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2012 (9) TMI 91 - HC - Income TaxUndisclosed income on account of royalty - ITAT deleted the addition as not assessable under Chapter XIV B of the Income Tax Act, 1961 - Held that:- The respondent had, in fact, not received any royalty with effect from October, 1999. Indeed, the appellant has not been able to indicate any evidence to the contrary. There is, however, nothing to indicate that the share-holder's agreement dated 17th November, 1999, between the respondent and BIIL was sham and bogus nor is there anything to indicate that the agreement was not implemented. As the trademark stood transferred to Jyothy Laboratories Limited, there would be no question of it continuing to pay royalty to the respondent - there was no undisclosed income and it is not even contended that these agreements were sham or bogus. Nor is it suggested that they were a device to launder money through BILL - no substantial question of law - in favour of assessee. Addition on account of reimbursement of advertisement expenses - Held that:- There is no material evidencing a reimbursement of the expenses to the respondent - this is a case where the respondent himself owns a large majority of the equity capital of the company and it would not, therefore, be unnatural for him not to have demanded the payment. Under clause 16(iii), the company was bound to reimburse the respondent only “on demand” from the respondent. The fact that the respondent's accounts are maintained on a mercantile basis would make no difference. Even assuming that he is entitled to reimbursement of the marketing expenses, the liability of the company to pay him the said would arise only in the event of his having demanded the same - that the primary facts were also disclosed in the books of accounts of the respondent as well as the company and that the AO was, therefore, not justified in making an addition in the block assessment - both the issues would not fall under the purview of Chapter-XIV B of the Act as no evidence was found during the course of search which would warrant their consideration only in the block assessment order - in favour of assessee.
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