PRINCIPAL COMMISSIONER vs. M/S. INDIAN ADDITIVES LTD

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TCA/893/2016HC Madras09 February 2022Bench: Hon`ble Mr Justice R. MAHADEVAN5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court noted that the assessee had availed the benefit of the Direct Tax Vivad Se Vishwas Act, 2020, and had obtained a full and final settlement order for tax arrears on 07.05.2021. This subsequent development was fairly conceded by the Revenue. In view of this, the Court was of the opinion that nothing survived for adjudication in the appeal. Consequently, the Tax Case Appeal was disposed of based on the submissions made by both parties. The specific questions of law regarding the classification of royalty payments as revenue or capital expenditure and their treatment as intangible assets under Section 32(1)(ii) were not decided on merits.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax 2, filed a Tax Case Appeal under Section 260A of the Income Tax Act, 1961, against an order dated 14.06.2016 passed by the Income Tax Appellate Tribunal (ITAT), 'A' Bench, Chennai. The appeal pertained to assessment year 2010-11 and concerned royalty payments made by the assessee, M/s. Indian Additives Ltd., to M/s. Chevron Oronite Company LLC, USA. The High Court admitted the appeal on substantial questions of law. Subsequently, during the pendency of the appeal, the assessee availed the benefit of the Direct Tax Vivad Se Vishwas Act, 2020, filed necessary declarations, and received an order for full and final settlement of tax arrears on 07.05.2021.

What were the issues?

The High Court was to decide two substantial questions of law: 1. Whether the ITAT was correct in treating royalty payments made to M/s. Chevron Oronite Company LLC, USA, as revenue expenditure, not resulting in the acquisition of intangible assets, despite the assessee enjoying enduring benefit through new technology infusion, as per Section 32(1)(ii) of the Act. 2. Whether the ITAT's finding was bad in law, considering royalty falls under the definition of intangible assets as per Section 32(1)(ii) and should be treated as capital expenditure. The Revenue contended that the royalty payments were for acquiring new technology, leading to enduring benefits and thus constituted capital expenditure, falling under intangible assets as per Section 32(1)(ii). The assessee submitted that they had availed the Direct Tax Vivad Se Vishwas Act, 2020, and obtained a settlement order, rendering the appeal infructuous. The Revenue conceded this subsequent development.

Which sections of the Income-tax Act were involved?

Section 260A,Section 32(1)(ii)

AI-generated summary — verify with the full judgment below

T.C.A.No.893 of 2016 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 09.02.2022 CORAM : THE HONOURABLE MR. JUSTICE R. MAHADEVAN AND THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD Tax Case Appeal No.893 of 2016 Principal Commissioner of Income Tax 2 No.121, Mahatma Gandhi Road, Chennai 600 034.

... Appellant Vs.

M/s. Indian Additives Ltd, Express Highway, Manali, Chennai - 600 068. PAN: AAA CI 1445 G ... Respondent

Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, “A” Bench, Chennai dated 14.06.2016 passed in I.T.A.No.835/Mds/2016. For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For Respondent : Mr.G.Baskar

Page 1/5 https://www.mhc.tn.gov.in/judis T.C.A.No.893 of 2016 J U D G M E N T (Judgment of the Court was delivered by R. MAHADEVAN, J.) This Tax Case Appeal has been filed by the appellant / Revenue challenging the order dated 14.06.2016 passed by the Income Tax Appellate Tribunal, Bench 'A', Chennai in I.T.A.No.835/Mds/2016, relating to the assessment year 2010-11. 2. By order dated 23.01.2017, this court admitted the aforesaid tax case appeal on the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in treating the royalty payments made to M/s.Chevron Oronite Company LLC USA as nothing but revenue expenditure not resulting in any acquisition of intangible assets when the assessee is enjoying enduring benefit by infusion of new technology? 2. Is not he finding of the Tribunal bad in law especially when the royalty falls under the definition of intangible assets as per the provisions of section 32(1)(ii) of the Act and the said expenditure is to be treated only as capital expenditure?” Page 2/5 https://www.mhc.tn.gov.in/judis T.C.A.No.893 of 2016 3.When the matter was taken up for consideration, the learned counsel appearing for the respondent / assessee submitted that during the pendency of this tax case appeal, the assessee has availed the benefit conferred under the Direct Tax Vivad Se Vishwas Act, 2020 and filed necessary declarations, which were accepted and Form 5 / order for full and final settlement of tax arrears, was also issued by the Income tax department, on 07.05.2021. The learned counsel has also filed a memo dated 08.02.2022 to that effect. 4.The aforesaid submission made by the learned counsel for the respondent/assessee has also been fairly conceded by the learned senior standing counsel appearing for the appellant/ Revenue. 5.In view of the subsequent development, this court is of the opinion that nothing survives for adjudication in this appeal. Recording the submission so made by the learned counsel on either side, the Tax Case Appeal stands disposed of. No costs. [R.M.D., J.] [J.S.N.P., J.] 09.02.2022 Internet : Yes

Page 3/5 https://www.mhc.tn.gov.in/judis T.C.A.No.893 of 2016 Index : Yes/No R. MAHADEVAN,

and J.SATHYA NARAYANA PRASAD

, J.

av To 1.The Income Tax Appellate Tribunal, Bench 'A', Chennai. 2.The Principal Commissioner of Income Tax 2, No.121, Mahatma Gandhi Road, Chennai 600 034. 3. The Deputy Commissioner of Income Tax, Corporate Circle 2 (2), Chennai 600 034. Tax Case Appeal No.893 of 2016

09.02.2022 Page 4/5 https://www.mhc.tn.gov.in/judis T.C.A.No.893 of 2016 Page 5/5 https://www.mhc.tn.gov.in/judis

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