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Dy. Commissioner of Income Tax, Circle 6 (1) , New Delhi Versus M/s Minda Autogas Ltd.

2016 (4) TMI 1047 - ITAT DELHI

Royalty disallowance under the provisions of section 40A(2)(a)/(b) - Held that:- Find no reason to differ from decision on this issue in the appellant’s own case for the A.Y. 2007-08 and also agree with the contention of the Ld. AR that reduction in the rate of royalty from 5% to 2.5% on the sales made to M/s Suzuki India Ltd. during the year also indicates the genuineness of commercial arrangement and it is not an attempt to pass profits from the appellant to M/s Minda Industrial Ltd. and furth .....

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he Department against the order passed by the Ld. CIT (A)-IX, New Delhi for assessment year 2008-09. 2. The brief facts of the case are that the assessee is engaged in the business of manufacturing CNG/LPG Kits and other alternative fuel solutions for various OEMs and the replacement market. The company has been supplying LPG Kits to Maruti Udyog Ltd. The return of income in this case was filed on 25.9.2009 declaring an income of ₹ 7,89,84,290/-. The case was processed u/s 143(1) of the In .....

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pany was changed to M/s. Minda Autogas Ltd., pursuant to a fresh Certificate of Incorporation issued by the Registrar of Companies on 5.9.2006. 4. The assessment in this case was completed by the Id. AO u/s 143(3) of the Act vide order dated 02.12.2010 determining the total income at ₹ 7,94,68,030/-. As per the computation of income appearing at the end of the assessment order, the following additional were made: i) On account of depreciation disallowed on Goodwill Rs.2,70,025/- ii) On acc .....

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amp; law. 2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in deleting the addition of ₹ 1,81,91,663/- out of royalty payments. 3. On the facts and circumstances of the case and in law, the learned CIT (Appeals) has erred in deleting the addition of ₹ 77,517/- out of depreciation of printers. 7. The Ld. DR, at the outset, submitted that ground no. 3 regarding depreciation on printers was not being pressed. Hence, the same is dismiss .....

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Goodwill or Brand name of Minda Industries Ltd. As this expenditure has not been incurred for earning revenue during this year i.e. it has not been incurred for the business purpose it is not an allowable expenditure. He further submitted that Minda Autogas Ltd. (MAGL) was incorporated in India on July, 2001 as Minda Impco Ltd. The name was changed to Minda Autogas Ltd. in F.Y. 2006- 07. This is contrary to the submission of the assessee that it being a new entity, Maruti Udyog Ltd. (MUL) was re .....

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interest in the company. It was further submitted that MUL has long and cordial relation with Minda Industries Ltd., knowing fully well that the Directors are common and it is the same group company with substantial interest of Minda Industries Ltd., there is no reason why MUL would hesitate to procure Gas kits from MAGL. The submission of the assessee is mere fiction and not a fact and therefore the disallowance u/s 40A(2)(a)/(b) was rightly made by the AO. 9. The Ld. AR, in response, placed h .....

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uction in the rate of royalty from 5% to 2.5%, the Id. AR submitted that in the A.Y. 2007-08, the rate of 5% was agreed because the initial efforts put in by M/s. Minda Industries Ltd. were much more to get an entry into Maruti Udyog Ltd. However, during the year under consideration, there were routine technical and supervisory services which were important for the appellant apart from continued patronage of Maruti Udyog Ltd. It was also explained that payment of reduced royalty @ 2.5% during th .....

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0A (2)(b) of the Act., The Ld. AR further submitted that it is for the businessman to decide as to what is required to be done for its business and the AO has only to see as to whether the expenses have been incurred wholly and exclusively for the business or not. The AR cited following judgments for this proposition of law: (i) Chandulal Keshavlal v. CIT 38 ITR 601 (SC). (ii) J.K. Woolen Mills v. CIT 72 ITR 612 (SC). (iii) Panipat Woolen & General Mills v. CIT 103 ITR 66 (SC). (iv) Sassoon .....

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