Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: TDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: empanelment :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: Central Excise rule to resale the machines to a new company :: VAT Audit :: VAT RATES :: ACCOUNTING STANDARD :: form 3cd :: due date for vat payment :: articles on VAT and GST in India :: cpt :: ACCOUNTING STANDARDS
 
 
From the Courts »
 Micro Spacematrix Solution P Ltd vs. ITO (ITAT Delhi)
 CIT vs. Greenfield Hotels & Estates Pvt. Ltd (Bombay High Court)
 IndiaBulls Financial Services Ltd vs. DCIT (Delhi High Court)
 Maharao Bhim Singh of Kota vs. CIT (Supreme Court)
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)
 Ashok Prapann Sharma vs. CIT (Supreme Court)a

JCIT, Range-3, Aayakar Bhawan, 2nd Floor, G-Block, Shopping Complex, 12, G-Block, Shopping Complex, 12, Noida 201301(U.P.) Vs. M/s. H-One India Pvt. Ltd. Udyog Vihar, Surajpur Kasna Road Sector 20, Greater Noida 201306
February, 16th 2015
                   IN THE INCOME TAX APPELLATE TRIBUNAL
                         DELHI BENCH `C': NEW DELHI

           BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER
                                 AND
               SHRI T.S. KAPOOR, ACCOUNTANT MEMBER

                                      ITA No. 630/Del/2012
                                     Assessment Year 2008-09

JCIT, Range-3,                                  Vs.     M/s. H-One India Pvt. Ltd.
Aayakar Bhawan, 2 nd Floor,                             (Formerly M/s Hongo India Pvt. Ltd.)
G-Block, Shopping Complex,                              12, Udyog Vihar, Surajpur Kasna Road
Sector 20,                                              Greater Noida ­ 201306
Noida ­ 201301(U.P.)

                                                        (PAN AAACH 3032 L)

(Appellant)                                                     (Respondent)

                Appellant by :          Sh. Robin Rawal, Sr. D.R.
                Respondent by:          Sh. D.D. Bansal, FCA.

                                                ORDER

PER SHRI GEORGE GEORGE K, JM:

1.      This appeal, at the instance of the Revenue, is directed against the order of the

CIT(A) dated 23.11.2011. The relevant assessment year is 2008-09.

2.      The effective grounds raised reads as follows:-

     "(1) The Ld. CIT(A) has erred in law and on facts by deleting the addition of Rs.4,00,25,949/-
         made by the Assessing Officer on account of payment of Royalty & Technical knowhow to M/s
         H-One Company Limited (formerly known as Hongo Company Limited), Japan by treating the
         expenditure as revenue in nature instead of the expenditure being capital in nature.
     (2) The Ld. CIT(A) has erred in law and on facts by deleting the addition of Rs.5,27,71,273/- made
         by the Assessing Officer on account of Sales Tax Recovered as the assessee retained with itself
         the amount collected as Sales Tax on the sale made by it in view of the Sales Tax Deferment
         Scheme of the State Government. The assessee showed this amount under the head Current
         Liabilities and enjoyed all the benefits of this amount. Accordingly, it should be treated as
         income in the year of receipt. Even otherwise it should be allowable in the year of payment as
         per the provisions of section 43B of the LT. Act, 1961."
                                                                         ITA No.630/Del /2012    2




3.     We shall dispose of the issues ground-wise as under:-

       Ground No.1

       The assessee is a Private Limited Company. It is engaged in the manufacturing

of metal sheet component and dyes. The assessee had entered into "lease and

technical collaboration agreement" with M/s Hongo Company Ltd. Japan (now M/s

H-One Company Ltd.), for the manufacturing of above products. As per the terms

and condition of license and technical collaboration agreement, assessee during the

relevant assessment year had paid a sum of Rs.2,25,69,891/- as a royalty and

Rs.1,74,56,028/- as technical supervision fees (totaling to Rs.4,00,25,949/-) to Hongo

Company Japan. The Assessing Officer while concluding the scrutiny assessment u/s

143(3) of the Act (order dated 29.12.2010) treated the entire royalty payment and

technical consultancy expenses as capital expenditure added the same to the taxable

income of the company.

