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13-05-2019, HONDA CARS INDIA, Section 43B, 14A, HIGH COURT OF DELHI
1. There are five questions urged by the Revenue in the present appeal filed against an order dated 18th August 2017 passed by the Income Tax Appellate Tribunal („ITAT‟) in ITA No. 5483/Del/2014 for Assessment Year (AY) 2010-11.
2. The first three questions urged in para 2.2 to 2.4 read thus:
“2.2 Whether the ITAT/CIT(A) erred in deleting the addition of Rs.2,85,14,345/- made by the Assessing officer treating the amount of expenditure on airfare booked under technical guidance fee as capital expenditure instead of revenue expenditure claimed by the Assessee?
2.3 Whether the ITAT/CIT(A) erred in deleting the addition of Rs.6,80,73,802/- made by the Assessing officer on account of disallowance of entry tax, which was claimed as a deductible under section 43B?
2.4 Whether the ITAT/CIT(A) erred in deleting the addition of Rs.97,32,768/- made by the Assessing officer treating the expenditure incurred on software expenses as capital expenditure instead of revenue expenditure?
3. The above three questions have already been answered against the Revenue by the order passed by this Court on 2nd August 2017 in the Revenue‟s appeal in the Assessee‟s own case for AY 2009-10 i.e. ITA 480/2017 (The Commissions of Income Tax – LTU v. Honda Cars India Ltd.)
4. As far as the question at 2.5 is concerned viz., whether the ITAT erred in deleting the addition of Rs. 31,80,007/- made by the AO under Section 14A of the Act, the issue stands answered against the Revenue by the decision in Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Del).
5. The only question, urged by the Revenue in the present case which remains to be considered reads as under:
“2.1Whether the ITAT/CIT(A) erred in deleting the addition of Rs.1,59,74,53,889/- made by the Assessing officer treating the amount of royalty and lump sum fee paid by the assessee as capital expenditure instead of revenue expenditure as claimed by the Assessee?”
6. The Court has heard the counsel for the parties.
7. It is pointed out, at the outset, by Mr. Ruchir Bhatia, learned senior standing counsel for the Revenue, that for AY 2009-10, the above issue stands remanded by this Court to the ITAT by the order dated 9th May 2018 in ITA 480/2017. This is not disputed by Mr. Deepak Chopra, learned counsel for the Assessee. Mr. Bhatia, therefore, submits that for the present AY 2010-11 also, the issue be remanded to the ITAT for a fresh decision, particularly, since, according to him, the ITAT has not given sufficient reasons in arriving at its conclusion. Further although for AY 2008-09, the issue of treatment of the expenditure towards royalty as revenue expenditure has been confirmed by the ITAT and upheld by this Court by dismissing the Revenue‟s appeal being ITA 34/2016 by the order dated 18th January 2016, Mr. Bhatia points out that the above order dated 18th January 2016 was in fact not on merits but on account of the extraordinary delay of over 790 days in the re-filing of the said appeal.
8. On the other hand, Mr. Deepak Chopra, learned counsel for the Assessee, points out that the ITAT has in the impugned order discussed the decision of the Supreme Court in Honda Siel Car Ltd. v. CIT (2019) 409 ITR 42 which concerned treatment of royalty payment made to its principal during the initial years of the Assessee‟s operations whereas the royalty payment made by the Assessee to its principal during the AY in question was pursuant to the agreement dated 1 st April 2005 and well over ten years after the Assessee‟s operations commenced. The ITAT therefore accepted the Assessee‟s contention that it had to be treated as revenue expenditure. .
9. The ITAT has given the reasons for its conclusion in para 33 of the impugned order which reads thus: