TMI Blog2016 (5) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of royalty expenditure. The appeal of the Revenue is therefore dismissed. - Decided in favour of the assessee Disallowance on account of travelling expenses made on adhoc basis at the rate of 15% - Held that:- The assessee had claimed the travelling expenses incurred for business purpose of the assessee which were covered by clause 9.6 of the agreement of the assessee with CBC Ltd. Respectively following the findings of the Tribunal given in the own case of the assessee in the earlier assessment year, we delete the adhoc disallowance made by the lower authorities on account of travelling expenses of the employees. This ground is accordingly decided in favour of the assessee. Addition under section 69C - Held that:- The assessee has specifically pleaded that it has not made any payment except ₹ 54,70,621/- through multiple payments to the American Express Bank, which fact has also been confirmed by the said bank. Under such circumstances, the burden shifts upon the AO to prove that the assessee has made payments in excess of what has been claimed by the assessee as the assessee is not supposed to prove the negative. Since there is no other evidence available of any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before us agitating the confirmation of disallowance of travelling expenses and also in respect of additions confirmed under section 69C of the Act. 4. First we take up the appeal of the Revenue i.e. ITA No.4380/M/2013. ITA No.4380/M/2013 5. The AO during the assessment proceedings noted that the assessee derived royalty income mainly on providing technology and knowhow purchased from M/s. Hercules INC, USA vide agreement dated 01.01.03 and further sold to the Indian companies. The AO noted that during the year, the assessee had sold the said technical knowhow to only one party namely Connell Brothers Company (India) Pvt. Ltd. (hereinafter referred to as the CBC Ltd.) with which the assessee had entered into an agreement dated 13.01.03. As per the terms of the said agreement, the assessee would receive a royalty payment of 14% on net sales value of product sold, against which the assessee had to make a payment at the rate of 5% to its parent company M/s. Hercules INC, USA and hence the assessee was left with a net margin of 9% on sales value effected. The AO noted that the assessee had shown a royalty income of ₹ 1,52,91,846/- according to which sales we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... probable that the assessee company would sale the same at the same rate of 5% without earning any profit. He accordingly reported that the disallowance on account of royalty expenditure was rightly made during the assessment proceedings. 7. The Ld. CIT(A), after going through the remand report and considering the submissions of the Ld. A.R. of the assessee, observed that the assessee had entered into original agreement in the year 2003 whereas the subsequent amendments were made in the agreement in the year 2005 which were duly placed on record during the assessment proceedings. The said amended agreement clearly stated that on product Hercon and Impress royalty at the rate of 5% was payable and for other products at the rate of 14%. He observed that the registration of the aforesaid agreements was not necessary as per the law. He, considering the submissions of the assessee that the products Hercon and Impress on which 5% royalty was charged were newly added in the list of products and in order to attract more customers the assessee company decided to recover only the cost on these products initially and that the same was a business decision and the AO was not supposed to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the licensor (assessee) may from time to time send its own representatives to visit the customers and promote the licensee s business with those customers. The assessee, therefore, claimed that the said expenditure was incurred on account of visits of its employees. The Ld. CIT(A), however, observed that the assessee could not fully substantiate the travelling expenses and further that even in the earlier assessment year, the disallowance at the rate of 50% of the expenses had been confirmed by his predecessor. He accordingly confirmed the disallowance made by the AO on this issue. 14. Before us, the Ld. A.R. of the assessee has brought our attention to the order of the Tribunal dated 30.04.13 passed in ITA No.7501/M/2011 in the own case of the assessee for assessment year 2007-08. The identical issue regarding 50% of disallowance of travelling expenses has been considered by the Tribunal and the Tribunal after considering the submissions of the parties has deleted the adhoc disallowance of travelling expenses observing as under: 7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the deduction on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d specifically by the assessee in the written submissions filed before the Id. CIT(A) were incurred for the purpose of visits of its employees to Hercules Inc.'s offices and plants situated in USA, Korea, Singapore, Thailand etc. for obtaining on site training in order to enable them in assisting M/s M/s Connell Bros. Co. (India) Pvt. Ltd. with regard to technology and marketing of its products. The Id. CIT(A) presumed that the said expenses were incurred for the purposes of training to the employees of M/s Connell Bros. Co. (India) Pvt. Ltd. and proceeded on this wrong presumption to confirm the disallowance made by the A.O. on account of traveling expenses. Moreover vide letter dtd. 13-12-2010 filed by the assessee before the Id. CIT(A) as additional evidence, M/s Connell Bros. Co. (India) Pvt. Ltd. had clarified that traveling expenses incurred by the assessee were covered by clause 9.6 of the agreement and not by clause 9.3. Having regard to all these facts of the case, we are of the view that the entire traveling expenses of ₹ 30,31,107/- were incurred by the assessee for the purpose of its business and there was no justification in disallowing 50% of the said exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought our attention to page 69 of the paper book which is a confirmation given by the American Express Banking Corporation stating that they have not received any consolidated payment for an amount of ₹ 54,70,621/- and ₹ 6,96,375/- during the financial year 2007- 08. It has been further stated that total payment worth ₹ 54,70,621/- have been received during the entire financial year 2007-08 through multiple remissions. The Ld. A.R. of the assessee has relied upon the decision of the co-ordinate bench of the Tribunal in the case of Shreeballabh R. Lohiya vs. ITO ITA No.4120/M/2011 dated 08.08.12 wherein the Tribunal has observed that the additions cannot be made merely on the basis of AIR information and without bringing any evidence on record that assessee has actually received any such amount as alleged as per AIR information. The Ld. A.R. has further relied upon another decision of the co-ordinate bench of the Tribunal in the case of Shri S. Ganesh vs. ACIT ITA No.527/M/2010 08.12.10 wherein the Tribunal has observed that there may be so many reasons for non matching of the actual receipts with that of AIR information and that the additions solely on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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