The Tax Publishers2020 TaxPub(DT) 0559 (Del-Trib) : (2020) 078 ITR (Trib) 0410

INCOME TAX ACT, 1961

Section 80-IB/IC

For the purpose of deduction under section 80-IB/IC sub-licencing fee, if any, ought to have been excluded on net basis after adjusting royalty paid against income of sub-licencing because sub-licencing income and royalty payment both had direct nexus with know-how agreement, but excluding direct nexus of sub-licencing to manufacturing activity of assessee. Assessee was directed to provide all the information and clauses to bifurcate said sub-licence fee from original royalty payment.

Deduction under section 80-IB/IC - Computation - Treatment of sub-licencing fee -

Assessee company was engaged in manufacturing of plastic film used in packaging industry, printing articles in pouch form and zipper diaphragm having two units at Baddi and Jammu. claimed deduction under section 80-IC AO took the view that income from sub-licencing fee was not income derived from manufacturing activity of the units respectively and was required to be excluded for working of the eligible profits whereas royalty paid related to manufacturing activity of Jammu and Baddi units and was required to be deducted out of profits for working out eligible profits available for deduction under section 80-IB/80-IC.Held: Sub-licencing fee, if any, ought to have been excluded on net basis after adjusting royalty paid against income of sub-licencing because sub-licencing income and royalty payment both had direct nexus with know-how agreement, but excluding direct nexus of sub-licencing to manufacturing activity of assessee. Matter remanded. Assessee was directed to provide all the information and clauses to bifurcate said sub-licence fee from original royalty payment.

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2007-08 to 2011-12

INCOME TAX ACT, 1961

Section 115JB

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