THE COMMISSIONER OF INCOME TAX-LTU vs. HONDA CARS INDIA LTD.

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ITA/480/2017HC DelhiDLHC01055767201709 May 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court found that the lower appellate authorities erred by relying on previous assessment year decisions without considering the new agreement entered into by the assessee in 2005. The issue was remitted back to the ITAT for reconsideration.

What were the facts?

The Revenue appealed against an ITAT decision regarding royalty and lump sum fee payments made by Honda Cars India Ltd. The assessee relied on previous Supreme Court judgments for earlier assessment years concerning similar payments.

What were the issues?

Whether payments for model fee/running royalty, characterized as lump sum by the ITAT, fall into the revenue or capital stream, considering a new agreement and previous judicial pronouncements.

Which sections of the Income-tax Act were involved?

Not explicitly mentioned in the provided text

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$~1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 480/2017

THE COMMISSIONER OF INCOME TAX-LTU ..... Appellant Through: Mr.Ruchir Bhatia, Sr.Standing Counsel.

versus

HONDA CARS INDIA LTD.

..... Respondent Through: Mr.Deepak Chopra, Mr.Amit Shrivastava and Mr. Ankul Goyal, Advocates.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

09.05.2018

The Revenue’s grievance is that ITAT without an appropriate analysis of the agreement in question concluded that the payment of royalty and lump sum fee (which the assessee says is running royalty and model fee) falls into capital stream. The assessee after accepting notice relied upon a previous judgment of the Supreme Court for Assessment Year (A.Y.) 1999- 2000, 2001-2002, 2003-2004 and 2005-2006 (reported as Honda Siel Cars India Limited Vs. Commissioner of Income Tax, Ghaziabad (2017) 395 ITR 713). It is submitted that although in respect of the past agreement, the amount paid (towards royalty and technical fee) in that case amounted to capital or revenue expenditure, the Court rejected the assessee’s contention that the expenditure was revenue

and at the same time in the later part of its judgment, upheld the reasoning of this Court for some other part of the payments made. The assessee furthermore contends that for A.Y. 2010-2011 similar payments were held to be revenue in nature. The discussion of the lower appellate authority i.e. the CIT(A) and the ITAT would disclose that they went by the previous assessment year’s decisions for A.Y. 2003-2004. The assessee entered into a new agreement in 2005. In these given circumstances, the omission by the lower appellate authorities is erroneous. The issue is therefore remitted for reconsideration by the ITAT which shall proceed to decide the question whether the payments made towards model fee/running royalty – characterised – lump sum payment, by the ITAT in the impugned order fall in the revenue or capital stream. The appeal is partly allowed in the above terms. Parties shall appear before the ITAT on 21st May, 2018.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J MAY 09, 2018 ndn

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