Addl. CIT, Noida v. M/s. Honda Siel Cars India Ltd, Uttar Pradesh

ITA 4701/DEL/2009 | 2004-2005
Pronouncement Date: 18-02-2010 | Result: Dismissed

Appeal Details

RSA Number 470120114 RSA 2009
Bench Delhi
Appeal Number ITA 4701/DEL/2009
Duration Of Justice 2 month(s) 4 day(s)
Appellant Addl. CIT, Noida
Respondent M/s. Honda Siel Cars India Ltd, Uttar Pradesh
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 18-02-2010
Assessment Year 2004-2005
Appeal Filed On 14-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI D.R. SINGH AND SHRI K.G. BANSAL ITA NO. 4701(DEL)/2009 ASSESSMENT YEAR: 2004-05 DEPUTY COMMISSIONER OF HONDA SIEL CARS INDIA LTD. INCOME-TAX CIRCLE NOIDA. VS. A-1 S ECTOR 40/41 SURAJPUR KASNA ROAD NOIDA UP. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.N. KAR CIT DR RESPONDENT BY: SHRI RUPESH J AIN ADVOCATE ORDER PER K.G. BANSAL : AM THIS APPEAL OF THE REVENUE EMANATES FROM THE O RDER OF THE CIT(APPEALS) GHAZIABAD PASSED ON 17.9.2009 IN APPEAL NO. 122/2006- 07 AND IT PERTAINS TO ASSESSMENT YEAR 2004-05. THE FOLLOWING GROUNDS HAVE BEEN TAKEN IN THE APPEAL:- (I) THAT THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS BY ALLOWING RELIEF OF RS. 27 78 86 000/- BY TREATIN G LUMP SUM FEE FOR TECHNICAL GUIDANCE AS REVENUE EXPENDITURE AS AGAINST CAPITAL EXPENDITURE HELD BY THE AO BY PLACING RELIANCE ON ORDER OF ITAT IN ASSESSEES CASE FOR A.Y. 2003-04 A GAINST WHICH DEPARTMENT HAS ALREADY FILED AN APPEAL BEFORE HONBLE ALLAHABAD HIGH COURT. ITA NO. 4701(DEL)/2009 2 (II) THAT THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS BY ALLOWING RELIEF OF RS. 26 03 25 000/- BY TREATING ROYALTY AS REVENUE EXPENDITURE AS AGAINST CAPITAL EXPENDITURE HELD BY THE AO BY PLACING RELIANCE ON ORDER OF HONBLE ITAT IN ASSESSEES CASE FOR A.Y. 2003-04 AGAINST WHICH DEPARTMENT HAS A LREADY FILED AN APPEAL BEFORE HONBLE ALLAHABAD HIGH COURT. (III) THAT THE LD. CIT(A) HAS ERRED IN LAW A ND ON FACTS BY ALLOWING RELIEF OF RS. 74 10 913/- BY TREATING RESEARCH A ND DEVELOPMENT AS REVENUE EXPENDITURE AS AGAINST CAPITAL EXPE NDITURE HELD BY THE AO BY PLACING RELIANCE ON ORDER OF HONBLE ITAT IN ASSESSEES CASE FOR A.YS. 2003-04 2001-02 AN D 2002-03 AGAINST WHICH DEPARTMENT HAS ALREADY FILED AN APPEAL BEFORE HONBLE ALLAHABAD HIGH COURT. (IV) THAT THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS BY ALLOWING RELIEF OF RS. 3 66 76 803/- BY HOLDING THAT THE PROVISION FOR WARRANTY IS ASCERTAINED BY PLACING RELIANCE ON ORDER OF HONBLE ITAT IN ASSESSEES CASE FOR A.YS 2002-03 AND 2 003-04 AGAINST WHICH DEPARTMENT HAS ALREADY FILED AN APPEAL BEFORE HONBLE ALLAHABAD HIGH COURT. (V) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALLOWING RELIEF OF RS. 11 24 636/- BY DELETING THE ADDI TION MADE ON ACCOUNT OF EXPORT COMMISSION BY PLACING RELIAN CE ON ORDER OF HONBLE ASSESSEES CASE FOR A.YS. 2001-02 2 002-03 AND 2003-04 AGAINST WHICH DEPARTMENT HAS ALREADY F ILED AN APPEAL BEFORE HONBLE ALLAHABAD HIGH COURT. 