TMI Blog2016 (9) TMI 1597X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the DRP for the Asst.Year 2010-11 and the learned DRP has favourably inclined with the arguments of the tax payer and directed the Assessing Officer to verify assessee's claim as to whether the amount was actually paid on behalf of Gulf Oil International Lubricants Pvt. Ltd. and allow assessee's claim accordingly - HELD THAT:- DRP has not applied its mind to the contentions of the assessee. Therefore, in the interest of justice, we deem it fit and proper to remit the issue to the file of the Assessing Officer with a direction to verify the assessee s claim. Thus, grounds of appeal No.3 and 4 are treated as allowed for statistical purposes. Correct figure taken by the Assessing Officer towards carry forward of short term capital loss as against the correct amount of loss carried forward - HELD THAT:- We deem it fit and proper to remand this issue to the file of the Assessing Officer with a direction to give consequential effect in computation of the brought forward short term capital loss, pursuant to the loss arrived at in the earlier assessment years consequent to remand by the ITAT. - ITA.No.401/Hyd/2016 - - - Dated:- 21-9-2016 - SMT. P. MADHAVI DEVI AND S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) The actual percentage of commission paid is very much less in comparison to what was approved by the RBI while according approval to the royalty agreement entered into. d) The matter stands covered in favour of the assessee by the order of the ITAT, Pune Bench in Kinetic Hondia Motors Ltd. Vs. J.C.I.T reported in 77 ITD 393 and also the decision of ITAT in Cadbury India Ltd. Vs Additional Commissioner of Income Tax. Thus, according to the Learned Counsel for the assessee the entire amount of royalty paid by the assessee should be allowed. 4. The Ld. D.R. however, supported the orders of the authorities below and also submitted that the very same issue had arisen in assessee s own case in the earlier A.Y. 2006-07 and this Tribunal has held 1% to be reasonable royalty on export sales. 5. Having regard to the rival submissions and the material on record, we find that this issue had arisen in the earlier assessment years and for the A.Y. 2006-07 in ITA.No.1450/Hyd/2010, the B Bench of this Tribunal vide its order dated 22.01.2014 has held as under : 10. The next issue for consideration through grounds No.6 to 11 is on the issue of disallowance of royalty am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domestic sales there is no disallowance in later years and accordingly, the commission paid on domestic sales in this year amounting to ₹ 2,14,28,108/- is allowable. Coming to the export sales claim of ₹ 62,29,972/-, it was submitted that entire royalty should be allowed and not merely restricted to 1% for the following reasons (a) the percentage of payment of royalty by third parties to other hubs is more than what was paid by the assessee/appellant to GOIMI. (b) percentage of payment of royalty by other subsidiaries to other hubs is more than what was paid by the assessee/appellant to GOIMI. (c) percentage of commission paid was very much less in comparison what was approved by RBI while according approval to the royalty agreement entered into (3.45% as against 8% approved by the RBI). (d) matter stands covered in favour of the assessee by the Order of the ITAT in Kinetic Motor vs. JCIT 77 ITD 393. 15. The learned D.R. however, accepted the factual position in later years and relied on the Orders of the authorities. 16. We have considered the issue and examined the documents placed on record. As far as the issue of royalty on domestic sales is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier, the restriction on the royalty amount is limited to ₹ 44,24,184/-. Accordingly, grounds No. 6 to 11 are partly allowed. 5.1. Since the issue is covered by the decision of the Coordinate Bench, to which one of us i.e., Accountant Member is the signatory, we do not see any reason to interfere with the order of the Assessing Officer which is in consonance with the said decision. Thus, ground of appeal No.2 is rejected. 6. As regards grounds No.3 and 4 against the addition of ₹ 45,97,042 made on the ground that the said amount is paid to foreign concerns without making TDS, the contention of the Learned Counsel for the assessee is that the assessee has paid ₹ 44,86,063 to M/s. C C Maritime P. Ltd., and ₹ 1,10,979 to M/s. East Port Maritime P. Ltd., towards trade and commission respectively for services rendered outside the country and since the payees are not liable to tax in India, the disallowance of the said amount for non-deduction of tax does not arise. It was further submitted that these payments are made for purchase of raw material and therefore, is the business income of the A.E. and hence, do not attract the provisions of TDS since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in respect of the said amount. The provisions of section 40(a)(ia) of the I.T. Act are not attracted towards cost of purchases. 8.1. The DRP has disposed of the objections of the assessee by observing as under : Having considered the submissions we have noticed that similar issue was there in the proceedings before the DRP for the Asst.Year 2010-11 and the learned DRP has favourably inclined with the arguments of the tax payer and directed the Assessing Officer to verify assessee's claim as to whether the amount was actually paid on behalf of Gulf Oil International Lubricants Pvt. Ltd. and allow assessee's claim accordingly. Further, it is also noticed that the Hon'ble ITAT, Hyderabad, on appeal by the tax payer has remitted back this matter for AY 2010-11 to the AO for detailed verification. Respectfully following the above orders, we direct the AO to verify the assessee's claim as to whether the amount was actually paid on behalf of Gulf Oil International Lubricants Pvt. Ltd. and allow assessee's claim accordingly. 8.2. Thus, it can be seen that the DRP has not applied its mind to the contentions of the assessee. Therefore, in the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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