIMILAR ADDITION WAS MADE IN RESPECT OF ASSESSMENT YEAR 2005-06 WHICH WAS DELETED BY CIT (A) AND HIS ORDER WAS UPHELD BY ITAT G BENCH AND COPY OF THOSE ORDERS WERE SUBMITTED TO THE CIT (A). IT WAS ALSO SUBMITTED THAT FOR 2001-0 2 SIMILAR ADDITION WAS DELETED BY THE CIT (A) HIMSELF AND FOLLOWING THAT ORDER LEARNED CIT (A) HAS DELETED THE ADDITION. THE REVENUE IS AGGRIEV ED HENCE IN APPEAL. 6. IT IS SEEN THAT FOR ASSESSMENT YEAR 1999-2000 AND 2000 -01 THIS ISSUE HAS BEEN DEALT BY THIS TRIBUNAL AS PER PARA 10 TO 10.1 THE RELEVANT PORTIONS OF THE TRIBUNAL IN THIS REGARD ARE REPRODUCED BELOW:- 10. IN REGARD TO GROUND NO.2 IN ITA NO.3226/DEL/200 4 WHICH IS SIMILAR TO GROUND NO.1 IN ITA NO.2244/DEL/2005 WHIC H IS AGAINST THE DELETION OF DISALLOWANCE MADE BY THE ASSESSING AUTH ORITY ON ACCOUNT OF ROYALTY PAID TO CORNING CORPORATION IT WAS SU BMITTED BY THE LD. DR THAT THE ASSESSEE HAD PAID THE ROYALTY WHI CH WAS IN THE NATURE OF CAPITAL EXPENDITURE. IN REPLY THE LD. AR SUBMITTED THAT DURING THE ASSESSMENT YEAR 1998-99 THE ASSESSEE CLAIM OF DEDUCTION OF ROYALTY HAD BEEN VERIF IED AND THE ASSESSING AUTHORITY AFTER DUE APPLICATION OF HIS MIND A ND ON PERUSAL OF THE FACTS ALLOWED THE DEDUCTION. IT WAS HIS FURTHER SUBMISSION THAT THE EXPENDITURE HAD BEEN INCURRED IN CONNECTION WITH THE MANUFACTURING OF GLASS SHELLS/PANEL S AND NOT FOR SETTING UP OF THE ASSESSEES BUSINESS. THE PAYMEN T MADE BY THE ASSESSEE TO CORNING CORPORATION TOWARDS THE TECHNICAL KNOW HOW FEE FOR SETTING UP OF THE PLANT OF THE ASSESSEE WERE SEPARATELY CAPITALIZED IN THE BOOKS OF ACCOUNTS OF THE A SSESSEE FOR THE ASSESSMENT YEAR 1994-95. IT WAS THE SUBMISSION THAT THE FINDING OF LD. CIT (A) WAS TO BE UPHELD. 10.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF LD. CIT (A) SHOWS THAT THE LD. CIT (A) HAS CONSIDERED THE CLAUSES OF THE AGREEMENT OF THE ASSESSEE WITH M/S CO RNING CORPORATION. IT IS ALSO NOTICED THAT THE PAYMENT HAS BEEN MADE ON THE BASIS OF SALE PRICE. A PERUSAL OF THE AGREEM ENT ALSO SHOWS THAT OVER AND ABOVE THE LUMPSUM PAYMENT BY THE ASSESSEE THE ASSESSEE HAS PAID THE ROYALTY ON THE BASIS OF THE SALES FOR THE YEAR. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW ITA NO.2351 TO 2353/DEL/2010 4 THAT THE LD. CIT (A) WAS RIGHT IN HOLDING THAT THE ROYALTY PAID DURING THE YEAR WAS A REVENUE EXPENDITURE. IN THE CIRCUMSTANCES THE FINDING OF THE LD. CIT (A) ON THIS I SSUE STANDS CONFIRMED. 