1.1 FROM THE NARRATION IN THE GROUNDS IT WILL BE CLEAR THAT ALL THESE MATTERS HAVE BEEN DECIDED BY THE TRIBUNAL AGAI NST THE REVENUE IN EARLIER YEARS. THEREFORE THE LD. COUNSEL FOR THE ASS ESSEE SUBMITTED AT THE OUTSET THAT THE APPEAL MAY BE DISMISSED BY FOLLOWING THE EARLIER ORDER. HOWEVER IN REGARD TO GROUND NO. 1 THE LD. DR WANTED TO RE-STATE THE ITA NO. 4701(DEL)/2009 3 CASE OF THE REVENUE IN THE LIGHT OF THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. J.K. SYNTHETICS LTD. (2009) 309 ITR 371 WHICH STATEDLY LAID DOWN CERTAIN PRINCIPLES IN DECIDING AS TO WHETHER PAYMENT OF FEES BY WAY OF TECHNICAL KN OW-HOW WAS CAPITAL OR REVENUE EXPENDITURE. FURTHER HIS CASE WAS THAT THIS POSITION WAS NOT CONSIDERED BY THE TRIBUNAL IN EARLIER ORDER. IN ORDER TO UPPORT HIS CASE THAT THIS BENCH OF THE TRIBUNAL COULD DIFFER FROM THE EARLIER DECISION IF SUCH A NEED ARISES HE RELIED ON THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA & ANOTHER VS. RAGH UBIR SINGH (1989) 178 ITR 548. 2. THE LD. DR REFERRED TO THE BACKGROUND FA CTS THAT THE ASSESSEE IS A JOINT VENTURE COMPANY AND A TECHNICAL COLL ABORATION AGREEMENT WAS ENTERED INTO WITH THE PARENT COMPANY ON 21.5.199 6 UNDER WHICH IT AGREED TO PAY LUMP-SUM KNOW-HOW FEES AMOUNTING TO ABOUT 31.50 MILLION US$ IN FIVE EQUAL INSTALLMENTS STARTING FROM THE YEAR OF COMMERCIAL PRODUCTION WHICH WAS ASSESSMENT YEAR 2001-02. IN ASSESSMENT YEARS 2001-02 AND 2002-03 TWO QUESTIONS CAME UP BEFO RE THE LD. CIT(APPEALS) NAMELY WHETHER- (I) THE PAYMENT TO THE PARENT C OMPANY AMOUNTED TO DIVERSION OF INCOME AS IT HELD 99.9% SHARES IN THE ASSESSEE COMPANY; ITA NO. 4701(DEL)/2009 4 AND (II) THE EXPENDITURE WAS CAPITAL IN NATU RE? THE CIT(APPEALS) DECIDED THE FIRST ISSUE IN FAVOUR OF THE REVEN UE BECAUSE OF WHICH IT WAS NOT NECESSARY FOR HIM TO DECIDE THE SECOND QUE STION. HOWEVER THE TRIBUNAL DID NOT UPHOLD THE FINDINGS OF THE LD. C IT(A) IN RESPECT OF DIVERSION OF INCOME AND RESTORED THE MATTER TO T HE FILE OF THE LD. CIT(A) FOR DECIDING WHETHER THE EXPENDITURE WAS CAPI TAL OR REVENUE IN NATURE. THIS MATTER ALSO TRAVELED UP TO THE TRIBUNAL WHICH WAS DECIDED IN ITA NO.3173(DEL)/20076 DATED 16.5.2008 A COPY OF WHICH WAS PLACED BEFORE US. IN PARAGRAPH 28 OF THE AFORESAID ORDER IT WAS HELD THAT THE EXPENDITURE WAS REVENUE IN NATURE. FOR THE SA KE OF READY REFERENCE THIS PARAGRAPH IS REPRODUCED BELOW:- 28. THE LEARNED COUNSEL FOR THE ASSESSEE AS WELL