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2017 (11) TMI 1472 - AT - Income TaxPayment on account of royalty for technical collaboration as per agreement to its AE - Held that:- When the issue as to payment or royalty and technical fee by the taxpayer to its AE has already been decided in its favour in AYs 2002-03 and 2004-05 by the Tribunal, an appeal preferred by the Revenue before the Hon’ble Delhi High Court has already been dismissed, we are of the considered view that the ld. TPO is to decide the issue qua payment of royalty and technical fees qua AY 2009-10 in accordance with the decision taken in earlier years in taxpayer’s own case. So, we remit the case to the TPO to decide afresh after providing an opportunity of being heard to the taxpayer. So grounds no.2 to 2.6 are determined in favour of the taxpayer for statistical purposes. Payment of royalty and technical fees - AO treating as intangible assets and capital expenditure and made disallowance- Held that:- When the agreement between the taxpayer and its AE is to grant indivisible and non-transferable nonexclusive right and licence to manufacture and assemble sale land distribute the product within the specified territory, it falls in the category of technical support and is not of enduring benefit of any kind to the taxpayer, so the addition made on account of royalty and technical fee is not sustainable, hence Grounds No.3 & 3.1 ordered to be determined in favour of the assessee. Addition u/s 14A - Held that:- When the entire working has been brought on record by the taxpayer during assessment proceedings as to availability of the surplus funds with the taxpayer and there has always been a credit balance in the bank of the taxpayer on every day, it goes to prove that taxpayer has used its own funds to purchase the mutual funds to earn interest free income and the taxpayer has not used loan or overdraft funds to make investment. Aforesaid facts have not been controverted by the AO by recording objective satisfaction that the taxpayer has used borrowed funds to purchase mutual funds. In these circumstances, contention of ld. DR that, “in case of huge circulatory fund, some disallowance should be there as there must be some expenditure” is not tenable. This contention is also not tenable in the face of the fact that AO has not invoked Rule 8D of the Act. So, we are of the considered view that disallowance made by the AO to the tune of ₹ 52,16,745/- is not sustainable in the eyes of law, hence ordered to be deleted. Ground No.4 is determined in favour of the assessee.
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