ACIT, CIRCLE- II, FARIDABAD vs. VOITH PAPER FABRICS INDIA LTD., FARIDABAD
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Income Tax Appellate Tribunal, DELHI BENCHES “F” : DELHI
Before: SHRI ANIL CHATURVEDI & SHRI N.K. CHOUDHARY
PER ANIL CHATURVEDI, A.M.
This appeal by Revenue has been directed against
the Order of the Ld. CIT(A), Faridabad, dated 31.03.2019
relating to the A.Y. 2016-2017.
The relevant facts as culled out from the material
on record are as under :
2 ITA.No.5297/Del./2019 M/s. Voith Paper Fabrics India Ltd., Faridabad.
2.1. The assessee is a Company stated to be engaged
in the business of manufacturing of industrial felts which
are used for paper making, manufacturing and selling of
paper machine clothing for pulp, paper and board industry.
The assessee filed its return of income for the A.Y. 2016-17
on 30.11.2016 declaring total income of Rs.21,94,03,760/-.
The case was selected for scrutiny and thereafter,
assessment was framed under section 143(3) of the I.T. Act,
1961 vide order dated 24.12.2018 and the total income of
the assessee was determined at Rs.25,54,52,295/-.
Aggrieved by the order of the A.O, assessee carried the
matter in appeal before the Ld. CIT(A) who vide order dated
31.03.2019 in Appeal No.10666/2018-19 allowed the
appeal of the assessee.
Aggrieved by the order of the Ld. CIT(A), the
Revenue is now in appeal before the Tribunal by raising the
following grounds :
Whether on the facts and in the circumstances of the
case, the Ld. CIT(A) was right in law in deleting the
3 ITA.No.5297/Del./2019 M/s. Voith Paper Fabrics India Ltd., Faridabad.
additions of Rs.3,60,48,535/- despite the fact that
the expenditure incurred on technical know how paid
to parent company M/s Voith Paper Fabrics Gmbh &
Co. KG for acquiring an intangible asset in the form of
technical knowhow and thus capital in nature?
Whether on the facts and in the circumstances of the
case, the Ld. CIT(A) was right on facts and in law in
deleting the additions of Rs.3,60,48,535/- despite the
fact that as per clause 2.6 of Technical knowhow
agreement dated 21.05.2010 ‘the ownership of the
technology so developed by assessee with the
assistance of Voith shall always vest with assessee’
and thus it is not an interim or adhoc arrangement,
rather is acquired permanently?”
Before us, at the outset, the Ld. D.R. submitted that
that though the Revenue has raised various grounds, but,
the sole grievance of the Revenue is with respect to deletion
of addition of Rs.3,60,48,535/-.
4 ITA.No.5297/Del./2019 M/s. Voith Paper Fabrics India Ltd., Faridabad.
During the course of assessment proceedings, A.O.
noticed that assessee had debited Rs.3,60,48,535/- on
account of “Technical know-How Fees Royalty”. According
to A.O. the expenses appeared to be of capital in nature. The
assessee was, therefore, show caused and asked to explain
as to why the expenses should not be considered as capital
expenditure. The assessee made detailed submissions which
were not found acceptable to A.O. A.O. noted that assessee
had entered into a “Technical Know-How Agreement” with
M/s. Voith Paper Fabrics GmbH & Co. KG, a company
incorporated under the laws of Germany, whereby it
provided know-how and technical assistance to the assessee
for the manufacture of paper maker felts, paper and other
industrial fabrics. As per the agreement assessee was
required to pay to Voith Paper Fabrics GmbH for technical
assistance and know-how, royalty @ 5% of the net export
sale price. A.O. noted that the expenses incurred in the form
of royalty was termed as “Technical Know-How Fees” in the
P & L A/c and was claimed as deductible expenditure. A.O.
was of the view that the expenditure in question was in
5 ITA.No.5297/Del./2019 M/s. Voith Paper Fabrics India Ltd., Faridabad.
relation to carrying on of the business of the assessee for
running the business more profitably and the rights
obtained by the assessee was absolute rights to use the
know-how. He was of the view that assessee had derived
benefits of enduring nature as well as increase in functional
capacity of the manpower which ultimately increases the
production of the company. He was further of the view that
acquisition of know-how under a license was capital
expenditure and it would fall within the ambit of amended
section 32 of the I.T. Act, 1961. He further noted that
identical expenditure was disallowed by the A.O. in A.Y.
