ACIT CORPORATE CIRCLE 4(1), CHENNAI vs. MYOUNG SHIN INDIA AUTOMOTIVE PRIVATE LIMITED, KANCHIPURAM

The Revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals)-8, Chennai, in dated 30.01.2019 for the AY 2009-10 and the assessee filed Cross-Objection on the same.

M/s.Myoung Shin India Automotive Pvt. Ltd., the assessee, is engaged in the business of manufacturing automobile parts and has entered into international transactions with its Associate Enterprises during the period relevant to the AY 2009-10. The AO issued a notice u/s.148 and on scrutinizing assessee’s return for the AY 2009-10, the AO found that the assessee claimed higher depreciation @30% on moulds and dyes and hence proposed to restrict the same @15%. The assessee has agreed to it and accordingly, the AO restricted the depreciation claim so. Further, the AO found that the assessee claimed Fee for Technical Services (FTS) & Royalty in its P&L A/c. On examination of assessee’s agreement with M/s.Autotech Co. Ltd., dated 01.08.2007, wherein the latter is Licensor, the AO found that the terms of it was similar to the terms decided by the Hon’ble Apex Court in the case of M/s.Scientific Engg. House (P) Ltd. v. CIT (1985) 23 Taxmann 66 and hence held that the FTS & Royalty amount claimed by the assessee are to be treated as capital expenditure and accordingly, disallowed them and completed the re-assessment. Aggrieved against that order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The Ld.CIT(A) partly allowed the appeal. Aggrieved against that order, the Revenue filed an appeal and the assessee filed the Cross- Objection.

The case was posted for hearing through videoconferencing. The Ld.DR invited our attention to Para Nos.5 & 8 of the Assessment Order and submitted that the AO has correctly come to a conclusion that the impugned expenditure is capital in nature and the Ld.CIT(A) without examining this issue properly, simply based on the mode of payments made by the assessee alone concluded the issue and hence pleaded to allow the appeal.

We heard the rival submissions. It is clear from the above that the facts and circumstances associated with the issues of FTS & Royalty are not properly examined with relevant documents. Therefore, in the interests of justice, we remit this issue to the AO for a fresh examination. The assessee is also given the liberty to raise the jurisdictional issue in connection with the reopening of the assessment. The assessee shall lay relevant material on which it relies in support of its contentions and comply with the AO in accordance with law. The AO, after affording adequate opportunity to the assessee shall decide this issues in accordance with law.