Dy. CIT, Circle-9, Pune v. Kirloskar Ferrous Industries Ltd.,, Pune

ITA 842/PUN/2013 | 2009-2010
Pronouncement Date: 16-04-2014 | Result: Dismissed

Appeal Details

RSA Number 84224514 RSA 2013
Assessee PAN AAACK7297E
Bench Pune
Appeal Number ITA 842/PUN/2013
Duration Of Justice 1 year(s) 5 day(s)
Appellant Dy. CIT, Circle-9, Pune
Respondent Kirloskar Ferrous Industries Ltd.,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 16-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 16-04-2014
Assessment Year 2009-2010
Appeal Filed On 10-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO.842/PN/2013 (ASSESSMENT YEAR : 2009-10) DY. COMMISSIONER OF INCOME TAX CIRCLE 9 PUNE. . APPELLANT VS. KIRLOSKAR FERROUS INDUSTRIES LTD. A-13 LAXMANRAO KIRLOSKAR ROAD KHADKI PUNE 411 003. PAN : AAACK7297E . RESPONDENT DEPARTMENT BY : MR. S. P. WALIMBE ASSESSEE BY : MR. C. H. NANIWADEKAR DATE OF HEARING : 10-04-2014 DATE OF PRONOUNCEMENT : 16-04-2014 ORDER PER G. S. PANNU AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V PUNE DA TED 21.01.2013 WHICH IN TURN HAS ARISEN FROM AN ORDER DATED 01.12.2011 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL THE ONLY ISSUE RAISED BY THE REV ENUE IS WITH REGARD TO THE ACTION OF THE CIT(A) IN DELETING AN ADDITION OF RS.1 39 71 307/- MADE BY THE ASSESSING OFFICER BY TREATING PAYMENTS TOWARDS ROYALTY AS A CAPITAL EXPENDITURE AS AGAINST THE ASSESSEES CLAIM OF THE SAME BEING REVENUE IN NATURE. 3. IN BRIEF THE FACTS RELEVANT TO ADJUDICATE THE C ONTROVERSY ARE AS FOLLOWS. THE RESPONDENT-ASSESSEE IS A COMPANY INCORPORATED U NDER THE PROVISIONS OF THE COMPANIES ACT 1956 AND IS INTER-ALIA ENGAGED IN THE BUSINESS OF MANUFACTURE OF GRAY IRON CASTING AND PIG IRON. FOR THE YEAR UNDER CONSIDERATION IT FILED A RETURN OF INCOME DECLARIN G TOTAL INCOME OF ITA NO.842/PN/2013 A.Y. 2009-10 RS.4 96 01 250/- WHICH WAS SUBJECT TO SCRUTINY ASSE SSMENT U/S 143(3) OF THE ACT WHEREBY THE TOTAL INCOME HAS BEEN ASSESSED AT R S.6 35 72 560/- AFTER MAKING AN ADDITION OF RS.1 39 71 307/-. THE SAID A MOUNT REPRESENTED ROYALTY PAID BY THE ASSESSEE TO M/S KIRLOSKAR PROPRIETARY L IMITED FOR USE OF KIRLOSKAR BRAND NAME. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID AMOUNT OF RS.1 39 71 307/- PAID TO M/S KIRLOSKAR PROPRIETARY LIMITED WAS AN EXPENDITURE OF CAPITAL NATURE BECAUSE THE POSSESSION OF THE RIG HT TO USE THE BRAND NAME WAS AN ENDURING BENEFIT AND THEREFORE ANY EXPENDITU RE INCURRED FOR ACQUISITION OF SUCH RIGHT WAS CAPITAL IN NATURE. AGAINST THE S AID DECISION ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 4. IN APPEAL THE PLEA OF THE ASSESSEE WAS THAT THE AMOUNTS HAVE BEEN PAID MERELY FOR USE OF KIRLOSKAR NAME AND NOT FOR THE SUPPLY OF ANY TECHNICAL KNOWHOW FOR PRODUCTION OF GOODS. THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSING OFFICER WAS FACTUALLY WRONG IN STATING TH AT THE ASSESSEE HAD ACQUIRED ANY COPYRIGHT FOR ANY TECHNICAL DOCUMENTAT ION IN RETURN OF THE IMPUGNED PAYMENT. THE CIT(A) CONSIDERED THE SUBMIS SIONS PUT-FORTH BY THE ASSESSEE AND ALSO THE AGREEMENT IN QUESTION AND CAM E TO CONCLUDE THAT NO CAPITAL ASSET WAS ACQUIRED BY THE ASSESSEE BUT THE PAYMENTS WERE MERELY MADE TO THE LICENSOR OF THE BRAND NAME FOR USE OF T HE SAME. THE CIT(A) ALSO CONSIDERED THE PLEA OF THE ASSESSEE THAT ROYALTY WA S PAID CONSISTENTLY EVEN IN THE PAST YEARS BASED ON ITS TURNOVER AND NO SUCH DI SALLOWANCE WAS MADE IN THE PAST. ACCORDINGLY THE CIT(A) HAS DELETED THE ADDITION OF RS.1 39 71 307/- AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATI VE HAS REITERATED THE STAND OF THE ASSESSING OFFICER TO THE EFFECT THAT A SSESSEE COMPANY HAS ACQUIRED AN ADVANTAGE OF ENDURING NATURE DUE TO THE USE OF BRAND NAME KIRLOSKAR WHICH CARRIES THE GOODWILL ATTACHED TO SUCH NAME AND THEREFORE PAYMENTS IN QUESTION ARE CAPITAL IN NATURE. ITA NO.842/PN/2013 A.Y. 2009-10 6. