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2013 (1) TMI 83 - AT - Income TaxRoyalty payment - AO disallowed 25% of payment treating it as an intangible asset following the decision of Southern Switch Gear [1997 (12) TMI 105 - SUPREME COURT] - CIT(A) deleted the addition - Held that:- The assessee company was granted only a non-exclusive and non-transferable right to use the intangibles. The ownership remained with the licensor and are continued during the currency of the agreement. The basis for payment of the amount was of net sales. No lump-sum payment was made for the right to use the intangibles. The licence acquired during the agreement was not to establish manufacturing base. Assessee is engaged in service industry. It was only in providing staffing and recruitment services which is a service industry. Thus the assessee had not acquired any enduring benefit. The agreement was also for a limited period. In view of these facts, no fault in the order of CIT (A) - the facts of the Southern Switchgear Ltd. are distinguishable from the facts of assessee’s company as the right of the assessee in the case of Southern Switchgear Ltd. was granted exclusive licence to manufacture, use and sell the scheduled products within India. While in assessee’s case, the assessee was granted non-transferable intangibles acquiring no ownership or proprietary right in the intangibles - in favour of assessee. Addition towards stale cheques issued to ex-employees - CIT(A) deleted the addition - Held that:- The original cheques of ₹ 31,74,343/- issued to the ex-employees and the same were pertaining to the financial year 2006-07 and 2007-08. Out of these, only cheques of ₹ 1,85,519/- were encashed. All other cheques became outdated on account of not claiming the same from the bank of the assessee. CIT (A) entertained the statement of stale cheques filed before him and observed that ₹ 4,62,883/- were encashed after the close of financial year. CIT (A) has also granted the relief relying on the audited accounts of the assessee. Such approach of CIT (A) is not as per law. The cheques issued are barred by limitation and became not payable by operation of law. CIT (A)’s observation that as soon as assessee reaches it conclusion that the liability of stale cheques have come to end the necessary right back to take place in the year of such conclusion is not based on any evidence. On what basis this finding has been recorded by CIT (A) is not clear. How these cheques remained uncashed for almost two years is not clear. CIT (A) was not justified in granting the relief to the assessee, thus remit the issue to the file of the AO for deciding afresh - in favour of revenue for statistical purposes. Disallowance of loss arising on account of non-receipt of TDS certificates - CIT(A) deleted addition - Held that:- As decided in Shreyans Industries case [2006 (11) TMI 187 - PUNJAB AND HARYANA HIGH COURT] the assessee had offered gross amount of interest including TDS to tax in the assessment year 1992-93. It is also a fact that the assessee was not allowed credit for the TDS for want of TDS Certificates & in spite of best efforts, the assessee could not obtain TDS certificates. Thus, it was a case of loss which has arisen to the assessee during the course of its business. In the case of Sutlej Cotton Mills Ltd. v. CIT (1978 (9) TMI 1 - SUPREME COURT), Hon'ble Supreme Court has held that what is material is the factors or the circumstances which cause loss & if the loss occurred during the course of carrying on the business, it is incidental to it and, hence, allowable. Admittedly, in this case, the assessee suffered loss during the course of carrying on its business therefore, same is allowable - as the issue involved is having the similar facts as involved in the case of CIT vs. Shreyans Industries Limited, the order of the CIT (A) on this issue sustained - in favour of assessee. Disallowance of professional tax not paid before the due date of filing the return of income - CIT(A) deleted of addition made by AO u/s 43B - Held that:- Certain facts are not clear which are necessary to decide the issue. What is the salary debited by the assessee in the profit & loss account whether it was net of professional tax or it was the gross amount including the professional tax. This fact has not been brought on record. In absence of this, it cannot be said that the amount of professional tax has not been debited in profit & loss account while computing the total income of the assessee. Secondly, under the Professional Tax Act, whether the assessee was liable to deduct the tax from the salary or it was deducted on the instruction of the employees to meet their obligation. This aspect also requires examination to decide whether it is covered u/s 43B or not - remit the issue to the file of the AO to bring correct facts on record.
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