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2016 (9) TMI 1471 - AT - Income TaxLiability for payment of compensation to the module supplier has arisen out of agreement entered into between the assessee and module supplier - Held that:- The observation made by the Commissioner of Income Tax (Appeals) in the present case are generic and out of context. There is nothing on record to show that there was any dispute between the assessee and module supplier. The liability was ascertained and had to be discharged in view of the agreement between the assessee and the module supplier. The Hon'ble Supreme Court of India in the case of Bharat Earth Movers Vs. Commissioner of Income Tax [2000 (8) TMI 4 - SUPREME COURT] has held that if a business liability has definitely arisen in the accounting year, deduction should be allowed even if the liability may not have been quantified and is discharged at a future date. What should be certain is, the incurring of the liability. Actual quantification of liability can be done at a later date. TPA qua payment of royalty - MAM - CIT-A rejecting CUP as the most appropriate method for determining Arm’s Length Price of international transaction in respect of payment of royalty - Held that:- AR contended that the issue can be remitted back to the file of Assessing Officer to re-examine the facts in the light of the decision of Tribunal. The ld. AR has fairly accepted the proposal made on behalf of the Department. Thus, in view of the statement made by the representatives of rival sides we deem it appropriate to remit this issue back to the file of Assessing Officer to reexamine the issue in the light of decision of the Tribunal in assessee’s own case in assessment year 2002-03. Characterization of royalty payment - whether revenue or capital in nature? - Held that:- We observe that the facts leading to payment of Project Technical Assistance Fees are identical in assessment years under appeal. The Assessing Officer has not disputed the payment of charges. The only dispute is with regard to the nature of expenditure. The Co-ordinate Bench of the Tribunal has held expenditure as revenue in nature. The ld. DR has not been able to controvert the findings of Tribunal. Thus, we do not find any merit in the ground raised by the Department. By applying the aforementioned decision of Coordinate Bench in assessee’s own case, we dismiss ground No. 4 raised in the appeal by the Revenue. Addition made on account of homologation expenses - Held that:- Commissioner of Income Tax (Appeals) has observed that there was no basis for making ad hoc disallowance without giving any opportunity of hearing to the assessee to furnish further details and deleted the addition. We are of the considered view that this issue needs a revisit to the file of Assessing Officer for re-consideration and appreciation of the relevant material relating to homologation charges. The Assessing Officer after considering the material furnished and affording sufficient opportunity of hearing to the assessee shall decide this issue afresh in accordance with law. Accordingly, ground No. 5 raised by the Revenue in appeal is allowed for statistical purpose. Claim of expenditure on capitalized cars - Held that:- After considering the submissions of rival sides and perusing the impugned order, we find no error in the findings of CIT(A) in remitting the matter back to AO. We are of the considered view that the AO should reexamine the issue denovo. Here, we would like to point out that the AO shall not substitute his judgement over that of the assessee to determine the need and quantum of expenditure. Claim of deduction u/s 80IB - Held that:- It is an admitted fact that reassessment proceedings initiated against the assessee in assessment year 2003-04 to disallow the benefit of deduction u/s. 80IB of the Act has already been set aside by the Tribunal in the appeal filed by the assessee. Thus, the Commissioner of Income Tax (Appeals) ignorant of the order of Tribunal has erred in holding that in reassessment proceedings the deduction granted u/s. 80IB has been disallowed. Without commenting on merits, we are remitting this issue back to the file of Commissioner of Income Tax (Appeals) for denovo adjudication, in the light of the fact that reassessment proceedings have already been quashed by the Tribunal and the position as of now is that the order passed by the Assessing Officer in rectification proceedings is live. This issue needs revisit to the file of Commissioner of Income Tax (Appeals) to examine agreement between the assessee and module supplier and determine the veracity of payments made. In so far as nature of liability is concerned, we have already held that if it is arising from the agreement the same is ascertained. Accordingly, ground No. 1 raised in the appeal by the assessee is allowed for statistical purpose. Amount representing provision towards octroi has been deducted twice - Held that:-n view of submissions made by rival sides, we are of considered view that this issue needs a revisit to the file of Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) shall decide the issue de novo after verification and proper appreciation of facts and records.
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