Itta/156/2004 Of The Commissioner Of Incometax v. M/S. Advanta India Ltd

THE HONB’E SRI JUSTICE G. CHANDRAIAH AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM JUDGMENT: (per GC,J) I.T.T.A.No.156 OF 2004 This appeal is filed by the Revenue under Section 260-A of the Income Tax Act,1961 (for short, the “the Act”), questioning the order dated 21.02.2003, passed by theIncome Tax Appellate Tribunal, Hyderabad Bench ‘B’, Hyderabad, inI.T.A.No.301/Hyd/2001, for the assessment year 1997-98, raising the followingsubstantial question of law for consideration of this Court: “Whether on the facts and in circumstances of the case the Tribunal wascorrect in law in quashing the order passed by the Commissioner ofIncome Tax under Section 263 of the Income Tax Act, 1961?” The brief facts of the case are that the respondent/assessee is a company engagedin the business of development and sale of hybrid seeds and during the assessmentyear 1997-98, the assessee paid royalty to M/s. Zeneca Limited, U.K and the claimfor deduction of royalty was allowed during that assessment year. TheCommissioner of Income Tax revised the order in terms of Section 263 of the Actholding that 1/4[th] of the royalty paid was capital in nature in as much as theexpenditure relating to transfer of technical information and for providing personneland services was in the capital field. Questioning the same, the assessee filed anappeal before the Income Tax Appellate Tribunal, Hyderabad Bench ‘B’, Hyderabadin I.T.A.No.109/Hyd/1999 and the Tribunal after having dealt with the matterelaborately, set side the order of the Commissioner (Appeals). Aggrieved thereby,the present appeal is filed by the department. Heard Sri J.V. Prasad, learned standing counsel for the appellant/ department andSri Parsi Pardivala, learned senior counsel for the respondent/assessee. In the related appeal I.T.T.A.No.153 of 2004 filed by the appellant/revenue forthe assessment year 1995-96, we had allowed the appeal approving the view takenby the C.I.T (Appeals) apportioning 1/4[th] of the expenditure on capital account and2/3[rd] on revenue account. The apportionment of the consideration paid by theassessee to the foreign company was only with respect to the lump sum paymentwhich has been made. So far as the royalty that is payable on the basis of theproduction and sale of the products, is concerned, we had answered the question infavour of the respondent/assessee and against the appellant/revenue. For the samereasons, the claim of the assessee for the assessment year 1997-98, relating to thepayment of royalty is required to be allowed as revenue expenditure and in that viewof the matter, the impugned order of the Tribunal allowing the appeal filed by theassessee in I.T.A.No.301/Hyd/2001 cannot be found fault. In those circumstances,the question of law raised in the present appeal deserves to be answered in favourof the respondent/assessee and against the appellant/revenue. Accordingly, the I.T.T.A is dismissed. No order as to costs. Miscellaneous petitions, if any pending in this appeal, shall stand closed. ____________________ G. CHANDRAIAH,J Date:09.10.2015. Gk. ____________________________ CHALLA KODANDA RAM, J THE HONB’E SRI JUSTICE G. CHANDRAIAH THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.156 OF 2004 Date:09.10.2015.