A S THE LEARNED CIT DR HAS SUBMITTED PAPER-BOOKS CONTAINING THE CASE-LAW ON WHICH THEY PLACED RELIANCE IN THE COURS E OF THE ARGUMENTS. PREDICTABLY WHEREAS THE LEARNED COUNSE L FOR THE ASSESSEE SOUGHT TO DISTINGUISH THE CASES CITED BY T HE LEARNED CIT DR THE LATTERS ATTEMPT WAS TO DISTINGUISH THE CASES CITED BY THE FORMER. WE HAVE GONE THROUGH THE CASES CITE D. IN OUR HUMBLE OPINION THE QUESTION HAS TO BE DECIDED ON T HE BASIS OF THE FACTS OF THE PARTICULAR CASE WITH WHICH WE ARE DEALING. ONE NOTEWORTHY FEATURE IN ALL THE CASES WAS THAT THERE IS NO DIVERGENCE OF JUDICIAL OPINION SO FAR AS THE PRINCI PLES TO BE APPLIED ARE CONCERNED; CASES WERE DECIDED ON THE AP PLICATION OF SUCH PRINCIPLES TO THE FACTS OF A PARTICULAR CAS E. WE HAVE ALREADY REFERRED TO THE COMMON BASIC PRINCIPLE WHIC H RUNS THROUGH ALL THE CASES CITED BY BOTH THE SIDES AND T HERE IS NO NEED TO REPEAT IT. IF THAT PRINCIPLE IS APPLIED TO THE FACTS OF THE ITA NO. 4701(DEL)/2009 5 PRESENT CASE AND TO THE TERMS AND CONDITIONS OF TEC HNICAL COLLABORATION AGREEMENT IT WOULD BE SEEN THAT THE ASSESSEE OBTAINED ONLY THE RIGHT TO USE DURING THE CURRENCY OF THE AGREEMENT THE TECHNICAL KNOW-HOW AND INFORMATION A ND THE INTELLECTUAL PROPERTY RIGHTS RELATING TO THE MANUFA CTURE OF HONDA CARS AND DID NOT SECURE ANY OWNERSHIP RIGHTS OVER THEM. WE THEREFORE HOLD THAT THE PAYMENT OF THE LUMP-SU M FEES FOR TECHNICAL KNOW-HOW AND THE ROYALTY IS ALLOWABLE AS REVENUE EXPENDITURE. WE MAY ADD THAT WE HAVE AVOIDED THE T EMPTATION TO BURDEN THIS ORDER WITH ANY DETAILED DISCUSSION O F THE ENTIRE CASE-LAW CITED BEFORE US BECAUSE AS WE HAVE ALREAD Y NOTICED THE DECISION IN SUCH CASES SHOULD BE BASED ON FACTS AND THE BASIC PRINCIPLES APPLICABLE ARE WELL-SETTLED AND NE ED NO ELABORATE REFERENCE. HOWEVER A FEW IMPORTANT JUDG MENTS BOTH OF THE JURISDICTIONAL HIGH COURT AND THE SUPREME CO URT CITED BY THE LEARNED CIT DR REQUIRE TO BE NOTICED. SIMILAR DECISIONS WERE TAKEN IN RESPECT OF A SSESSMENT YEARS 2001-02 2002-03 AND 2005-06. 2.1 THE CASE OF THE LD. DR WAS THAT THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF J.K. SYNTHETICS LTD. (S UPRA) WAS NOT CONSIDERED IN THE EARLIER ORDERS AND THIS DECISION HAS A MATERIAL BEARING ON THIS ISSUE. THIS DECISION HAD LAID DOWN CERTAIN PRINCI PLES ON REVIEWING VARIOUS JUDGMENTS OF SUPREME COURT AND HIGH COURTS IN TH E MATTER ON PAGES 412 AND 413. THE PROPOSITIONS AT SERIAL NOS. (I) ( IV) AND (V) WERE IN FAVOUR OF THE REVENUE WHICH MAY NOW BE TAKEN INTO C ONSIDERATION FOR ITA NO. 4701(DEL)/2009 6 DECIDING THE CASE. FOR THE SAKE OF READY REFE RENCE THE DISCUSSION AT PLACITUM 55 OF THE AFORESAID DECISION ARE RE PRODUCED BELOW:- AN OVERALL VIEW OF THE JUDGMENTS OF THE SUPREME COURT AS WELL AS OF THE HIGH COURTS WOULD SHOW THAT THE FOLLOWING BROAD PRINCIPLES HAVE BEEN FORGED OVER THE YEARS WH ICH REQUIRE TO BE APPLIED TO THE FACTS OF EACH CASE: (I) THE EXPENDITURE INCURRED TOWARDS INITIAL OU TLAY OF BUSINESS WOULD BE IN THE NATURE OF CAPITAL EXPE NDITURE HOWEVER IF THE EXPENDITURE IS INCURRED WHILE TH E BUSINESS IS ON GOING IT WOULD HAVE TO BE ASCERTAINED IF TH E EXPENDITURE IS MADE FOR ACQUIRING OR BRING INTO EXISTENCE AN ASSET OR AN ADVANTAGE OF AN ENDURING BENEFIT FOR THE BUSI NESS IF THAT BE SO IT WILL BE IN THE NATURE OF CAPITAL E XPENDITURE. IF THE EXPENDITURE ON THE OTHER HAND IS FOR RUNNING THE BUSINESS OR WORKING IT WITH A VIEW TO PRODUCE PROFITS IT WOULD BE IN THE NATURE OF REVENUE EXPENDITURE; (II) IT IS THE AIM AND OBJECT OF EXPENDITURE WHICH WOULD DETERMINE ITS CHARACTER AND NOT THE SOURCE AND MANNER OF ITS PAYMENT; (III) THE TEST OF ONCE AND FOR ALL PAYMENT I.E. A LUMP SUM PAYMENT MADE IN RESPECT OF A TRANSACTION IS AN INCONCLUSIVE TEST. THE CHARACTER OF PAYMENT C AN BE DETERMINED BY LOOKING AT WHAT IS THE TRUE NATU RE OF THE ASSET WHICH IS ACQUIRED AND NOT BY THE FACT WHE THER IT IS A PAYMENT IN LUMP SUM OR IN AN INSTALMENT. IN APPLYING THE TEST OF AN ADVANTAGE OF AN ENDURING NATURE IT WOULD NOT BE PROPER TO LOOK AT THE ADVANTAGE OBTAINED AS L ASTING FOREVER. THE DISTINCTION WHICH IS REQUIRED TO B E DRAWN IS WHETHER THE EXPENSE HAS BEEN INCURRED TO DO AWAY WITH WHAT IS A RECURRING EXPENSE FOR RUNNING A BU SINESS AS AGAINST AN EXPENSE UNDERTAKEN FOR THE BENEFIT OF THE BUSINESS AS A WHOLE; ITA NO. 4701(DEL)/2009 7 (IV) AN EXPENSE INCURRED FOR ACQUISITION OF A SOURCE OF PROFIT OR INCOME WOULD IN THE ABSENCE OF ANY CONTRARY CIRCUMSTANCE BE IN THE NATURE OF CAPITAL EXPEND ITURE. AS AGAINST THIS AN EXPENDITURE WHICH ENABLES TH E PROFIT- MAKING STRUCTURE TO WORK MORE EFFICIENTLY LE AVING THE SOURCE OR THE PROFIT MAKING STRUCTURE UNTOUCH ED WOULD BE IN THE NATURE OF REVENUE EXPENDITURE. IN OTHER WOR DS EXPENDITURE INCURRED TO FINE TUNE TRADING OPERA TIONS TO ENABLE THE MANAGEMENT TO RUN THE BUSINESS EFFE CTIVELY EFFICIENTLY AND PROFITABLY LEAVING THE FIXED A SSETS UNTOUCHED WOULD BE AN EXPENDITURE OF A REVENUE NATURE E VEN THOUGH THE ADVANTAGE OBTAINED MAY LAST FOR AN INDEFIN ITE PERIOD. TO THAT EXTENT THE TEST OF ENDURING BENEFIT OR ADVANTAGE COULD BE CONSIDERED AS HAVING BROKEN DOWN; (V) EXPENDITURE INCURRED FOR GRANT OF LICENCE W HICH ACCORDS ACCESS TO TECHNICAL KNOWLEDGE AS AGAINST ABSOLUTE TRANSFER OF TECHNICAL KNOWLEDGE AND INFORMATIO N WOULD ORDINARILY BE TREATED AS REVENUE EXPENDITURE. IN ORDER TO SIFT IN A MANNER OF SPEAKING THE GRAIN FROM TH E CHAFF ONE WOULD HAVE TO CLOSELY LOOK AT THE ATTENDANT C IRCUMSTANCES SUCH AS : (A) THE TENURE OF THE LICENCE. (B) THE RIGHT IF ANY IN THE LICENSEE TO CREATE FURTHER RIGHTS IN FAVOUR OF THIRD PARTIES (C) THE PROHIBITION IF ANY IN PARTING WITH A CON FIDENTIAL INFORMATION RECEIVED UNDER THE LICENCE TO THIRD PARTIES WITHOUT THE CONSENT OF THE LICENSOR (D) WHETHER THE LICENCE TRANSFERS THE FRUITS OF RESEARCH OF THE LICENSOR ONCE FOR ALL (E) WHETHER ON EXPIRY OF THE LICENCE THE LICENSEE IS REQUIRED TO RETURN BACK THE PLANS AND DESIGNS OBTAINED UNDE R THE LICENCE TO THE LICENSOR EVEN THOUGH THE LICENSEE MAY C ONTINUE TO MANUFACTURE THE PRODUCT IN RESPECT OF WHICH ACCESS TO KNOWLEDGE WAS OBTAINED DURING THE SUBSISTENCE OF THE LICENCE ITA NO. 4701(DEL)/2009 8 (F) WHETHER ANY SECRET OR PROCESS OF MANUFACTUR E WAS SOLD BY THE LICENSOR TO THE LICENSEE. EXPENDITURE ON O BTAINING ACCESS TO SUCH SECRET PROCESS WOULD ORDINARILY BE CONSTRUED AS CAPITAL IN NATURE; (VI) THE FACT THAT THE ASSESSEE COULD USE T HE TECHNICAL KNOWLEDGE OBTAINED DURING THE TENURE OF THE LIC ENCE FOR THE PURPOSES OF ITS BUSINESS AFTER THE AGREEMENT HAS EXPIRED AND IN THAT SENSE RESULTING IN AN ENDURING ADVANTA GE HAS BEEN CATEGORICALLY REJECTED BY THE COURTS. THE COURT S HAVE HELD THAT THIS BY ITSELF CANNOT BE DECISIVE BECAUSE KNOWLEDGE BY ITSELF MAY LAST FOR A LONG PERIOD EVEN THOUGH DUE TO RAPID CHANGE OF TECHNOLOGY AND HUGE STRIDES MADE IN THE FIELD OF SCIENCE THE KNOWLEDGE MAY WITH PASSAGE OF TIME BE COME OBSOLETE; (VII) WHILE DETERMINING THE NATURE OF EXP ENDITURE GIVEN THE DIVERSITY OF HUMAN AFFAIRS AND COMPLICATED N ATURE OF BUSINESS; THE TEST ENUNCIATED BY COURTS HAVE TO BE APPLIED FROM A BUSINESS POINT OF VIEW AND ON A FAIR APPRECIATION OF THE WHOLE FACT SITUATION BEFORE CONCLUDING W HETHER THE EXPENDITURE IS IN THE NATURE OF CAPITAL OR REVEN UE. 2.2 FOR THE PURPOSE THAT THE TRIBUNAL HAD POWER TO TAKE INDEPENDENT DECISION IN SUBSEQUENT YEAR THE LD. DR PLAC ED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F RAGHUBIR SINGH (SUPRA). IN THIS CONNECTION RELIANCE WAS PLACED ON THE HEAD NOTE WHERE IT IS MENTIONED THAT THE SUPREME COURT OF INDIA SHOULD NOT DIFFER FROM ITS EARLIER DECISION MERELY BECAUSE A CONTR ARY VIEW APPEARED PREFERABLE. BUT IF THE PREVIOUS DECISION IS P LAINLY ERRONEOUS THERE IS A DUTY OF THE COURT TO SAY SO AND NOT PERPETUATE THE MISTAKE. A REVISION OF ITS ITA NO. 4701(DEL)/2009 9 EARLIER DECISION WOULD BE JUSTIFIED IF THERE W ERE COMPELLING AND SUBSTANTIAL REASONS TO DO SO. THE EARLIER DE CISION MAY BE REVIEWED FOR INSTANCE (I) WHERE AN EARLIER RELEVANT STATUT ORY PROVISION HAD NOT BEEN BROUGHT TO THE NOTICE OF THE COURT OR (II) IF A V ITAL POINT WAS NOT CONSIDERED. WHETHER THE COURT