Southern Switchgear Ltd. v. CIT

Commissioner of Income Tax vs. Bharti Hexacom Ltd

…able licence fee. 40. In Jonas Woodhead and Sons (India) Ltd. (supra), the Assessing Officer had himself treated 25% of the amount paid as royalty as capital and the balance amount Avas treated as revenue expenditure. in Southern Switch Gear Ltd. vs. Or(1998) 232 ITR 359, the Supreme Court has aftlrmed dccision of the Madras High Court in CIT vs. Southern Switch Gear Ltd. (1984) 148 ITR 272, wherein royalty payable Avas apportioned and 25%' tliereof was treated as capital payment or expenditure on the ground that the righl to manufacture certain goods exclusively in India should be taken as an independent right s…

CIT vs. Bharti Cellular Ltd

…able licence fee. 40. In Jonas Woodhead and Sons (India) Ltd. (supra), the Assessing Officer had himself treated 25% of the amount paid as royalty as capital and the balance amount Avas treated as revenue expenditure. in Southern Switch Gear Ltd. vs. Or(1998) 232 ITR 359, the Supreme Court has aftlrmed dccision of the Madras High Court in CIT vs. Southern Switch Gear Ltd. (1984) 148 ITR 272, wherein royalty payable Avas apportioned and 25%' tliereof was treated as capital payment or expenditure on the ground that the righl to manufacture certain goods exclusively in India should be taken as an independent right s…

Commissioner of Income Tax vs. Bharti Hexacom Ltd

…40. In Jonas Woodhead and Sons (India) Ltd. (supra), the Assessing Officer had himself treated 25% of the amount paid as royalty as capital and the balance amount was treated as revenue expenditure. Similarly in Southern Switch Gear Ltd. vs. CIT (1998) 232 ITR 359, the Supreme Court has affirmed decision of the Madras High Court in CIT vs. Southern Switch Gear Ltd. (1984) 148 ITR 272, wherein royalty payable was apportioned and 25% thereof was treated as capital payment or expenditure on the ground that the right to manufacture certain goods exclusively in India should be taken as an independent righ…

CIT vs. Bharti Cellular Ltd

…able licence fee. 40. In Jonas Woodhead and Sons (India) Ltd. (supra), the Assessing Officer had himself treated 25% of the amount paid as royalty as capital and the balance amount Avas treated as revenue expenditure. in Southern Switch Gear Ltd. vs. Or(1998) 232 ITR 359, the Supreme Court has aftlrmed dccision of the Madras High Court in CIT vs. Southern Switch Gear Ltd. (1984) 148 ITR 272, wherein royalty payable Avas apportioned and 25%' tliereof was treated as capital payment or expenditure on the ground that the righl to manufacture certain goods exclusively in India should be taken as an independent right s…

CIT vs. Federal Mogul Tpr India Ltd

Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE R.V.EASWAR

…e paid as royalty to Telkoku Piston Ring Company Ltd., in accordance with its agreement. 3. The reasoning of the Tribunal shows that it distinguishes the decision of the Supreme Court relied upon by the Revenue, in the case of Southern Switchgears Ltd. 232 ITR 359(SC). In that case the Supreme Court had disallowed expenditure of 25% of the royalty actually paid. The Tribunal relied upon the decisions of this Court in case of CIT v. Sharda Motor Industries Ltd. 319 ITR ITA-398/2012 Page 2 109 (Del) and CIT v. J.K. Synthetics Ltd. 309 ITR 371 (Del). 4. In Para 6 of the impugned…

CIT vs. Federal Mogul Tpr India Ltd

Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE R.V.EASWAR

…mpany Ltd., in accordance with its agreement. ITA-397/2012 Page 2 3. The reasoning of the Tribunal shows that it distinguishes the decision of the Supreme Court relied upon by the Revenue, in the case of Southern Switchgears Ltd. 232 ITR 359(SC). In that case the Supreme Court had disallowed expenditure of 25% of the royalty actually paid. The Tribunal relied upon the decisions of this Court in case of CIT v. Sharda Motor Industries Ltd. 319 ITR 109 (Del) and CIT v. J.K. Synthetics Ltd. 309 ITR 371 (Del). 4. In Para 6 of the impugned order, the Tribunal’s reasoning can be foun…

