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2019 (5) TMI 1008

by this Court on 2nd August 2017 in the Revenue’s appeal in the Assessee’s own case for AY 2009-10 in The Commissions of Income Tax - LTU v. Honda Cars India Ltd. [2018 (5) TMI 1875 - DELHI HIGH COURT] Addition u/s 14A - HELD THAT:- The issue stands answered against the Revenue by the decision in Cheminvest Ltd. v. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] Royalty and lump sum fee paid by the assessee - capital expenditure OR revenue expenditure as claimed by the Assessee - HELD THAT:- ITAT has rightly drawn a distinction between the royalty payments made by the Assessee to the principal during its formative years and those made in subsequent years when the Assessee was fully operational. While the former payments were character .....

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n deleting the addition of ₹ 97,32,768/- made by the Assessing officer treating the expenditure incurred on software expenses as capital expenditure instead of revenue expenditure? 3. The above three questions have already been answered against the Revenue by the order passed by this Court on 2nd August 2017 in the Revenue s appeal in the Assessee s own case for AY 2009-10 i.e. ITA 480/2017 (The Commissions of Income Tax - LTU v. Honda Cars India Ltd.) 4. As far as the question at 2.5 is concerned viz., whether the ITAT erred in deleting the addition of ₹ 31,80,007/- made by the AO under Section 14A of the Act, the issue stands answered against the Revenue by the decision in Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Del). 5. The .....

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oints out that the ITAT has in the impugned order discussed the decision of the Supreme Court in Honda Siel Car Ltd. v. CIT (2019) 409 ITR 42 which concerned treatment of royalty payment made to its principal during the initial years of the Assessee s operations whereas the royalty payment made by the Assessee to its principal during the AY in question was pursuant to the agreement dated 1st April 2005 and well over ten years after the Assessee s operations commenced. The ITAT therefore accepted the Assessee s contention that it had to be treated as revenue expenditure.. 9. The ITAT has given the reasons for its conclusion in para 33 of the impugned order which reads thus: 33. We have considered the rival submission and perused the relevant .....

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engaged in the manufacturing of cars and spare parts and the payments towards royalty/technical knowhow paid in pursuant to agreement dated 01/04/2005 were not toward setting up of manufacturing facility, hence we hold that royalty/technical knowhow payment made by the assessee during the year under consideration were revenue in nature and the Ld. CIT-A has correctly allowed the said expenditure as revenue. Accordingly, we dismiss the ground of appeal of the Revenue. 11. Mr. Bhatia then urged that the ITAT has not discussed the clauses of the agreement dated 1st April 2005. The Court in fact finds that in paragraph 26 of the impugned order while setting out the submissions of learned counsel for the Assessee, the clauses of the said agreem .....

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