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TMI Blog2009 (3) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... at Pune and Madhawas and the production of the carburetors was done at both the plants. The raw materials, spares, tools and stores were common at both the production units but the only difference is that the brass was used at Pune unit only and not at Madhawas. It was noticed by the AO that the total number of carburetors produced at Pune unit were 9,59,672 and at Madhawas Division 5,46,661. The AO made the comparison of the consumption of the raw materials in respect of both the units i.e., Pune as well as Madhawas. As per the working made out by the AO in the assessment order, the consumption of the raw material for carburetors in respect of Madhawas unit comes to 26.06 per cent and at Pune unit 60.30 per cent. The AO has also worked out using his own formula in respect of consumption of the components, spares and tools, packing materials and thereafter came to the conclusion that the consumption of raw materials, stores, components, tools and packing materials etc, are much higher at Pune as compared to Madhawas plant. The AO sought the explanation of the assessee and same was filed vide letter dt. 14th Nov., 2005, which was rejected by the AO and the AO following the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue. Copies of the said orders are placed in the paper book at pp. 11 to 17 and though the Tribunal has not specifically given any reasons but has reproduced the reasons given by learned CIT(A) for deletion on the same set of facts. It is pertinent to note that in subsequent assessment year i.e. asst. yr. 2002-03 on this issue also, the Tribunal has already decided in favour of the assessee in assessee's own case in ITA No. 804/Mum/2006 vide order dt. 12th May, 2008. We, therefore, following the orders of the Tribunal for asst. yrs. 2000-01, 2001-02 and 2002-03, confirm the order of learned CIT(A) on this issue. Ground No. 1 of the Revenue is dismissed. 7. The next issue arises out of ground No. 3 taken by the Revenue is in respect of inclusion of sales-tax and excise duty in the total turnover for the purpose of computing the deduction under s. 80HHC. 8. We have heard ,the parties. We find that this issue is covered in favour of the assessee 9Y the decision of the Hon'ble Supreme Court in the case of CIT vs. Lakshmi Machine Works (2007) 210 CTR (SC) 1 : (2007) 290 ITR 667 (SC). Learned Departmental Representative fairly conceded the same. We, therefore, following the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p sale cannot be excluded by applying Expln. (baa). In respect of scrap sale, we concur with the order of learned CIT(A) as the Expln. (baa) cannot be applied for excluding 90 per cent of scrap sale receipts. In respect of labour charges of Rs. 1,58,551. Learned Departmental Representative submitted that now this issue is covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. K. Ravindranathan Nair (2007) 213 CTR (SC) 227 : (2007) 295 ITR 228 (SC), wherein, it has been held that 'independent incomes' having no nexus with the export turnover were required to be deducted from business profits under cl. (baa). There being no dispute that the labour charges are in the nature of 'independent incomes', therefore, following the decision of the Hon'ble Supreme Court in the case of K. Ravindranathan Nair, we are of the opinion that the AO has rightly invoked the Expln. (baa) to s. 80HHC and, accordingly, we decide this issue in favour of the Revenue and reverse the order of learned CIT(A) on this issue and restore that of the AO. In respect of miscellaneous receipts of Rs. 3,43,925, the AO has applied Expln. (baa) and excluded the same as the same cannot be equated with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the products and parts described in the Annexure to TCA. By virtue of cl. (3) of s. 3.02, it was provided that the assessee shall not use the trade mark of the products without the consent of Keihin in respect of the domestic parts and packing materials. As per s. 4.02, Keihin agreed to make available to the assessee after the effective date of the agreement, the technical documents to the extent described in Annex. B attached to the agreement and also agreed that whatever question should be raised by the assessee in respect of the technical information, Keihin was under contractual obligation to reply the same. Keihin further agreed that to the best of endeavour, it will assist the assessee and provide with necessary technical advice in manufacturing of the products, which was the subject-matter of the agreement. As per s. 5.01.1 of the agreement, it was provided that in order to maintain the quality of products to be manufactured, purchase of the parts and capital goods necessary for the manufacturing of the carburetors will be strictly in accordance with the recommendations or advice of Keihin. It was further provided that Keihin can change design and specifications for the prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows: Model: Item No. 10PB-00B()() 2. As to the technical assistance for other models than mentioned above, Keihin will give first priority to Spaco for manufacturing in India. The parties hereto shall conclude a separate agreement by mutual deliberation." 