CIT vs. Federal Mogul Tpr India Ltd

…cordance with its agreement. 2012:DHC:4526-DB ITA-397/2012 Page 2 3. The reasoning of the Tribunal shows that it distinguishes the decision of the Supreme Court relied upon by the Revenue, in the case of Southern Switchgears Ltd. 232 ITR 359(SC). In that case the Supreme Court had disallowed expenditure of 25% of the royalty actually paid. The Tribunal relied upon the decisions of this Court in case of CIT v. Sharda Motor Industries Ltd. 319 ITR 109 (Del) and CIT v. J.K. Synthetics Ltd. 309 ITR 371 (Del). 4. In Para 6 of the impugned order, the Tribunal’s reasoning can be foun…

CIT vs. Federal Mogul Tpr India Ltd

…e paid as royalty to Telkoku Piston Ring Company Ltd., in accordance with its agreement. 3. The reasoning of the Tribunal shows that it distinguishes the decision of the Supreme Court relied upon by the Revenue, in the case of Southern Switchgears Ltd. 232 ITR 359(SC). In that case the Supreme Court had disallowed expenditure of 25% of the royalty actually paid. The Tribunal relied upon the decisions of this Court in case of CIT v. Sharda Motor Industries Ltd. 319 ITR 2012:DHC:4525-DB ITA-398/2012 Page 2 109 (Del) and CIT v. J.K. Synthetics Ltd. 309 ITR 371 (Del). 4. In Para…

CIT vs. Ekl Appliances Ltd

…on the sales in the year. The arguments of the assessee cannot be accepted as the expenditure is in the nature of capital and give enduring benefit to the assessee. In view of the Supreme court deicision in the case of Southern Switch Gear Ltd. 232 ITR 359, it cannot be allowed and is therefore disallowed and added to the income of the assessee.” 5. The order passed by the Assessing Officer is cryptic and non-reasoned. It does not explain and state why and on what ground the payment of royalty in the present case was to be treated as a capital expenditure and was not a revenue expense.…

ITA 1069/2011 vs. Ekl Appliances Ltd

…on the sales in the year. The arguments of the assessee cannot be accepted as the expenditure is in the nature of capital and give enduring benefit to the assessee. In view of the Supreme court deicision in the case of Southern Switch Gear Ltd. 232 ITR 359, it cannot be allowed and is therefore disallowed and added to the income of the assessee.” 5. The order passed by the Assessing Officer is cryptic and non-reasoned. It does not explain and state why and on what ground the payment of royalty in the present case was to be treated as a capital expenditure and was not a revenue expense.…

CIT vs. Munjal Showa Ltd

Bench: HON'BLE MR. JUSTICE SANJIV KHANNA,HON'BLE MR. JUSTICE R.V.EASWAR

…3/- under the head of royalty and Rs. 10,73,766/- under the head technicians fee in the P & L a/c ending 31.3.2000. 25% of the royalty expenses should be considered as capital expenditure in view of the Supreme Court judgment in Southern Switchgear Ltd. 232 ITR 359 (SC) as it gives rise to enduring benefit which can be enjoyed by the assessee over a number of years. Under the terms of the technical collaboration, the royalty is payable at 3% of the ex-factory sales price of the products carried out by the manufacturing ITA 149 & 150 of 2011…

CIT vs. Munjal Showa Ltd

…3/- under the head of royalty and Rs. 10,73,766/- under the head technicians fee in the P & L a/c ending 31.3.2000. 25% of the royalty expenses should be considered as capital expenditure in view of the Supreme Court judgment in Southern Switchgear Ltd. 232 ITR 359 (SC) as it gives rise to enduring benefit which can be enjoyed by the assessee over a number of years. Under the terms of the technical collaboration, the royalty is payable at 3% of the ex-factory sales price of the products carried out by the manufacturing 2012:DHC:779-DB ITA 149 & 150 of 2011…

CIT vs. Munjal Showa Ltd

…3/- under the head of royalty and Rs. 10,73,766/- under the head technicians fee in the P & L a/c ending 31.3.2000. 25% of the royalty expenses should be considered as capital expenditure in view of the Supreme Court judgment in Southern Switchgear Ltd. 232 ITR 359 (SC) as it gives rise to enduring benefit which can be enjoyed by the assessee over a number of years. Under the terms of the technical collaboration, the royalty is payable at 3% of the ex-factory sales price of the products carried out by the manufacturing 2012:DHC:779-DB ITA 149 & 150 of 2011…