7. FURTHER THE ORDER OF THE TRIBUNAL DELETING THE ADDITION ON SIMILAR ISSUE HAS ALSO BEEN UPHELD BY THE HONBLE DELHI HIGH CO URT VIDE ITS ORDER DATED 26.11.2010. THE OBSERVATIONS OF THEIR LO RDSHIPS ARE AS UNDER:- ITA NO.520/2010 ROYALTY PAID BY THE ASSESSEE TO ITS PARENT COMPANY M/S SAMSUNG CORNING CO. LTD. WAS TREATED AS CAPITAL EXPENDI TURE BY THE ASSESSING OFFICER AND ON THAT BASIS ADDITION WAS MA DE. THE CIT (A) DELETED THE ADDITION HOLDING IT A REVENUE EXPEN DITURE. ORDER OF THE CIT (A) HAS BEEN CONFIRMED BY THE INCOME TAX APPELLATE TRIBUNAL IN THE FOLLOWING MANNER:- 3. WE HAVE HEARD THE PARTIES AND CONSIDERED THE RIVAL SUBMISSIONS. IN VIEW OF THE RESTRICTION IMPOSED BY THE AGREEMENT FORM TRANSFER OF ASSIGNMENT TO A THIRD PARTY AND THE FACT THAT THE ASSESSEE HAD BEEN MERELY GRANTED A NON-EXCLUSIVE LICENSE FOR THE USE OF TECHNICAL INFORMATION AND THERE BEING NO ACQUISITION OF ANY ASSET AS SUCH THE EXPENDITURE WOULD BE AN ALLOWABLE DEDUCTION AND IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. WAVIN (INDIA) LTD. 236 ITR 314 (SC) REFERRED TO BY THE CIT (A) IT WOULD NOT BE A CASE OF ACQUISITION OF ASSET. IT IS CASE OF RUNNING ROYALTY PAID ON THE BASIS OF PERCENTAG E OF SALES MADE BY THE ASSESSEE AND WOULD BE OF A REVENUE CHARACTER. THE ROYALTY PAYMENT IS FOR SERVICES IN RESPECT OF STAGE AFTER INSTALLATION OF THE PLANT AND ON THE SALE OF ITEM MANUFACTURED WITH THE HELP OF THE TECHNICAL INFORMATION. IN SUCH A CASE THE EXPENDITURE WOULD BE AN ALLOWABLE DEDUCTION EVEN AS PER THE DECISIONS OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF JYOTI ELECTRIC MOTORS LTD. 258 ITR 345 AND GUJARAT CARBON LTD. 254 ITR 294 AND ALSO IN THE CASE OF POWER BUILD LTD. 244 ITR 19 AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ALEMBIC CHEMICAL WORKS LTD. VS. CIT 177 ITR 377 AND CIT VS AQUA PUMP INDUSTRIES 218 ITR 427 (MAD). IN SUCH CIRCUMSTANCES IN OUR OPINION THE ORDER OF THE CIT (A ) IS JUST AND PROPER AND DOES NOT CALL FOR ANY INTERFERENCE. ITA NO.2351 TO 2353/DEL/2010 5 IT IS AN ADMITTED FACT THAT THE ROYALTY WAS PAID @ 3% OF SALES FOR TECHNICAL ASSISTANCE. IN THESE CIRCUMSTANCES HAVING REGARD TO THE VARIOUS JUDGEMENTS TAKEN NOTE OF BY THE TRIBUNAL IN THE AFORESAI D EXTRACTED PORTION WE ARE OF THE VIEW THAT THE TRIBUNAL HA S RIGHTLY HELD IT TO BE REVENUE EXPENDITURE. NO QUESTION OF LAW ARISES. THIS APPEAL IS ACCORDINGLY DISMISSED. 8. IN THIS VIEW OF THE SITUATION AS THE ISSUE IS COVERED BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL AS WELL AS THE HONBLE DELHI HIGH COURT WE FIND NO INFIRMITY IN THE ORDER OF TH E CIT (A) ON THE ISSUE RAISED BY THE REVENUE IN THESE APPEALS HENCE HIS ORDE R ON THIS ISSUE IN ALL THE THREE YEARS IS CONFIRMED AND THE DEPARTMEN TAL APPEALS ARE DISMISSED. 9. IN THE RESULT THE APPEALS FILED BY THE DEPARTMENT ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 25.03.20 11. SD/- SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 25.03.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES