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Tax Publishers 2017 TaxPub(DT) 5260 (Del-Trib)

 

Munjal Showa Ltd. v. Asstt. CIT

 

INCOME TAX ACT, 1961

--Disallowance under section 14A--Expenditure against exempt incomeSufficient own funds----Where assessee had sufficient own funds to make investments yielding tax free income disallowance under section 14A was not sustainable.--Assessee had earned exempt dividend income from investment made in mutual fund. AO made disallowance under section 14A by applying ad hoc rate of 12% on investment purchased and sold during the year. Assessee|s case was that it had sufficient own funds to make investments. Held : Entire working had been brought on record by assessee as to availability of the surplus funds and there had always been a credit balance in its bank account on every day. This went to prove that the assessee had not used loan or overdraft funds to make investment, therefore, disallowance under section 14A was not taxable and that too, in the absence of invocation of rule 8D.

Income Tax Act, 1961 Section 14A

Relied on : Godrej and Boyce Mfg. Co. Ltd. v. Dy. CIT (2010) 328 ITR 81 (Bom)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10


 

INCOME TAX ACT, 1961

--Transfer pricing--Determination of ALPPayment of royalty and technical fee to AE----Where TPO applying the benefit test determined arm|s length value of royalty paid by assessee to its AE as nil, issue was remanded with the direction to decide the same in accordance with decisions taken by High Court in earlier years in assessee|s favour.--Assessee engaged in manufacturing and sale of shock absorbers for transport vehicles made payment of royalty, technical fees and design & drawing fee to AE abroad. On failure of the assessee to furnish certain vital information viz. how the royalty rate was determined along with the basis thereof. TPO applied the "benefit test" and determined arm|s length value of royalty in uncontrolled condition as nil under CUP. Held : Issue as to payment or royalty and technical fee by assessee to AE has already been decided in its favour in assessment years 2002-03 and 2004-05 by Tribunal, and appeal preferred by revenue before High Court had already been dismissed. Accordingly, TPO was directed to decide the issue qua relevant assessment year in accordance with decision taken in earlier years in assessee|s own case after providing an opportunity of being heard to the assessee.

Income Tax Act, 1961 Section 92C

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10


 

INCOME TAX ACT, 1961

--Capital or revenue expenditure--Royalty towards acquisition of know-how for a fixed tenure----Where TPO applying the benefit test determined arm|s length value of royalty paid by assessee to its AE as nil, issue was remanded with the direction to decide the same in accordance with decisions taken by High Court in earlier years in assessee|s favour.--Assessee claimed deduction of royalty payment made towards know-how granted by foreign company for the purpose of manufacture, assembly and sale of products during the term of related contract. AO treated the royalty as capital expenditure resulting into eduring benefit. Held : If royalty agreement was read in entirety in a purposeful manner, there could be no trace of doubt that know-how acquired related to the process of manufacturing for a tenure and the same fall in the category of technical support and was not of enduring benefit of any kind to assessee. Therefore, royalty payment in question was allowable as revenue expenditure.

Income Tax Act, 1961 Section 37(1)

Relied on : CIT v. Munjal Showa Ltd. (2010) 329 ITR 449 (Del).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10



IN THE ITAT, DELHI 'I-2' BENCH

N.K. SAINI, A.M. & KULDIP SINGH, J.M.

Munjal Showa Ltd. v. Asstt. CIT

IT Appeal No.1030 (Delhi) of 2014

A.Y. 2009-10

22 November, 2017

Matter remanded

Cases Referred to:

Munjal Show Ltd. v. Addl. CIT [IT Appeal Nos. 4675 of 2010 and 4242 (Delhi) of 2011, dt. 30-5-2014]

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