Acit New Delhi v. M S Ruskin Titus India P Ltd New Delhi

In The Income Tax Appellate Tribunal Delhi Benches F New Delhi Before Shri G D Agrawal President And Smt Beena A Pillai Judicial Member Ita No 4337 Del 201 6 A Y 20 12 13 Acit Circle 21 2 Room No 199 C 2 Nd Floor Cr Bldg Ip Estate New Delhi Vs Ruskin Titus India P Ltd C 434 3 Rd Floor Defence Colony New Delhi 110 024 Pan Aadcc 0463 B Appellant Respondent Appellant By Shri Atiq Ahmad Sr D R Respondent By Smt Lalitha Krishnamurthy Ca Date Of Hearing 20 12 2017 Date Of Pronouncement 26 12 2017 Order Per Beena A Pillai Judicial Member T He Present Appeal Has Been Filed By The Revenue Against Order Dated 30 05 16 Passed By Ld Cit A 7 New Delhi For A Ssessment Y Ear 2012 13 On The Following Grounds Of Appeal 1 On The Facts And Circumstances Of The Case Ld Cit A Has Erred On Facts And In Law In Deleting Addition Of Rs 1 47 52 000 2 The Appellate Craves For Any Addition Modification Deletion Of Grounds Of Appeal If Find Nec Essary During The Course Of Appeal Ita 4337 Del 2016 A Y 2012 13 Acit Vs Ruskin Titus India P Ltd Page 2 Of 6 2 Brief Facts Of The Case Are As Under A Ssessee Filed Its Return Of Income On 29 11 12 Declaring A Total Loss Of Rs 1 44 21 840 The Case Was Selected For Scrutiny And Notice Under Section 143 2 Along With Questio Nnaire Under Section 142 1 Was Issued In Response To Notices Issued Representatives Of Assessee Appeared From Time To Time And Furnished Requisite Details Books Of Account Bills Vouchers Which Ha Ve Been Put To Test Check 2 1 Ld Ao Observed That As Sessee Is Engaged In The Business Of Manufacturing Of Air Distribution Product A Control Device It Was Observed That Assessee During The Year Claimed Royalty Paid To The Following Companies Amounting To Rs 1 47 52 000 The Details Of Which Are As Under Air Systems Components Inc Usa Rs 36 88 000 Ruskin Company Usa Rs 36 88 000 Caryair Equipment India Pvt Ltd Rs 73 76 000 2 2 I T Was Submitted By Assessee That The Abo Ve Royalty Was Paid To These Companies As Per Agreement Entered Into Between Them Copies Of The Agreements Were Enclosed And Filed Before The Ld Ao Submissions Recorded By The Ld Ao Shows That An Identical Issue Had Arise N For Assessment Year 2008 09 Against Which Addition Was Made By Ld Ao Which Was Allowed By Ld Cit A 6 New Delhi It Is Also Recorded That The Department Has Filed The Appeal Before This T Ribunal Against The Order Of Ld Cit A For Assessment Year 2008 09 Ita 4337 Del 2016 A Y 2012 13 Acit Vs Ruskin Titus India P Ltd Page 3 Of 6 2 3 However Ld Ao Follow Ed His Predecessor And Disallowed The Claim Of Assessee By Hol Ding That Royalty Paid By Assessee Needs To Be Disallowed By Treating It As Capital In Nature 2 4 Aggrieved By The Order Of Ld Ao Assessee Preferred Appeal Before Ld Cit A Ld Cit A Followed The Decision Of This T Ribunal For A Ssessment Y Ear 2008 09 And Deleted The Addition Made By A Ssessing O Fficer 2 5 Aggrieved By The Order Of Ld Cit A Revenue Is In Appeal Before Us Now 2 6 At The Outset Ld Ar Submitted That In The Order Dated 06 01 16 Passed By This T Ribunal In Assessee S Own Case For Assessment Year 2008 09 In Ita No 147 Del 2012 This T Ribunal Dealt With Identical Issue In Para 14 At Page 8 Of The Order As Under 14 The Ratio Of Judgement Supra Is That In Case The Foreign Company