2010-11 to 2014-15. He, therefore, held the expenditure
incurred by the assessee on technical know-how fees be not
a revenue expenditure. He, therefore, made a net
disallowance of Rs.3,60,48,535/- after allowing the claim of
depreciation.
Aggrieved by the order of A.O., assessee carried the
matter before CIT(A).
6 ITA.No.5297/Del./2019 M/s. Voith Paper Fabrics India Ltd., Faridabad.
The Ld. CIT(A) decided the issue in favour of the
assessee by noting that similar disallowances made by the
A.O. for the A.Ys. 2009-10 to 2014-15 were deleted by his
predecessor. He further noted that the order of Ld. CIT(A)
for A.Y. 2009-10 to 2010-11 was confirmed by ITAT vide
order dated 28.05.2018 and 07.06.2018 in ITA.Nos.6603,
6923/2014 and ITA.Nos.1196 & 1197/Del./ 2015. He,
therefore, following the order of the Tribunal held that A.O.
was not justified in making disallowance of
Rs.3,60,48,535/-.
Aggrieved by the order of the Ld. CIT(A), the
Revenue now is in appeal before us.
Before us, the Ld. D.R. strongly supported the
order of the A.O.
The Learned Authorized Representative, on the
other hand, supported the order of the Ld. CIT(A) and
further submitted that the issue has already been decided
by CIT(A) in its favour and apart from the decisions of the
Tribunal in assessee’s own case, on identical facts, the issue
7 ITA.No.5297/Del./2019 M/s. Voith Paper Fabrics India Ltd., Faridabad.
has also been decided in favour of the assessee by Hon’ble
Punjab & Haryana High Court in the case of CIT vs., Super
Steels reported in [1989] 178 ITR 637 [P & H]. He, therefore,
supported the order of the Ld. CIT(A).
We have heard the rival submissions and perused
the material available on record. The issue in the present
case is with respect to deletion of addition of
Rs.3,60,48,535/-. We find that A.O. had disallowed the
expenditure considering it to be a capital expenditure and
following the decision of his predecessor for earlier
assessment years. When the matter was carried before the
Ld. CIT(A), Ld. CIT(A) noted that in A.Ys. 2009-10 to 2014-
15 the addition made by the A.O. has been deleted by his
predecessor. He also noted that for those years the order of
Ld. CIT(A) has been upheld by the Tribunal. Before us, no
fallacy in the findings of the Ld. CIT(A) has been pointed-out
by Revenue nor has Revenue placed on record any material
to demonstrate that the order of Tribunal in assessee’s own
case for earlier years has been set aside, overruled or
modified by higher judicial forum. We, therefore, find no
8 ITA.No.5297/Del./2019 M/s. Voith Paper Fabrics India Ltd., Faridabad.
reason to interfere with the order of the Ld. CIT(A) and thus
dismiss the grounds of the Revenue.
In the result, appeal of the Revenue is
dismissed.
Order pronounced in the open court on 30.06.2022.
SD/- Sd/- [N.K. CHOUDHARY] [ANIL CHATURVEDI] JUDICIAL MEMBER ACCOUNTANT MEMBER
Delhi, Dated 30th June, 2022
VBP/-
Copy to 1. The appellant 2. The respondent 3. Ld. CIT(A) concerned 4. CIT concerned 5. DR ITAT “F” Bench, Delhi 6. Guard File //By Order//
Assistant Registrar, ITAT, Delhi Benches, Delhi.
9 ITA.No.5297/Del./2019 M/s. Voith Paper Fabrics India Ltd., Faridabad.
Date of dictation on 13.06.2022 Date on which the typed draft order is placed before 13.06.2022 the dictation Member Date on which the approval draft comes to the Sr. PS 13.06.2022 Date on which the fair order is placed before the 29.06.2022 Dictation member for pronouncement Date on which the fair order comes back to the Sr. P.S. 30.06.2022 Date on which the final order is uploaded on the 30.06.2022 website of ITAT Date on which the file goes to the Bench Clerk 30.06.2022 Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order.
