TMI Blog2019 (2) TMI 1619X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature - as per assessee royalty was paid by the appellant in the course and for the purposes of business and was therefore revenue in nature - HELD THAT:- . As relying on assessee's own case [ 2017 (4) TMI 1437 - ITAT KOLKATA] the conclusions of the tribunal on the allowability of the aforesaid expenses as a revenue expenditure are contained in paragraph 9.3 to 9.7. The tribunal relied on the decision in the case of Bata India Ltd. [ 2014 (8) TMI 1178 - CALCUTTA HIGH COURT] .The assessee is entitled to claim the entire royalty paid to DIC Asia Pacific PTE Ltd., Singapore and DIC Corporation, Japan. The addition made by the AO is directed to be deleted. Disallowing the claim of normal depreciation additional depreciation u/s 32( 1 )(ii.) 32( 1 )(iia) - HELD THAT:- Additional depreciation was claimed by the A multi gas detector mode! selection mode! -PGM-6228 12KL GO Storage Tank. The said object cannot be regarded by LIS as an office equipment or furniture, The AO shall verify from records whether additional depreciation is pressed against the above plant or against some office equipment. If it is in respect of the former the claim shall be allowed. It would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the Hon'ble DRP as well as the Id. AO failed to appreciate that the sale tax component of ₹ 3,34,330/- inter alia included in the sundry debtors written off to the P L A/c, was in the nature of 'trade debt' and hence allowable as deduction from the profits of the business. 3. The Assessee is a company engaged in the business of manufacturing, trading and selling of printing ink, industrial adhesives and other allied products. While computing income from business, the assessee claimed deduction of a sum of ₹ 1,45,55,609/- on account of bad debts. It is not in dispute that bad debts were written off in the books of accounts of the assessee and that the Assessee was entitled to claim deduction in respect of bad debts written off u/s 36(1) (vii) of the Act. The dispute raised by the AO was that the bad debts written off comprised of component of sales tax of ₹ 3,34,330/-. The AO was of the view that the sales tax component of the bad debts written off cannot be allowed as deduction as bad debts written off because it was not a debt arising from the trading transaction between the Assessee and its customer. Rather it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore it will assume the character of a debt in the hands of the assessee. If ultimately the customer does not pay this amount to the assessee, it has to be regarded as bad debt written off and allowed as deduction u/s 36(1)(vii) of the Act. In any event the deduction has to be allowed u/s 28 of the Act as a loss incidental to the business. We therefore direct the claim of the assessee to be allowed. 7. Ground no. 3 and 4 raised by the assessee reads as follows :- 3.For that on the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in law and on facts in upholding the disallowance of 75% of the royalty payments made by the AO treating it to be capital in nature. 4. For that on the facts and in the circumstances of the case and in law, the royalty was paid by the appellant in the course and for the purposes of business and was therefore revenue in nature and in that view of the matter both the Hon'ble DRP as well as the Id. AO erred in making disallowance to the extent of ₹ 6,88,18,277/- out of total royalty paid during the year. 8. The assessee paid a sum of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2000 that assessee is engaged in the business of manufacturing of printing inks and allied products in India in its various factories located at Calcutta, Delhi, Mumbai, Chennai, Noida and Ahmedabad. The assessee was desirous of upgrading its overall technology and introduction of new technology for manufacturing printing inks and allied products of all types viz., manufacturing of flushed pigments, sheetfed offset inks, gravure inks, web offset inks, news inks, screen printing inks, varnishes of all types including flush varnish, adhesives including packaging adhesives on a continuous basis. The assessee had approached DIC Japan to make available to it the said technical knowhow for the purpose of upgrading its manufacturing technology for the existing as well as future products relating printing inks and allied products on a continuous basis in its plants located at Calcutta, Mumbai, Noida, Ahmedabad , New Delhi , Madras or any other future place as may be determined by assessee from time to time. It is further stated that the DIC Japan would.make available to assessee the technical knowhow as aforesaid and the right to use the trade names and brand names. In this regard, the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to keep the Licensed Information provided hereunder by DIC as secret and confidential and agrees not to disclose it to any third party provided that the information of the following nature shall be excluded from these secrecy obligations: ( a) Information that is in public domain. ( b) Information that COATES has in its possession at the Effective date which is not subject to an Agreement of Confidentiality. ( c ) Information which COATES has received rightfully from other sources before or after at the Effective Date. 7.2. The obligation under this article shall survive any termination of this Agreement for ten (10) years. 9. Period of Agreement 9.1. This Agreement will remain in force for 7 years from the Effective Date, provided that DIC, directly or indirectly, owns more than fifty (50) percent of the shares of COATES. 9.2. One (1) year prior to the expiration of this Agreement, the parties shall meet and shall decide jointly either to renew this Agreement for the further period fo five (5) years at the expiration of this Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f seven years only. Admittedly the licensed information has been obtained for a period of seven years by the assessee and hence there cannot be any question of acquisition of such licensed information by the assessee. We have gone through the agreement entered into between the assessee and DIC Asia Pacific Pte Ltd, Singapore and DIC Corporation, Japan and we find that nowhere it was mentioned that the assessee had acquired the business/ commercial rights of IPR so as to fall within the ambit of an asset having enduring nature in the capital field.. On the contrary it is very clearly stated in both the agreements that DIC Asia Pacific Pte Ltd, Singapore and DIC Corporation, Japan has granted license to use technology, knowhow and other license information for a specified period and hence it cannot be said that the assessee had acquired any business / commercial rights thereon. We find that the ld. CIT had persuaded himself to incorrect assumption of facts that assessee by using the licensed information obtained from DIC Asia Pacific Pte Ltd, Singapore and DIC Corporation, Japan had upgraded its P M and also changed the setting up of P M to make its finished products viable for the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained any capital asset on the basis of the payment of the royalty as per the agreement, The technical know-how trade marks denies drawings. notes etc. in respect of the agreement for which the assessee has paid the royalty belongs to the licensor being M/s. Wolverine World Wide, INC. Thus as the assessee has derived no enduring benefit the same cannot be treated as a capital expenditure but is clearly in the name of revenue expenditure and allowable. In the circumstances the AO is directed to allow the royalty paid by the assessee as revenue expenditure as claimed. 11. The tribunal also placed reliance on the decision of the Hon ble Calcutta High Court in the case of Timken India Ltd. (2014) 51 Taxman 184 (Cal) in which the Hon ble Calcutta High Court took the following view :- 10. We have considered the rival submissions of the learned advocates for the parties. The submissions advanced by Ms. Gutgutia are no doubt meritorious and certainly represent one way of looking at the things. Sight cannot however be lost of the fact that the payment made by the assessee is on account of license fee. By making such payment, the assessee has got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only a non-exclusive and nontransferable license to use Licensed Information for manufacture of products. Assessee was not granted any right to sublicense to any third parties or make available any licensed information to any third parties and is also directed to maintain the secrecy and confidentiality or the licensed information by not disclosing to any third party and such secrecy confidentiality clause shall be binding even after termination of the agreement for ten years. Hence it is a restrictive usage privilege given to the assessee in the instant case and hence the facts before the Hon ble Madras High Court are squarely distinguishable. 13. In view of the aforesaid decision on the same facts, we are of the view that the claim for deduction as made by the assessee ought to have been allowed by the revenue authorities. 14. The ld. DR submitted that the order of the tribunal relied upon by the ld. Counsel needs a re-look because the decision of the Hon ble Madras High Court in the case of CIT vs Southern Switchgear Ltd had not been appreciated. He further submitted that a new advantage and acquisition of capital asset by the assessee existed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be allowed. In view of above discussion on each of the grounds of objection, the Assessing Officer is directed to complete the assessment as per the directions of the DRP as above. 18. The ld. Counsel for the assessee brought to our notice that in the order passed by the AO giving effect to the directions of the DRP, he did not give effect to the directions of the tribunal. The limited prayer of the ld. Counsel for the assessee is to direct the AO to follow the directions of the DRP and give effect to such directions. 19. We are of the view that it would be just and proper to direct the AO to comply with the directions of the DRP and before doing so afford opportunity of being heard to the assessee. 20. Ground No.7 raised by the assessee reads as follows :- 7. For that on the facts and in the circumstances of the case and in law, both the DRP as well as the AO erred on facts in law in not allowing deduction in respect of sum of ₹ 43,35,000/- actually paid towards leave encashment u/s 43B of the Act. 21. The assessee made a claim before the AO for deduction of a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a revised return, and did not impinge on the power of the Appellate Tribunal under section 254 of the Income-tax Act, 1961 . This has been interpreted in several judicial pronouncements as applicable even to the first appellate authorities. The Hon ble Delhi High Court in the case of Jai parabolic Springs 306 ITR 42 (Delhi) has held that the appellate authorities under the Act, were free to consider a claim made by an Assessee even in the absence of a revised return of income and that the requirement for filing a revised return of income as laid down by the Hon ble Supreme Court in the case of Goetz India Ltd. (supra) is applicable only when a claim is made contrary to the return of income before the AO. The Hon ble Delhi High Court in the case of Bharat Aluminium 163 Taxman 430J, has inter-alia ruled that assessee can file revised computation in the course of ongoing assessment proceedings under the Act, without making recourse to revised return, despite the fact that time limit for revising return under section 139(5) had expired. In the light of the aforesaid decisions, we are of the view that the DRP ought to have examined the claim of the Assessee. We therefore set aside th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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