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2011 (2) TMI 568 - AT - Income TaxDeemed dividend u/s 2(22)(e) - commercial borrowings - Commissioner of Income-tax (Appeals) noted that assessee company was not a share holder of M/s. Husqvarna AB, from whom external commercial borrowing had been made. But the same was subsidiary of AB Electrolux which had 51 per cent share of the share holding in the assessee company. Thus the assessee which had obtained external commercial borrowing was not share holder of M/s. Husqvarna AB. - Held that:- following the decision in Asstt. CIT v. Bhaumik Colours (P.) Ltd. (2008 -TMI - 59371 - ITAT BOMBAY-E) the order of CIT(A) sustained. Arms Length Price (ALM) - royalty payment during the year to the Associated Enterprises - the arms length price of these transactions is considered at NIL - Held that:- royalty payment in this case was justified and the TPO was totally wrong in disallowing the royalty payment on the ground that the company has incurred losses. We do not find any infirmity in the well reasoned order of the Ld. Commissioner of Income-tax (Appeals) and accordingly we uphold the same. Capital expenditure or revenue expenditure - payment of royalty - held that:- the royalty in this case is based upon the percentage of production/sales and it cannot be said to be resulting in a benefit of enduring nature and as such the same is allowable. Research and Development expenditure - expenditure was incurred for development and improvement of the existing products as well as the new products in the appellant’s existing line of business. - Held that:- the details regarding research and development expenditure were not produced before the Assessing Officer Ld. Commissioner of Income-tax (Appeals)’s order in this regard is also silent regarding details. Under these circumstances, both the counsel fairly agreed that the issue may be remitted to the files of the Assessing Officer to examine the issue afresh.
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