Ita/861/2019 Of Principal Commissioner Of Income Tax, Delhi-2 v. M/S Continental India (P) Ltd. Through

$~75 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 861/2019, CM APPL. 43005/2019, CM APPL. 43006/2019PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2, ..... AppellantThrough:Ms. Vibhooti Malhotra, Sr. Standingcounsel with Mr.Siddharth Manocha,Adv. versus M/S CONTINENTAL INDIA (P) LTD.Through: ..... Respondent CORAM:HON'BLE MR. JUSTICE VIPIN SANGHIHON'BLE MR. JUSTICE SANJEEV NARULAO R D E R%26.09.2019 CM APPL. 43005/2019 (exemption) 1. Exemption allowed, subject to all just exceptions. 2. The application stands disposed of. CM APPL. 43006/2019 and ITA 861/2019 3. The revenue has preferred the present appeal to partially assail the orderdated 19.03.2019 insofar it has held that the respondent/assessee satisfiedthe test that the transfer of technical know-how by Continental AG to theassessee’s company was non-exclusive and non-transferable license for theuse of latter’s technology for manufacturing of tyres in India. It was only aproduction license and was for limited purpose of manufacturing the tyres.4. The tribunal has relied upon the decisions in CIT v. Sharda MotorsIndustries Ltd. 319 ITR 109 and CIT v. Hero Honda Motors Ltd 372 ITR 481 both decided by this Court. The Tribunal has also placed reliance uponthe circular No. 21/1969 issued by the CBDT which clarifies that when alicense is obtained for user of technical knowledge from a foreignparticipants for a limited period together, with or without the right to use thepatents and trademarks of the foreign party, the payment would not bringinto existence an asset of enduring the advantage to the Indian party. Therelevant discussions on impugned order read as follows: “21. Following the ratio of the judgment CIT vs. ShardaMotor Industries Ltd., CIT vs. Hero Honda Motors Ltd.(supra), we are of the considered view that assesseecompany satisfied the test that transfer of technical knowhow I royalty by the continental AG to the assesseecompany was "non-exclusive and non-transferable" licencefor the use of technology for manufacturing of tyres inIndia, which was only a production licence and for limitedpurpose for use for manufacturing of tyers. Even thetermination clause 11.8 is very categoric that immediatelyupon termination of the agreement the assessee shalldelivered to the continental AG statement of product sold ordisposed of to the effective date of termination which havenot already been accounted for and shall pay to thecontinental amount of royalties due in respect thereof,assesseeshallimmediatelyreturntocontinentalalldocuments,originaldataandtechnologyrelatedtotechnology and information for manufacturing and designof products placed at its disposal by the continental AGunder this agreement. 22. We are of the considered view that the expenditureincurred by the assessee in accordance with TEA agreementpe1taining to the technical "know-how" is quantified on thebasis of sale I production effected by using such technicalknow-how is of revenue nature and as such allowable asbusiness deduction. Ld. CIT(A) has also relied uponCircular no. 21 of 1969 issued by CBDT I clarified that when a licence is obtained for user of technical knowledgefrom a foreign participant for a limited period together withor without the right to use the patents and trademarks of theforeign party, the payment would not bring into existence anasset of enduring advantage to the Indian party. So in viewof the matter decision relied upon by Ld. DR viz. HondaSiel Car India Ltd. v. ACIT, Semoco Electrical Pvt. Ltd.are not applicable to the facts and circumstances of thecase. Consequently, we find no illegality or perversity in thefindings in the findings returned by Ld. CIT(A). Hence,ground no. 2 is determined against the revenue.” 5.In view of the aforesaid, we are of the opinion that no question of lawarises for consideration in the present petition. Accordingly, present petitionstands dismissed. VIPIN SANGHI, J SEPTEMBER 26, 2019Pallavi SANJEEV NARULA, J