TMI Blog2016 (7) TMI 1095X X X X Extracts X X X X X X X X Extracts X X X X ..... lty, in the facts and circumstances, would only be a revenue expenditure paid for the use of the licence, trade mark and technical information for a particular period. - Decided in favour of assessee. - I.T.A. No.835/Mds/2016. - - - Dated:- 14-6-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri. P. Radhakrishnan, IRS, JCIT. For The Respondent : Shri. M. Viswanathan, C.A. ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: The appeal filed by the Revenue is directed against order of the Commissioner of Income-tax (Appeals)-6, Chennai in ITA No.155/CIT(A)-6/2014-15, dt 27.01.2016 for the assessment year 2010-2011 passed u/s.143(3) r.w.s. 144C(3) and 250 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not become final and appal before the Hon ble High Court is pending . 3. The Brief facts of the case are that the assessee company is engaged in manufacturing and sale of lubricating oil, additives and filed return of income on 23.09.2010 with total income of A66,31,49,630/- and was processed u/s.143(1) of the Act and the case was selected for scrutiny under CASS and notice u/s.143(2) of the Act was issued. In compliance to notice, the ld. Authorised Representative of assessee appeared and filed details. The assessee during the financial year 2009-2010 entered into International transactions with Associate Enterprise (AE) situated outside India were the value exceed A15 crores. The ld. Assessing Officer made a reference to Transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable for infusion of new technology and other benefits and treated the said payment as intangible asset being eligible for depreciation . The ld. Assessing Officer relied on the Apex Court decision considering the stipulations in the agreement and provisions of Sec. 32 of the Act and the explanations on treatment as intangible assets. The ld. Authorised Representative brought to the knowledge of the ld. Assessing Officer, that similar issue was decided in favour of the assessee in earlier assessment years. Therefore, the expenditure has to be allowed in the financial statements. But the ld. Assessing Officer found that against the Tribunal order, Department has preferred an appeal before Hon ble High Court of Madras and same is pending. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricing proceedings. The ld. Commissioner of Income Tax (Appeals) considering the submissions dismissed the ground of the assessee on the disputed issue of TPO downward adjustment A3,83,93,740/- and on last ground, the ld. Commissioner of Income Tax (Appeals) considered the Authorised Representative submissions, findings of the Assessing Authorities and the nature of expenditure dealt in assessee s own case for earlier assessment years 1999-2000 to 2002- 03 in ITA No.2138/Mds/2008 and ITA Nos.700 to 702/Mds/2009, dated 13.11.2009 wherein royalty disallowance was deleted and the Revenue has filed an appeal before Hon ble High Court and is pending. The ld. Commissioner of Income Tax (Appeals) considered the Tribunal decision in assessee s own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the material on record and judicial decisions relied. The sole crux of the issue being payment of royalty to M/s. Chevron Oronite Company LLC, USA is a Revenue expenditure or capital expenditure eligible for depreciation @25%. We perused the assessment order and found that ld. Assessing Officer has elaborately discussed on the agreement and treated the said payment in the nature of intangible assets and allowed depreciation. The ld. Commissioner of Income Tax (Appeals) relied on the order of the Co-ordinate Bench of this Tribunal in assessee s own case and allowed the appeal. The only contention of the Department before the Tribunal that the Revenue has not accepted the order of the Tribunal and an appeal has already been filed in Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the products. The technical know-how for the manufacturing process was acquired by the assessee against a lump sum payment of royalty and subsequent to that, if there is no sale of the product manufactured by the assessee, then there would be no royalty payable. Thus, the running royalty payable has no nexus or direct connection with the manufacture of the product. The liability to pay the royalty arises only when there is a sale. Therefore, we are of the view that the running royalty cannot be said to be a capital expenditure. We do not find any rationale in bifurcation of the running royalty and treating one part as capital and the other part as revenue by the learned Commissioner of Income Tax (Appeals) without any basis. The decis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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