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Income Tax Appellate Tribunal, DELHI BENCH: ‘I’ NEW DELHI
Before: SHRI G.S. PANNU & SHRI SAKTIJIT DEY
Date of hearing 07.03.2023 Date of pronouncement 15.03.2023 ORDER PER SAKTIJIT DEY: JUDICIAL MEMBER: Captioned appeal has been filed by the assessee challenging the final assessment order dated 30.03.2016 passed under Section 143(3) read with section 144C(13) of the Income-Tax Act, 1961 pertaining to assessment year 2016-17 in pursuance to the directions of the learned Dispute Resolution Panel (DRP).
At the outset, we must observe, this appeal was earlier disposed of by the Tribunal vide order dated 09.11.2021.
Inadvertently, while disposing of the appeal, ground no. 10 raised by the assessee was left out, hence, remained undecided. Therefore, while considering the miscellaneous application filed by the assessee in MA No. 214/Del/2021, the Tribunal vide order dated 29.07.2022 recalled the appellate order for the limited purpose of deciding ground no.10. This is how the present appeal came up for hearing before us.
Ground No.10, reads as under:
10. That the A.O/LEARNED DRP have erred in not allowing deduction of expenses of INR 250,17,14,636/- in respect of Technical know-how duly claimed before the A.O and DRP.
10.1 That the A.O/Learned DRP have erred in not allowing deduction of expenses of 250,17,14,636/- in respect of Technical know-how in utter disregard to circular no.14(XL-35) dated 11.04.1955.
Briefly, the facts relating to this issue are the assessee is a resident corporate entity and is a subsidiary of Honda Motorcycle Co.
Ltd., Japan. Basically, assessee is engaged in the business of manufacturing and distribution of motorcycles, scooters etc. in India.
In the year under consideration, the assessee had paid Rs.250,17,14,636 towards fee for technical know-how. However, in the return of income, the assessee did not claim it as deduction.
In course of assessment proceedings, in submission dated 10.12.2019, the assessee claimed deduction of the aforesaid amount as Revenue expenses.
While examining the issue, firstly, the Assessing Officer observed that the claim cannot be allowed as the assessee should have claimed it in the return of income filed for the impugned assessment year.
In this context, he relied upon the decision of Hon'ble Supreme Court in case of Goetz India Ltd. vs. CIT – 284 ITR 323. Against the rejection of claim of deduction, assessee raised objection before learned DRP. However, relying upon its direction on similar issue in assessee’s own case in assessment year 2015-16, learned DRP upheld the decision of the Assessing Officer.
Before us, learned counsel appearing for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessment year 2015-16. In this context, he drew our attention to the relevant observations of the Tribunal while deciding the issue in dated 21.05.2021.
Learned Departmental Representative, though, agreed that the issue is covered by the decision of the Tribunal, however, he relied upon the observations of the Assessing Officer and learned DRP.
We have considered rival submissions and perused the material available on record.
On going through the material available on record, we find, the issue, whether, technical know-how fee paid is in the nature of capital or revenue expenditure is a legacy issue and is continuing from preceding assessment years. While, deciding the issue in the immediately preceding assessment year i.e. assessment year 2015-16, the Tribunal, in the order referred to above, followed its earlier decision and allowed assessee’s claim. The relevant observations of the Tribunal in this regard are as under:
“25. We have carefully considered the rival contention and perused the orders of the lower authorities. The identical claim with respect to the deduction of expenses in respect of technical knowhow arose before the coordinate bench in case of the assessee in ITA number 7463 and 7464/del/2018 for assessment years 2013 – 14 and 2014 – 15 wherein at para number six the coordinate bench dealt with this issue. The coordinate bench considered the decision of the coordinate bench in assessee’s own case for assessment year 1213 as under :-
“6. Additional claim of deduction of expenses in respect of technical know- how- A similar issue has been decided in A.Y. 2012-13. The relevant findings read as under :-
Now coming to the next issue raised which is by way of additional ground of appeal. Since it is legal issue, it is admitted for adjudication. The assessee fairly pointed out that the lump sum Royalty was capitalized in its books of accounts and also not claimed as an expenditure in the return of income. However, because of the settled position by way of the decision of the Jurisdictional High Court in CIT v. Hero Honda Motors Ltd. (supra), the same is being claimed as business expenditure. The relevant findings are as under:-
"The Hon'ble ITAT in the appellant's own case for assessment Year 2011- 12 reiterated that the facts in the case of the appellant differ from, the facts of Honda Siel Cars Ltd. (supra) because the amount expended is in relation to the running royalty and not for the purpose of setting up of plant.
Further, reference is also made to the decision of the Delhi Tribunal in the case of Honda Cards India Ltd vs DCIT : dated 18.08.2017 (pages 414- 457 of the CLPB) and also confirmed by Hon'ble Delhi High Court in ITA No.45/2019 vide order dated. 13.05.2019 (refer pages 457A-457F of the CLPB), wherein the Tribunal after referring to the decision of the Supreme Court in the case of Honda Siel Cars (supra) observed that the Supreme Court has carved out the distinction between the payments at the time of setting up of the manufacturing facility and the payments made once the manufacturing process has already began. In the former case, royalty expenditure for setting up the manufacturing facility is capital in nature while in the latter case, the royalty expense is revenue in nature. "
The SLP filed against the said decision has been dismissed by the Hon'ble Supreme Court. Applying the said ratio, we are of the view that the assessee was entitled to claim the aforesaid expenditure as revenue expenditure in the hands of the assessee.
Coming to the stand of the Revenue that where the assessee itself had not claimed as deductible in its hands, then the same cannot be allowed by the additional ground of appeal. We find no merit in the stand of the Ld. DR for the Revenue as there is no estoppel in law;
especially where the issue has been decided by the Jurisdictional High Court on similar facts. Accordingly, we allow the additional ground of appeal raised by the assessee. 6.1 Respectfully following the findings of the coordinate bench we decide accordingly. In view of this issue being squarely covered in favour of the assessee by the order of the coordinate bench in assessee’s own case for the earlier years, we respectfully following the same allow ground number 11 of the appeal of the assessee.”
14. Factual position being identical in the impugned assessment year, respectfully following the consistent view of the Tribunal in assessee’s own case, as discussed above, we direct the Assessing Officer to allow assessee’s claim of deduction in respect of technical know-how payment. Ground is allowed. Order pronounced in the open court on 15th March, 2023.