CIT vs. Honda Siel Power Products Ltd

Bench: HON'BLE MR. JUSTICE A.K.SIKRI,HON'BLE MR. JUSTICE M.L. MEHTA

…nts of royalty as well as payments of guidance fee were discussed in detail by the AO in the light of the Agreement and on that basis, after relying upon the judgment of the Supreme Court in the case of Southern Switch Gear Ltd. Vs. Commissioner of Income Tax 232 ITR 359 (SC), 25o/o ot payments was capitalized. The Tribunal in respect of royalty found that the issue was considered by the AO in the following manner: "Therefore, it is clear from the above that the terms of agreement are quite comprehensive and the whole technical know-how to set up the business of the assessee are provided by Honda. Further, the as…

C.I.T vs. Denso India Ltd

Bench: HON'BLE MR. JUSTICE A.K.SIKRI,HON'BLE MS. JUSTICE REVA KHETRAPAL

…rinciple, it becomes crystal clear that the expenditure is of revenue nature. 8. Learned Counsel for the Revenue submits that the Tribunal has not considered the effect of the judgment of the Supreme Court in Southern Switchgears Ltd. v. CIT [1998] 232 ITR 359, inasmuch as in that case the payment of royalty was treated as capital expenditure. However, what is glossed over is that under the terms of the agreement in that case, the assessee-company therein had agreed to pay the foreign company lump sum of royalty and it was in these circumstances the same was treated as capital expenditu…

Denso Haryana P.Ltd vs. Commissioner of Income Tax

Appeal is allowed

…enso Japan for rendering the aforesaid services by way of training the assessee`s employees were paid the amount and payment in this behalf has to be the revenue expenditure. The reliance upon the judgment in the case of Southern Switchgear Ltd Vs. CIT, 232 ITR 359 (SC) therefore, would not be justified. Learned Senior Counsel appearing for the assessee was right in his submission that that judgment was rendered in the light of peculiar facts of the case. In that case, the collaboration agreement with foreign company for grant of technical aid and for setting up factory and right to sell the produc…

Commissioner of Income Tax vs. Virgo Marketing P.Ltd

…proposed at Sl. No.(b) is concerned, the Tribunal has capitalized 25% of Rs.2,11,20,147/- treating the same as capital expenditure. In support of this, the Tribunal has referred to the judgment of Supreme Court in Southern Switch Gear Ltd. vs. CIT-(1998) 232 ITR 359. 5. We may only note that the assessee had also filed appeal against the aforesaid order of the ITAT, inasmuch as, the grievance of the assessee was that the entire amount of Rs.2,11,20,147/- should have been treated as revenue expenditure. The admitted facts are that under the Agreements dated 25th December, 1998 titled as “Agreement f…

Commissioner of Income Tax vs. Sharda Motor Industrial Ltd

…aforesaid principle, it becomes crystal clear that the expenditure is of revenue nature. 7. Learned counsel for the Revenue submits that the Tribunal has not considered the effect of the judgment of the Supreme Court in *Southern Switch Gears Ltd.* v. *CIT*, 232 ITR 359, inasmuch as in that case the payment of royalty was treated as capital expenditure. However, what is glossed over is that under the terms of the 2009:DHC:13336-DB Tribunal had disallowed 25% thereof. In the present of pointed out above, royalty is to be paid on the quantity of the goods produced, calculating per piece of the said goods produce…

Commissioner of Income Tax vs. Virgo Marketing P.Ltd

Bench: HON'BLE MR. JUSTICE MADAN B. LOKUR,HON'BLE MR. JUSTICE V.B. GUPTA

…proposed at Sl. No.(b) is concerned, the Tribunal has capitalized 25% of Rs.2,11,20,147/- treating the same as capital expenditure. In support of this, the Tribunal has referred to the judgment of Supreme Court in Southern Switch Gear Ltd. vs. CIT-(1998) 232 ITR 359. 5. We may only note that the assessee had also filed appeal against the aforesaid order of the ITAT, inasmuch as, the grievance of the assessee was that the entire amount of Rs.2,11,20,147/- should have been treated as revenue expenditure. The admitted facts are that under the Agreements dated 25th December, 1998 titled as “Agreement f…