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE R ESPONDENT-ASSESSEE POINTED OUT THAT THE PAYMENTS IN QUESTION ARE BEING MADE BY THE ASSESSEE SINCE PAST YEAR AND EVEN IN THE EARLIER TWO ASSESSM ENT YEARS OF 2007-08 AND 2008-09 SIMILAR PAYMENTS WERE MADE BUT NO DISALLOWA NCE HAS BEEN MADE. APART THEREFROM THE LEARNED COUNSEL HAS REFERRED T O THE WRITTEN SUBMISSIONS MADE BEFORE THE CIT(A) WHICH HAVE BEEN REPRODUCED IN PARA 6 AND HAS SUPPORTED THE FINDINGS OF THE CIT(A) THEREON WHICH ACCORDING TO HIM CLEARLY ESTABLISH THAT THE IMPUGNED PAYMENTS ARE REVENUE IN NATURE. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE PERTINENT FACTS WHICH EMERGE FROM THE ORDERS OF THE AUTHORITIES BEL OW CAN BE SUMMARIZED AS FOLLOWS. THE ASSESSEE IS USING THE NAME KIRLOSKAR IN ITS BUSINESS OPERATIONS. THE COPYRIGHT OF KIRLOSKAR NAME IS WITH M/S KIRLO SKAR PROPRIETARY LIMITED AND IN TERMS OF AN AGREEMENT ASSESSEE PAYS A SUM OF RS .1 00 000/- PER ANNUM AS LICENSE OR COPYRIGHT FEE TO M/S KIRLOSKAR PROPRI ETARY LIMITED FOR THE USE OF NAME. FURTHER ASSESSEE HAS ALSO ENTERED INTO A US ER AGREEMENT WITH M/S KIRLOSKAR PROPRIETARY LIMITED DATED 24.11.2006 WHIC H WAS REVISED ON 04.02.2008. IN TERMS THEREOF THE SAID CONCERN M/S KIRLOSKAR PROPRIETARY LIMITED HAS ADMITTED ASSESSEE AS A MEMBER AND ASSES SEE ALSO AGREED TO MAINTAIN THE QUALITY AND TO COMPLY WITH THE SPECIFI CATIONS PRESCRIBED BY THE SAID CONCERN. M/S KIRLOSKAR PROPRIETARY LIMITED IS ACKNOWLEDGED AS THE ORIGINAL CONCEIVER ADOPTER USER AND REGISTERED PR OPRIETOR OF THE TRADEMARK KIRLOSKAR. FOR ALLOWING THE USE OF THE TRADEMARK M/S KIRLOSKAR PROPRIETARY LIMITED CHARGES FROM ASSESSEE 0.25% OF ITS ANNUAL T URNOVER AS ROYALTY IN TERMS OF THE METHOD PRESCRIBED IN THE AGREEMENT. S IMILAR PAYMENTS WERE MADE IN ASSESSMENT YEARS 2007-08 AND 2008-09 AS COP YRIGHT FEE AND ROYALTY TO M/S KIRLOSKAR PROPRIETARY LIMITED. HAVING REGAR D TO THE FACT POSITION IT IS QUITE EVIDENT THAT THE PAYMENTS TO M/S KIRLOSKAR PR OPRIETARY LIMITED HAVE BEEN MADE ONLY FOR THE USE OF KIRLOSKAR NAME AND NOT F OR THE SUPPLY OF ANY TECHNICAL KNOWHOW FOR PRODUCTION OF GOODS. THERE I S NO MATERIAL TO SUPPORT THE PLEA OF THE REVENUE THAT ANY ENDURING BENEFIT H AS ACCRUED TO THE ITA NO.842/PN/2013 A.Y. 2009-10 ASSESSEE WHICH WOULD BE IN THE CAPITAL FIELD. IN-F ACT DURING THE CURRENCY OF THE AGREEMENT WITH M/S KIRLOSKAR PROPRITARY LIMITED THE BENEFIT WHICH ACCRUES TO THE ASSESSEE IS IN THE REVENUE FIELD NAMELY IN THE COURSE OF CARRYING ON OF ITS BUSINESS OPERATIONS AND THE EXPENDITURE INCURRE D IN CONNECTION THEREOF WOULD BE REVENUE IN NATURE. THEREFORE IN OUR CONS IDERED OPINION THE CIT(A) MADE NO MISTAKE IN DIRECTING THE ASSESSING OFFICER TO TREAT THE IMPUGNED EXPENDITURE AS A REVENUE EXPENDITURE. 8. IN VIEW OF THE AFORESAID DISCUSSION WE HEREBY A FFIRM THE ORDER OF THE CIT(A) SPECIALLY HAVING REGARD TO THE FINDINGS REC ORDED BY HIM IN PARA 7 OF THE IMPUGNED ORDER WHICH HAVE NOT BEEN ASSAILED BY THE REVENUE BEFORE US ON THE BASIS OF ANY COGENT MATERIAL OR EVIDENCE. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH APRIL 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED : 16 TH APRIL 2014 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V PUNE; 4) THE CIT-V PUNE; 5) THE DR B BENCH I.T.A.T. PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T. PUNE