M/S I.P.RINGS LTD vs. THE DEPUTY COMMISSIONER OF

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TCA/317/2015HC Madras26 April 2021Bench: Hon`ble Mr Justice M.DURAISWAMY6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law framed for consideration. This was due to the enactment of the Direct Tax Vivad Se Vishwas Act, 2020. The learned counsel for the assessee informed the court that the assessee had been issued Form-3 under this Act and sought permission to withdraw the appeal. Consequently, the High Court dismissed the Tax Case Appeal as withdrawn. No costs were awarded. The specific findings or reasoning on the substantial questions of law by the ITAT or the High Court are not part of this judgment as the appeal was withdrawn before adjudication on merits.

What were the facts?

The assessee, M/s. I.P. Rings Ltd., filed an appeal before the High Court of Judicature at Madras against the order dated 26.09.2014 passed by the Income Tax Appellate Tribunal (ITAT), Madras "D" Bench. The appeal pertained to the assessment year 2008-09. The substantial questions of law were admitted on 22.07.2015. The dispute revolved around the classification of royalty payments made for the right to use technical know-how as capital expenditure. The High Court noted that the Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020, to resolve disputed tax matters. The assessee informed the court that they had been issued Form-3 under this Act and sought permission to withdraw the appeal.

What were the issues?

The High Court was to decide four substantial questions of law: 1. Whether the ITAT was correct in upholding the CIT(Appeals)'s order treating 25% of royalty payments for the right to use technical know-how from a non-resident as capital in nature. 2. Whether the ITAT was correct in treating 25% of royalty payments as capital expenditure under Section 32(1) when the assessee did not own the asset and tax was deductible at source, as the payment was for the right to use and not for acquisition of an intangible asset. 3. Whether the ITAT was correct in applying the ratio of the Apex Court judgment in Southern Switchgears v. CIT (232 ITR 359) concerning the initial year of factory setting up to the present case. 4. Whether the ITAT was correct in not following the Apex Court judgments in CIT v. IAEC Pumps Ltd. (232 ITR 316) and CIT v. Panasonic Carbon India Ltd. (Madras), which were applicable to the facts. The assessee contended that the royalty payment was for the right to use and not for acquisition of an intangible asset, and that certain Apex Court judgments were applicable. The revenue's contentions are not explicitly recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 260A,Section 32(1)

AI-generated summary — verify with the full judgment below

Tax Case Appeal No.317 of 2015 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.04.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMY AND THE HON'BLE MRS.JUSTICE R. HEMALATHA Tax Case Appeal No.317 of 2015 M/s.I.P.Rings Ltd., Arjay Apex Centre, No.24, College Road, Chennai – 600 006.

... Appellant Vs.

The Deputy Commissioner of Income Tax, Company Circle – II(3), Chennai – 600 034. ... Respondent

Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras "D" Bench, dated 26.09.2014 passed in I.T.A.No.729/Mds/2014. For Appellant : Mr.R.Venkata Narayanan for M/s.Subbaraya Aiyar Padmanabhan For Respondent : Mr.Karthik Ranganathan

Senior Standing Counsel Page 1/6 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.317 of 2015 J U D G M E N T (Delivered by M.DURAISWAMY, J.) This appeal filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 26.09.2014 passed by the Income Tax Appellate Tribunal, Madras "D" Bench, ('the Tribunal' for brevity) in I.T.A.No.729/Mds/2014 for the assessment year 2008-09. The above appeal has been admitted on 22.07.2015 on the following Substantial Questions of Law: "1.Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the order of CIT (Appeals) treating 25% of the Royalty payment made towards right to use the technical know- how granted by the Non Resident as Capital in nature? 2.Whether on the facts and circumstances of the case, the Tribunal was right in treating 25% of the royalty payment as capital expenditure under Section 32(1) when the same is not owned by the appellant and tax was deductible at source on the ground that payment was for right to use and not for acquisition of intangible asset? Page 2/6 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.317 of 2015 3.Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the ratio of judgment of the Hon'ble Apex Court in the case of Southern Switchgears v. CIT 232 ITR 359 (SC) dealing with the initial year of setting up of factory is applicable to the facts of this case? 4.Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in not following the judgment of the Hon'ble Apex Court in the case of M/s.CIT Vs.IAEC Pumps Ltd. 232 ITR 316 and CIT Vs. Panasonic Carbon India Ltd. (Mad) which is applicable to the facts of the case ?” 2. We have heard Mr.R.Venkata Narayanan for M/s.Subbaraya Aiyar Padmanabhan, learned counsel for the appellant/assessee and Mr.Karthik Ranganathan, learned Senior Standing Counsel for the respondent/Revenue. 3. It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for Page 3/6 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.317 of 2015 resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. 4. We are informed by the learned counsel for the appellant/ assessee that the assessee had already been issued with Form-3 on 20.04.2021 and the learned counsel for the appellant seeks permission of this Court to withdraw the appeal. 5. In view of the submission made by the learned counsel for the appellant, the Tax Case Appeal stands dismissed as withdrawn. No costs. [M.D., J.] [R.H., J.] 26.04.2021

Index : Yes/No

Internet : Yes

mkn To Page 4/6 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.317 of 2015 1. Income Tax Appellate Tribunal, Madras "D" Bench 2.The Deputy Commissioner of Income Tax, Company Circle – II(3), Chennai – 600 034. Page 5/6 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.317 of 2015 M. DURAISWAMY, J. and R. HEMALATHA, J. mkn Tax Case Appeal No.317 of 2015

26.04.2021 Page 6/6 https://www.mhc.tn.gov.in/judis/

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