4.     Aggrieved the assessee, preferred an appeal before the First Appellate

Authority. The CIT(A) allowed the appeal of the assessee following the order of the

Tribunal in assessee's own case for AY 2007-08. The relevant finding of the CIT(A)

reads as follows:-

" Para 5.2   This is squarely covered issue in favour of appellant. Last year, the
             undersigned had upheld addition on the same issue; but the ITAT Delhi
             Bench-C has reversed the decision on the ground that in earlier year also this
             issue has been decided by the ITA T in favour of appellant and the said
             decision is already subject matter of appeal before Hon'ble High Court.
             Respectfully, following decision of the ITAT, this issue for this year is decided
             in favour of the appellant and addition of Rs. 4,00,25,919/- regarding payment
             royalty and technical know-how is held as Revenue Expenditure."
                                                                    ITA No.630/Del /2012   3




5.     The Revenue being aggrieved is in appeal before us. At the very outset, Ld.

counsel for the assessee submitted that this issue is squarely covered by the various

orders of the Tribunal in assessee's own case for AYs. 2001-02, 2003-04 to 2007-08

and 2009-10. The Ld. DR was unable to controvert the submissions made by the Ld.

AR.




6.     We have heard rival submissions and perused the material on record. The issue

of payment of royalty and technical supervision fees whether it is capital or revenue

is covered in favour of the assessee by the various orders of the Tribunal in assessee's

own cases. The details of which are as follows:-

" Re.Royablty:

      Appeal Ref              AY      Deciding Authority       Order Reference
ITA No.2146(Del) 2006       2001-02    ITAT, Delhi "A      Order dated 04/07/2008
                                           Bench".
ITA No.154(Del) 2010        2003-04    ITAT, Delhi "C      Order dated 29/04/2010
                                           Bench".
ITA No.4031(Del) 2009       2005-06     ITAT, Delhi "E     Order dated 01/12/2009
                                           Bench".
ITA No.2613(Del) 2011       2006-07    ITAT, Delhi "C      Order dated 05/08/2011
                                           Bench".
ITA No.5984(Del) 2012       2004-05    ITAT, Delhi "C      Order dated 22/02/2013
                                           Bench".
ITA No.5985(Del) 2012       2007-08    ITAT, Delhi "C      Order dated 22/02/2013
                                           Bench".
ITA No.5986(Del) 2012       2009-10    ITAT, Delhi "C      Order dated 22/02/2013
                                           Bench".
Re. Technical supervision fees:

      Appeal Ref              AY      Deciding Authority       Order Reference
ITA No.4031(Del) 2009       2005-06     ITAT, Delhi "E     Order dated 04/12/2009
                                           Bench".
ITA No.5984(Del) 2012       2004-05    ITAT, Delhi "C      Order dated 22/02/2013
                                           Bench".
ITA No.5985(Del) 2012       2007-08    ITAT, Delhi "C      Order dated 22/02/2013
                                           Bench".
ITA No.5986(Del) 2012       2009-10    ITAT, Delhi "C      Order dated 22/02/2013
                                           Bench".
                                                                   ITA No.630/Del /2012      4


7.    In the present case, CIT(A) had followed the order of the Tribunal for the

previous assessment year, namely, AY 2007-08. Since the facts of the instant case,

are identical to the facts considered by the Tribunal for the AY 2007-08 in assessee's

own case, we find no error in the order of the CIT(A) warranting our interference.

Therefore, Ground No.1 raised in Revenue's appeal is rejected.

8.    Ground No.2

      The assessee's company was eligible and availing the benefit of "sales tax

deferment scheme" introduced by the U.P. Government. Under the said scheme,

assessee was authorized to collect VAT from its customers and payment of same to

the government account was deferred for a period of five years. The entire amount so

collected was shown by the assessee as a liability in its balance sheet as on

31.03.2008.

9.    The AO treated the entire amount of Rs.5,27,71,273/- VAT collect under the

scheme as subsidy received by the assessee and added the same to the taxable

income.

10.   The assessee being aggrieved filed an appeal before the CIT(A). The CIT(A)

decided the issue in favour of the assessee. The CIT(A) held that it is not a case of the

subsidy given by the Government to the assessee. The CIT(A) was of the view that

the assessee only gets temporary cash flow benefit by not requiring to pay sales tax

due to the Government account for the deferred period. The relevant finding of the

CIT(A) in allowing the plea of the assessee reads as follows:

"Para 5.3          Regarding on this issue, the AO observes from the audit report that the
                                                                         ITA No.630/Del /2012         5


            sales tax recovered during the year amounting to Rs. 5,27,71,273/- has not been
            included III P&L A/c. When asked, the appellant explained that Company was
            enjoying Sales Tax Deferment Scheme.
                   The AO resumed that the said amount was a subsidy and elaborating on
            that expenditure and relying on various court cases relevant to the issue of subsidy
            held that the sales lax recovered or Rs. 5,27,71,273/- is a subsidy in form or sales
            tax expenditure and hence is includible as income.
                    The appellant has produced all the documentary evidences and also
            balance sheet entries to prove that this amount is not at all 'subsidy' or any `grant'.
            Rather this amount has been with held by the assessee i.e. not deposited with State
            Government, simply because State Government had announced the sales tax
            deferment scheme. The amount was payable to the State Government but only
            after certain lime limit (of 5 years as per initial announcement). In effect of this
            scheme, the eligible Industrial units were allowed to retain the sales tax recovery
            amount for 5 years.
                   Thus, it is clear that there is no `grant' or 'subsidy' received by the
            assessee. The assessee only gets a temporary cash flow benefit by not required to
            pay the sale tax dues during the deferred period.
                    Even this scheme is under litigation and pending with High Court for
            direction. But the fact of litigation has no connection with the present dispute
            under consideration.
                    The sum and substance of the matter is that the AO has wrongly
            interpreted the sales tax recovery amount as "subsidy", while on factual
            verification, this explanation of AO is found to be wrong. The amount remains
            payable, although after certain time period. Amount has in fact been shown in the
            head of 'current liability' in the balance sheet."


11.   The Revenue being aggrieved is in appeal before us. The Ld. D.R. strongly

relied on the assessment order whereas the Ld. AR reiterated the submissions made

before the Income Tax Authorities. The Ld. AR has also filed the paper book

comprising of 107 pages enclosing copies of the case laws and the scheme framed

under the Sales Tax Act with reference to "sales tax deferment scheme".

12.   We have heard rival submissions and perused the material on record. As per

the U.P. Government policy with reference to sales tax deferment scheme, which the

assessee was duly covered, the sales tax collected by the assessee need not be paid to

the Government account within the due date but same can be deferred for a period of
                                                                          ITA No.630/Del /2012   6


five years as per the Government policy. The eligible unit under the scheme only gets

a temporary cash flow by not having to pay the sales tax dues during the tax

deferment period of five years. The liability of the assessee to pay such sales tax is

existing and real, and by no stretch of imagination can be called "Grant or subsidy".

Therefore, the CIT(A) is correct in deleting a sum of Rs.5,27,71,273/- added by the

AO to the taxable income of the assessee's company for the reason that it is a "grant

or a subsidy", granted by U.P. State Government.
13. Whether this amount can be disallowed by invoking the provision of Section 43B of the Act, has not been considered by the AO and CIT(A). However, since the Revenue had raised the said issue in its ground of appeal, it is imperative for us to consider the same. The Hon'ble Madhya Pradesh High Court in the case of CIT Vs. KM Oil Industries reported in 226 ITR 547 by referring to Board Circular No. 674 dated 29.12.1993 had held that the amount held by the assessee under the deferred payment scheme shall be deemed to be a payment made by assessee to the State Government account. The relevant finding of the Hon'ble High Court reads as follows:- (Para 4 P.B). "The assessee also claimed a liability of Rs.1,49,988 towards payment of sales-tax which remained unpaid throughout the previous accounting period and in the next, succeeding previous year as well. The Assessing Officer invoked the provisions of section 43B of the Act and disallowed the claim. On appeal by the assessee, the Commissioner (Appeals) allowed the claim and held that as per CBDT Notification No. 496, dated 25-9-1987, an assessee who is notified to be entitled to benefit of deferred payment scheme, is entitled to retain the sales tax collected from customers for a period of ten years and for the purposes of Sales-tax Act and also for the purposes of section 43B, the amount shall be deemed to have been paid. The Tribunal decided the issue in favour of the assessee and dismissed the departmental appeal. In view of the circular of the CBDT, it is clarified that wherever such amounts under the deferred payment scheme are there in the State, the assessee will be entitled to the benefit of deductions and the ITA No.630/Del /2012 7 provisions of section 43B will not come in the way of the assessee. Therefore, this question is answered against the revenue and in favour of the assessee." 14. In view of the Hon'ble Madhya Pradesh High Court judgment and the CBDT Circular referred (Supra), we hold the sales tax collected by the assessee's company under the deferred payment scheme is not liable for disallowance by invoking the provision of Section 43B of the Act. 15. In view of aforesaid reasoning, we hold that the CIT(A)'s order is correct and no interference is called for. Hence, we reject Ground No.2 raised. It is ordered accordingly. 16. In the result, appeal filed by the Revenue is dismissed. The decision was pronounced in the open Court on 6th February, 2015. Sd/- Sd/- (T.S. KAPOOR) (GEORGE GEORGE K.) Accountant Member Judicial Member Dated: 6th February, 2015. Aks/- Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
SEO Services SEO LLC e-boost Search Engine Optimization Services Internet Marketing Services Website Placement Services On-site Webs

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions