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TMI Blog2018 (6) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer to grant credit in respect of retained MOD VAT credit relating to opening stock. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition made on account of payment to MIs Crawford Bailey & Co u/s 40A'2)('b) of the Act though the assessee has not discharged its onus to prove the reasonableness. 4. On the facts in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing depreciation on testing equipment provided to laboratories and hospitals free of charge even though such testing instruments were not used by the Assessee. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the adjustment made on account of tax on brand usage royalty without appreciating the fact that as per Article 13 of the agreement for payment of royally, no condition exists for royalty being net of taxes and approval taken from RBI cannot be consider to be augmenting the terms of agreement with the principal. 6. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in deleting the adjustment made on account of payment of royalty on trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 6. The issue raised in ground No.2 is against the direction of Ld. CIT(A) to AO to grant credit in respect of retained modvat credit relating to the opening stocks. After perusal of the record and hearing both the parties, we find that the issue is squarely covered by the order of the co-ordinate bench of the Tribunal wherein the same was restored to the file of AO with the direction to decide the issue afresh in the light of direction of the Tribunal in ITA No.2680/M/2003. The relevant operative extracts are reproduced below: "7. We have carefully perused the orders of the lower authorities and we have also the benefit of the order of the Tribunal in assessee's own case in ITA No. 2680/M/03. We find that the Tribunal has considered this issue at para-95 of its order and at para-96 has held as under: "Rival contentions heard. After hearing both the parties, we find that though this issue is similar to the issue raised in earlier years, however, provisions of section 145A, has been brought on statute w.e.f. 1st April 1999. Therefore, the same will be applicable in the assessment year 1999-- 2000. Consequently, we set aside the impugned order passed by the learned Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. We find that the Ld. CIT(A) has deleted the addition holding that for the payments for legal counseling, it is futile to think of comparables because counsels may not charge standard fee but may charge according to the issue involved. The Ld. CIT(A) further observed that if the AO wanted to disallow on the ground of excessive payment, he ought to have established excessiveness of the payment. This has not been done. Considering the decision of the Tribunal in assessee's own case, in the light of the observations made by the Ld. CIT(A), we do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 7 is accordingly dismissed." 9. A perusal of the decision of the co-ordinate bench of the Tribunal reveals that for the purpose of making disallowance under section 40A(2)(b) of the Act, the AO has to demonstrate the excessive or unreasonable payment in the current year also vis a vis the market rate of such services. The AO has failed to prove that payment is unreasonable and excessive and we, therefore, following the co-ordinate bench of the Tribunal and maintaining the consistency with the earlier year, dismiss the ground raised by the Revenue. Pertinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for A.Y. 2002-03 order dated 28.08.2013 which was fairly conceded by the Ld. D.R. 14. After hearing both the parties and perusing the decision of the co-ordinate bench of the Tribunal, we find that that the issue is covered in favour of the assessee by the decision of the co-ordinate Bench. The relevant extract is reproduced as under: "34. We have heard the rival submissions, perused the orders of the lower authorities and also the copy of agreement submitted alongwith application to RBI as exhibited at pages 1143 to 1145 of the Paper book. We find that the application made by the assessee to RBI for brand usage agreement specifically mentions that the royalty to be remitted is net of taxes. Further, the approval was received from the RBI to remit the royalty on brand usage by the assessee @ 1% net of taxes. Considering the brand usage agreement vis-à-vis the approval granted by RBI, it can be safely inferred that taxes were liability of J&J India under the terms of agreement. The assessee has entered into a commercial arrangement with J&J US and it has been so arranged that the payment of taxes have to be borne by the assessee being a commercial arrangement, the same sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Ld. A.R. pointed out that the issue is covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in ITA No.4092/M/07 for A.Y. 2002-03 order dated 28.08.13 which was fairly conceded by the Ld. D.R. 20. We have perused the said decision which is in favour of the assessee. The operative part is extracted below: "52. The Ld. CIT(A) has considered this issue at page-12 para-6 of his order. It was strongly contended before the Ld. CIT(A) that the TPO has not provided any sound basis for restricting this royalty. After considering the facts and submissions of the assessee, the Ld. CIT(A) was convinced that the restriction by the TPO to 1% is without any basis and allowed the appeal. 53. Before us, the Ld. DR strongly supported the findings of the TPO. 54. The Ld. Counsel for the assessee reiterated that the payment is based as per the agreement entered into between J&J India and J&JUSA. 55. We have considered the submissions and perused the orders. As we have already held hereinabove that the payment of royalty has to be considered in the light of the agreement between the assessee and J&J USA, for the same reasons, we do not find any rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,69,60,372/- being remission of sales tax (deferral sales tax liability) under package scheme of incentives of Government of Maharashtra is not chargeable to tax as 'Business income' of the assessee company u/s 41(1) of the Act. The Ld. A.R. submitted that the issue is covered in favour of the assessee by the decision of the Hon'ble jurisdictional Bombay High Court in the case of CIT vs. Sulzer India Ltd. [2014] 369 ITR 717 (Bom) and the decision of the Apex Court in the case of CIT vs. Balkrishna Industries Ltd. (2017) 88 taxmann.com 273 (SC) which was fairly conceded by the Ld. D.R. 28. We have heard the rival submissions of both the parties and perused the material on record including the decisions cited by the Ld. A.R. The undisputed facts are that the assessee availed the benefit of sales tax deferral scheme offered by the State of Maharashtra for its Aurangabad plant. Under the said scheme the company has deferred the sales tax liability to the tune of Rs. 13,14,79,300/- for the period ending from September 1999 to March 31.09.2008. Thereafter, the said deferred sales tax liability has been converted into interest free loan payable to Ckom vide agreement dated 10.05.1994 bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed as deduction. The Ld. A.R. submitted that the issue is covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in assessee's own case in ITA No.675/M/2009 for A.Y. 1999- 2000 vide order dated 18.01.2013 which was fairly conceded by the Ld. D.R. 30. We have heard the rival submissions of both the parties and perused the material on record. We find that the identical issue was decided by the co-ordinate bench of the Tribunal in assessee's own case in ITA No.675/M/2009 (supra). The operative portion which is reproduced as under: "135. We have considered the rival contentions, perused the orders of the authorities below and the material available on record. The assessee, which is also engaged in the manufacturing of drugs, was selling scheduled drugs. The NPPA which is a Government authority is responsible for implementation of the provisions of drug price and control and/or is competent to fix the price of scheduled drugs by taking into consideration certain cost parameter. The assessee was charging Rs. 25 per strip of Raricap tablet. Later on, the NPPA, vide order dated 7th August 19996, fixing the revised price of Raricap tablet at Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the cost for which no reply or order was passed by the NPPA in respect to the same. Finally, the amount was determined at Rs. 1.56 crores which only include the principal amount of the refund. Thus, the payment of Rs. 1.50 crores made on 10th December 1998, which falls in assessment year 1999-2000, is an allowable expenditure under section 37(1) and, therefore, the same is allowed as revenue expenditure. Various case laws relied upon by the learned Counsel are not dealt with as on the facts of the case itself, we allow the assessee's ground on merit." 31. The facts of the present case being materially same to the one as decided by the co-ordinate bench of the Tribunal as referred to hereinabove, we, therefore, maintaining the consistency with the earlier year, dismiss the ground raised by the Revenue. 32. The issue raised in ground No.7 is against the decision of CIT following the order of ITAT in assessee's own case wherein it is held that brand usage royalty was payable without a formal deed and based on commercial expediency, despite the assessee failing to provide sufficient evidence to prove its liability during the period. 33. After hearing both the parties and p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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