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National Plasto Products (P) Ltd. Versus CIT. Kolkata

2016 (8) TMI 814 - CALCUTTA HIGH COURT

TDS u/s 194J - payment on account of royalty - Held that:- Allow the appeal for the limited purpose of remanding the matter to the learned Tribunal for the purpose of considering whether the services provided by the recipient of the aforesaid sum of ₹ 30,04,407/- and ₹ 22,91,045 are covered by Explanation 2 to clause (vi) of sub-section (1) of section 9 of the Income Tax Act as contended by Mr.Khaitan or the payment or any part thereof is on account of technical services as contended .....

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Appellate Tribunal B Bench, Kolkata allowed the appeals preferred by the revenue. The assessing officer disallowed an expenditure of a sum of ₹ 30,04,407/- for the assessment year 2005-06 and an expenditure of ₹ 22,91,045 for the assessment year 2006-07. The contention of the assessee was that these were the expenses incurred on account of royalty. Royalty found place in section 40 only with effect from 1st April, 2006 and corresponding amendment to section 194J was made with effect .....

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of the clauses (vi) and (vii) of section 9(i), section 40(a)(ia) and section 194J of the Income Tax Act, 1961, and the agreement dated April 1, 2004 between the appellant and the trade mark owner, the Tribunal was justified in law in holding that the payment made to the trade mark owner was not royalty and was to be disallowed under section 40(a)(ia) because of non-deduction of tax at source under section 194J and its purported findings in that behalf are arbitrary, unreasonable and perverse ? M .....

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t the payment was not on account of royalty simplicitor, even assuming that the assessee made any payment on account of royalty. He relied upon the following parts of the agreement. WHEREAS, you M/s. NATIONAL PLASTO PRODUCTS P. LTD. Jalan Industrial Estate, Baniyara, P.S. Domjur, Howrah - 711 411 are interested in technical know-how use of Cello Trademark for plastic items and moulds and we are willing to grant licence to use Cello trademark and to provide technical know-how and to supply moulds .....

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y the amount. He also drew our attention to the following part of clause 1(g) in support of his submission that Wim Plast Limited was to incur expenditure for the purpose of providing facilities to the assessee. The relevant portion of clause (g) of article 1 of the agreement reads as follows:- Providing facilities, at the expenses of ours, for procuring accessories like colour pigment, stickers, metal parts etc. at your request. We will either supply you or will help in identifying the supplier .....

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