15. As per TCA, the assessee commenced manufacturing of the carburetors which were used by the Hero Honda Motors Ltd., for installing in CD 100 type motorcycles. After entering into the TCA, Keihin subsequently developed another carburetor which they designated as 10PB-7FA ('carburetor B' or 'carburetor 7FA') and that was the point as dispute started between the assessee and Keihin. In pursuance of the TCA, the assessee manufactured carburetor from March, 1993 to March, 2000 i.e., carburetor A. It appears that there was some problem with the main body of the casting die. The assessee requested to Keihin to supply the main body of casting die for carburetor. The assessee sent five units of the carburetors manufactured by using newly supplied main body casting die to the Hero Honda Motorcycles for approval. On 4th Dec., 1999, Hero Honda Motors Ltd., informed the assessee that there was a new carburetor assembly, which would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal that as per the evidence, a new model of the carburetor was developed for new engine due to change in engine specifications and that engine CD 100 motorcycles had different specifications of the pre and post Y2K emission norms in India and hence, carburetor 'B' developed by the Keihin was a totally different model than carburetor 'A' as carburetor 'A' was designed for the engine of the pre-Y2K norms. In respect of alternative claim of the assessee that. Keihin failed to offer the first priority to manufacture carburetor 'B' i.e., newly developed carburetor in India, which was developed during the tenure of the TCA, Keihin took the stand that offer was made to the assessee to produce the newly developed carburetor 'B' in joint venture in India. The joint venture negotiations commenced in the mid of March, 1995 and concluded in March, 1998. That was not materialised in spite of the fact that the negotiations were going on for almost three years. It appears that in the joint venture negotiations also, newly developed carburetor 'B' was not expressly included. Therefore, there was some controversy between the assessee company and Keihin company. The Arbitration Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved by the order of learned CIT(A), both the parties are in appeals before us. 19. We have heard the rival submissions and perused the record of the case. We have also carefully considered all judicial precedents relied upon both the sides. Learned counsel for the assessee vehemently submitted that the compensation awarded was in respect of the extinction of a source of income and profit earning apparatus as assessee company was deprived of the opportunity to manufacture newly developed carburetor as it was its right and thereby lost the source of income. It is argued that the compensation is not awarded for breach of contract of the revenue nature. Learned counsel also referred to the TCA which is placed on record at pp. 32 to 56 of paper book. He took us through different clauses in TCA. Learned counsel also referred to the final award passed by the ICA dt. 17th June, 2002. Learned counsel placed his heavy reliance on the following decisions: (i) Oberoi Hotel (P) Ltd. vs. CIT (1999) 152 CTR (SC) 474 : (1999) 236 ITR 903 (SC); (ii) Dy. CIT vs. SAK Industries (P) Ltd. (2005) 1 SOT 798 (Del). 20. Per contra, learned Departmental Representative supported the order of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o operate the property was not for settlement of rights under a trading contract, but the injury was inflicted on the capital asset of the assessee and giving up the contractual right on the basis of the principal agreement which has resulted in loss of source of the assessee's income. 23. We may refer here to the decision of the Tribunal, Delhi in the case of SAK Industries (P) Ltd., in which the Tribunal has again considered the issue of taxability of a sum of Rs. 20.86 crores. As far as the facts of the said case, the assessee company entered into a promotion agreement on 30th Sept., 1963 with M/s Meturit AG, a company which was hundred per cent subsidiary of a German company, Krupp Widia GmbH. In terms of promotional agreement, a manufacturing company was floated in India by the name of Widia (India) Ltd., at Bangalore. The assessee company was having 26 per cent equity in shares. In terms of the promotional agreement, the assessee had the first option for purchase of shares of Widia (India) Ltd., held by M/s Meturit AG, which was 51 per cent. The assessee was paid the amount equivalent to Rs. 20.86 crores for not exercising the right of first option to purchase the shares. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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