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2014 (6) TMI 6 - ITAT DELHIDeletion of Royalty expenses – Held that:- Following M/s Hero MotoCorp Limited Versus Additional Commissioner of Income tax [2013 (9) TMI 796 - ITAT DELHI] - The running royalty was calculated as a percentage of sales - The lump sum payment was treated as capital expenditure by the assessee company and the running royalty was treated as revenue expenditure - The assessee made lump sum payment of $5,00,000 for the technical assistance for construction of plant and paid a running royalty as a percentage of sales in respect of technical assistance for manufacture, assembly and service of the motorcycles – thus, the order of the CIT(A) is upheld – Decided against Revenue. Deletion of model fee – Fee paid for obtaining technical know-how – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee’s expenditure towards TGF/model fee is fully eligible to be treated as revenue expenditure and even if it is assumed that there is any shred of doubt, the rule of consistency does help assessee’s case and it will not be desirable that assessee be subjected to a new regime of opinion without analysis of peculiar facts - The model fee expenditure is to be treated as revenue expenditure – Decided against Revenue. Addition of software expenses u/s 37(1) of the Act – Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that the application software, which were used in day to day operation and conduct of assessee’s business - they do not provide any enduring benefit to the assessee - The assessee only had the license to use the software and the proprietary, intellectual rights contained in the software continued to vest with the vendor i.e. licensor of the software - thus, the order of the CIT(A) is upheld – Decided against Revenue. Transfer pricing adjustment - Difference in arm’s length price in international transactions of purchase of spare parts – Held that:- Following M/s Hero MotoCorp Limited Versus Additional Commissioner of Income tax [2013 (9) TMI 796 - ITAT DELHI] - for determining the ALP of purchase of the spare parts/ components, CUP method would be most appropriate method - the selection of CUP method by the TPO - while applying the CUP method, it is to be ascertained whether similar goods were available indigenously - no specific opportunity was allowed to produce such evidence – thus, the matter is remitted back to the AO to allow adequate opportunity to the assessee to produce evidence in support of its contention that the spare parts were purchased from the AE only when the same were not available indigenously – Decided partly in favour of Revenue. Denial of benefit of deduction u/s 80HHC of the Act – Custom duty benefit under DEPB Scheme and other claims – Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that assessee contended that Hon’ble Supreme Court has transferred a large number of writ petitions filed in various High Court’s, challenging the amendment carried out in the 3rd and 4th provision to section 80HHC, vide amendment of taxation law (2nd amendment) Act, 2005 – the benefit of the decisions of the High Courts are not available to the Revenue because CIT(A) has decided the appeal of assessee on 29.11.2010 – thus, the matter is remitted back to the AO for verification and re-adjudication – Decided in favour of Assessee. Treatment of interest income - Income from other sources or not – Exclusion of the interest income for computing deduction u/s 80HHC of the Act – Held that:- As decided in assessee's own case for the earlier assessment year, it has been held that net income has to be excluded under Clause (baa) of the explanation to Section 80HHC - Clause (baa) of the explanation to Section 80HHC envisages two-step process in computing profit derived from export. In the first step assessing officer is required to apply section 28 to 44 in order to compute the profits and gains of business or profession – thus, the matte is remitted back to the AO for adjudication – Decided in favour of Assessee. Disallowance of deduction u/s 80IA of the Act - Captive power generating unit – Held that:- Following M/s Hero MotoCorp Limited Versus Additional Commissioner of Income tax [2013 (9) TMI 796 - ITAT DELHI] - where the goods or services held for the purposes of eligible business are transferred to another business, carried on by the assessee, then for the purpose of deduction, the profits and gains of such eligible business shall be computed as it transfer had been made at the market value of such goods or services as on date - there was a loss in the power generation undertaking of the assessee, thus, there was no eligible profit for allowing deduction u/s 80IA – Decided against Assessee. Levy of interest u/s 234D of the Act – Held that:- Explanation (2) to section 234D of the act has been clearly stated that the provision of the section shall also apply to an AYs before 1st June 2003 if the assessment for such year commences before 1st June 2003, and if the proceedings in respect of such assessment year is completed after the date - assessment was completed only on 28.02.2006 – thus, the provision of section 234D would apply – thus, the order of the CIT(A) is upheld – Decided against Assessee.
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