Agreeing Not To Manufacture Similar Product In India Or Give Right F O R Manufacture To Others It Amounts To Exclusive And Enduring Advantage And Subsequently Payment Of Technical Aid Or Fee Or Royalty Is To Be Disallowed But The Judgment Supra Is Not Applicable To The Facts And Circumstances Of The Presen T Case For The Sole Reason That In The Instant Case Benefit Of Enduring Nature Has To Be Transferred To The Assessee Company As Is Evident From Article 6 Of The Agreement Transfree Company I E Ceipl Would Get 3 Of The Net Selling Price Of The License D Products Manufactured By The Licensee Calculated As Per Article 6 Of The Agreement Meaning Thereby Transferee Company Ceipl Was Having Complete Lien On The Ita 4337 Del 2016 A Y 2012 13 Acit Vs Ruskin Titus India P Ltd Page 4 Of 6 Technical Know How Assisting Skills And Other Expertise As Per Article 4 Of The Agreement So Finding No Illegality Or Perversity In The Findings Returned By Ld C I T A Ground No 2 Is Also Determined Against The Reve Nue 2 7 Ld D R Placed Reliance Upon The Order Passed By Ld Ao 3 We Have Perused The Submissions Advanced By Both The Sides In The Light Of The Records Placed Before Us 3 1 On Comparing The Facts Discussed By The T Ribunal For Assessment Year 2008 09 Supra V Ide Order Dated 06 01 16 With That Of The Facts For The Relevant Assessment Year Under Consideration It Is Observed Th At Assessee Has Been Consistently Paying Royalty As Per License Agreement At 3 Of The Net Selling Price Of The Licensed Products Under Article 6 Of The Agreement While Doing So This T Ribunal In Assessment Year 2008 09 Placed Reliance Upon The Judgmen T Of Hon Ble Supreme Court In The Case Of Suthe N Land Switchgear Ltd Vs Cit Reported In 232 Itr 359 Similarly In The Facts Of Present Case Ld Cit A Has Observed That The Transferee Company Was Having Complete Lien On The Technical Know How Assisting Skills And Other Expertise As Per Article 4 Of The Agreement 3 2 As The Revenue Has Not Been Able To Point Out Any Factual Material Difference Between The Year Under Consideration As Well As A Ssessment Y Ear 2008 09 Or Any Contrary Decision We Do Not F Ind Any Reason To Deviate From The View Taken By This T Ribunal In A Ssessment Y Ear 2008 09 We Thus Hold The Royalty Payment To Be A Revenue Expenditure Ita 4337 Del 2016 A Y 2012 13 Acit Vs Ruskin Titus India P Ltd Page 5 Of 6 3 3 Accordingly Ground Raised By Revenue Stands Dismissed 4 In The Result Appeal Filed By The Revenue Stands Dismissed Order Pronounced In The O Pen C Ourt On 2 6 T H December 2017 S D S D G D Agrawal Beena A Pillai President Judicial Member Dated 2 6 T H December 2017 Mv Copy Of The Order Forwarded To 1 Appellant 2 Respondent 3 Cit 4 Cit A 5 Dr 6 Guard File By Order Asst Registrar Itat Delhi Benches New Delhi Ita 4337 Del 2016 A Y 2012 13 Acit Vs Ruskin Titus India P Ltd Page 6 Of 6 S No Details Date Initials Designation 1 Draft Dictated On Dragon 21 12 2017 Sr Ps Ps 2 Draft Placed Before Author 12 2017 Sr Ps Ps 3 Draft Proposed Placed Before The Second Member Jm Am 4 Draft Discussed Approved By Second Member Am Am 5 Approved Draft Comes To The Sr Ps Ps Sr Ps Ps 6 Kept For Pronouncement Sr Ps Ps 7 File Sent To Bench Clerk Sr Ps Ps 8 Date On Which The File Goes To Head Clerk 9 Date On Which File Goes To A R 10 Date Of Dispatch Of Order