SHOULD REVIEW DEPENDS ON SEVERA L RELEVANT CONSIDERATIONS SUCH AS: (A) WHAT WAS THE NATURE OF THE INFIRMITY OR ER ROR ON THE EARLIER OCCASION (I) DID SOME PATENT ASPECTS OF THE QUE STION INVOLVED REMAIN UNNOTICED OR (II) WAS THE ATTENTION OF THE COU RT NOT DRAWN TO ANY RELEVANT AND MATERIAL STATUTORY PROVISION OR ( III) WAS ANY PREVIOUS DECISION OF THE COURT BEARING ON THE POINT NOT N OTICED? (B) IS THE COURT HEARING THE PLEA FOR REVIEW U NANIMOUS THAT THERE IS SUCH AN ERROR IN THE EARLIER VIEW? (C) HAS THE EARLIER DECISION BEEN FOLLOWED ON S UBSEQUENT OCCASIONS EITHER BY THE SUPREME COURT OR BY THE HIGH COURT? ITA NO. 4701(DEL)/2009 10 (D) WHAT WOULD BE THE IMPACT OF THE ERROR ON TH E GENERAL ADMINISTRATION OF LAW OR ON THE PUBLIC GOOD? (E) WOULD THE REVERSAL OF THE EARLIER DECISION LEAD TO PUBLIC INCONVENIENCE HARDSHIP OR MISCHIEF? 2.3 IT WAS ALSO SUBMITTED THAT IN CASE TH E EXPENDITURE IS HELD TO BE REVENUE IN NATURE THEN THE DIRECTION GIVEN BY THE TRIBUNAL IN PARAGRAPH 32 OF THE ORDER FOR ASSESSMENT YEAR 2003-04 MAY ALSO BE REITERATED AND THE MATTER MAY BE ALLOWED TO BE REFERRED TO THE TPO FOR DETERMINING ARM LENGTH PRICE OF THE TRANSACTION. 3. IN REPLY THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AGREEMENT ON THE BASIS OF WHICH PAYMENT WAS MAD E IN THIS YEAR WAS THE SAME AS IN ASSESSMENT YEAR 2003-04 AND OTHER YEARS WHERE THE MATTER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT HONBLE DELHI HIGH COURT HAS NOT LAID DOWN ANY NEW PROPOSITION OF LAW FOR DECIDING THE ISSUE AS TO WHETHER THE EXPENDITURE WAS REVENUE OR CAPITAL IN NATURE. THE HONBLE COURT MERELY SUMMARIZED THE RATIOS OF VARIOUS CASES AND TERMED THEM AS BROAD PRIN CIPLES WHICH SHOULD BE ITA NO. 4701(DEL)/2009 11 TAKEN INTO ACCOUNT FOR THIS PURPOSE. THE DEC ISION IS NOT OF THE JURISDICTIONAL HIGH COURT AS THE ASSESSEE FAL LS WITHIN THE JURISDICTION OF ALLAHABAD HIGH COURT. COMING TO THE ISSUE OF DE TERMINING ARMS LENGTH PRICE IT WAS SUBMITTED THAT THE REVENUE HAS NOT TAKEN ANY SUCH GROUND IN ITS APPEAL. IN ANY CASE THE ARMS LENGTH PRICE WAS DETERMINED BY THE TPO IN ORDER DATED 30.9.2009 FOR ASSESS MENT YEAR 2003-04 A COPY OF WHICH WAS PLACED BEFORE US IN WHICH IT WAS HELD THAT AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE THE DOCUMENTATION PLACED ON RECORD AND THE ECONOMIC ANALYSIS CONT AINED THEREIN NO ADVERSE INFERENCE IS DRAWN IN RESPECT OF IN TERNATIONAL TAXATION (I.E. ROYALTY PAYMENT AND LUMP-SUM FEE FOR TECHNICAL KNOW-HOW ) UNDERTAKEN BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISE S. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BEFORE US. WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF RAGHUBIR SINGH (SUPRA) LAID GREATER EMPHASIS O N THE PRINCIPLE OF CONSISTENCY THAT IT SHOULD NOT DIFFER FROM ITS EARLIER DECISION MERELY BECAUSE A CONTRARY VIEW APPEARS TO BE PREFERAB LE. HOWEVER IF THE PREVIOUS DECISION IS PLAINLY ERRONEOUS THERE WILL BE A DUTY ON THE COURT TO SAY SO AND NOT TO PERPETUATE THE MISTAKE. THE HONBLE COURT ALSO ITA NO. 4701(DEL)/2009 12 FURNISHED TWO ILLUSTRATIONS- (I) WHERE RELEVANT STATUTORY PROVISION WAS NOT BROUGHT TO ITS NOTICE (II) IF A VITAL POINT W AS NOT CONSIDERED. EVEN IF THIS DECISION IS APPLIED MUTATES MUTANDIS TO THE ORDERS OF THE TRIBUNAL THE REVENUE WILL HAVE TO SHOW THAT EITHER THE RE LEVANT STATUTORY PROVISION WAS NOT BROUGHT TO THE NOTICE OR A VITAL POINT WAS NOT CONSIDERED. NO SUCH CASE HAS BEEN MADE OUT BY THE REVENUE. T HE TRIBUNAL HAD CONSIDERED THE SAME AGREEMENT THE LUMP-SUM P AYMENT UNDER WHICH WAS TO BE PAID IN FIVE YEARS. HONBLE DELHI HIGH COURT HAS NOT BROUGHT ANY NEW CONSIDERATION FOR DECIDING THE ISSUE OF CAPITAL VERSUS REVENUE. IT MERELY CULLED OUT RATIOS OF VARI OUS CASES ALREADY IN EXISTENCE. THEREFORE WE ARE OF THE VIEW THA T THE DECISION IN THE CASE OF RAGHUBIR SINGH (SUPRA) IS NOT APPLICABLE TO T HE FACTS OF THIS CASE. THE LD. DR HAD ALSO RELIED ON THE DECISION OF M UMBAI BENCH OF THE TRIBUNAL IN THE CASE OF THOMAS COOK INDIA VS. DY. CIT (20 07) 293 ITR (AT) 283 IN WHICH IT WAS HELD THAT IF THE DECISI ON OF THE COORDINATE BENCH IS IN CONFLICT WITH THE DECISION OF SUPREME COURT THEN THE DECISION OF COORDINATE BENCH IS NOT APPLICABLE. WE FIND THA T NO CASE HAS BEEN MADE OUT BY THE LD. DR THAT THE DECISION OF THE T RIBUNAL IN EARLIER YEAR IS IN CONFLICT WITH THE DECISION OF HONBLE DELHI HIG H COURT IN THE CASE OF J.K. SYNTHETICS LTD. (SUPRA). APART FROM THAT THE DELHI HIGH COURT IS NOT ITA NO. 4701(DEL)/2009 13 THE JURISDICTIONAL HIGH COURT IN THIS CASE AND THEREFORE ITS DECISION CANNOT BE TAKEN AT PAR WITH THE DECISION OF SUPREME COURT IN THIS CASE TO COME TO A CONCLUSION THAT THE DECISION OF THE COORDINATE BENCH IS NOT BINDING. 4.1 COMING TO THE REFERENCE OF THE INTERNATIONAL TRANSACTION TO THE TPO THE DECISION OF THE TRIBUNAL WAS AGAINST THE REVENUE AND NOT IN ITS FAVOUR. PARAGRAPH 32 OF THE ORDER FOR ASSESSME NT YEAR 2003-04 READS AS UNDER:- 32. BEFORE PROCEEDING TO THE NEXT GROUND WE MAY A LSO DISPOSE OF THE PRELIMINARY ARGUMENT TAKEN BY THE LE ARNED CIT DR. IT WAS SUBMITTED THAT THE TRIBUNAL SHOULD NOT GIVE ANY FINDING AS TO WHETHER THE PAYMENT UNDER THE TECHNIC AL COLLABORATION AGREEMENT SHOULD BE TREATED AS CAPITA L OR REVENUE WITHOUT OBTAINING THE ARMS LENGTH PRICE FR OM THE TPO. IN SUPPORT OF HIS SUBMISSION REFERENCE HAS BEEN MA DE TO SECTIONS 92 TO 92C OF THE ACT AS ALSO TO THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AZTEC SOFTWARE AND TECHNOLOGY SERVICES LIMITED VS. ACTI (2007) 294 ITR (AT) 32 (BANGALORE) (SB). THIS PLEA WAS OPPOSED BY MR. VOH RA THE LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THA T THE ONLY FUNCTION OF THE TPO UNDER THE PROVISIONS OF SECTION S 92 TO 92C OF THE ACT IS TO SEE IF THE PRICE PAID IS AN ARMS LENGTH PRICE AND THAT HE IS NOT CONCERNED WITH THE QUESTION WHETHER THE PAYMENT WAS CAPITAL OR REVENUE NOR WAS HE COMPETENT IN LAW TO DECIDE THE QUESTION. HE FURTHER SUBMITTED THAT THE ORDER OF THE SPECIAL BENCH CITED ABOVE DOES NOT TOUCH UPON THE CONTROVER SY SOUGHT TO BE RAISED BY THE DEPARTMENT. HE CONTENDED THAT THE NATURE OF THE PAYMENT WHETHER IT IS CAPITAL OR REVENUE HA S TO BE ITA NO. 4701(DEL)/2009 14 DECIDED FIRST AND THE QUESTION OF DETERMINING THE QUANTUM OF THE ALLOWANCE WOULD LOGICALLY COME IN FOR CONSIDERA TION ONLY LATER. MR. VOHRA HOWEVER HAD NO OBJECTION TO THE A RMS LENGTH PRICE BEING REFERRED TO TPO FOR DETERMINATION AFTER THE TRIBUNALS ORDER DETERMINING THE NATURE OF THE PAYM ENT. ON A CONSIDERATION OF THE MATTER IT SEEMS TO US THAT TH E SUBMISSIONS OF MR. VOHRA SHOULD PREVAIL AS THEY ARE LOGICAL AN D SUPPORTED BY THE PROVISIONS OF THE INCOME-TAX ACT NOTICED ABO VE. THE TPO IS NOT CONCERNED NOR IS HE COMPETENT TO DECIDE AS TO WHETHER THE PAYMENT UNDER THE COLLABORATION AGREEME NT IS CAPITAL OR REVENUE. IT IS FIRST NECESSARY TO DETER MINE THE NATURE OF THE PAYMENT AND DECIDE WHETHER IT IS CAPITAL OR REVENUE. IF IT IS HELD TO BE CAPITAL IT IS NOT ALLOWABLE AS DEDUC TION AND THE QUESTION OF DETERMINING THE ARMS LENGTH PRICE MAY NOT BE NECESSARY TO BE DECIDED BY THE TPO. HOWEVER AS WE HAVE HELD THE PAYMENT TO BE REVENUE IN NATURE AND HENCE ALLOW ABLE ACCEPTING THE SUBMISSION OF MR. VOHRA WE DIRECT TH AT WHILE GIVING EFFECT TO OUR ORDER THE ASSESSING OFFICER MA Y IF SO ADVISED REFER THE QUESTION OF ARMS LENGTH PRICE T O TPO FOR DETERMINATION IN ACCORDANCE WITH LAW. THE DECISION OF THE TRIBUNAL REGARDING THE NATURE OF THE PAYMENT CANNOT BE DEFERRED AS REQUESTED BY THE LEARNED CIT DR TO A STAGE AFTER THE TPO DETERMINES THE ARMS LENGTH PRICE. SUCH A COURSE IS NOT CONTEMPLATED BY LAW. WE THEREFORE REJECT THE PRELIMINARY OBJECTION RAISED BY THE LEARNED CIT DR. APART FROM THAT THE TPO HAS NOT FOUND ANY FAUL T WITH THE VALUE PLACED BY THE ASSESSEE ON THE INTERNATIONAL TRANSACT ION. THEREFORE THERE IS NO NEED FOR GIVING ANY DIRECTION IN THIS MATTER. 4.2 IN THE RESULT WE DO NOT FIND ANY REASON TO DIFFER WITH THE COORDINATE BENCH IN THIS MATTER. ITA NO. 4701(DEL)/2009 15 4.3 AS MENTIONED EARLIER ON PLAIN READING OF ALL THE GROUNDS IT IS CLEAR THAT ALL ISSUES WERE DECIDED AGAINST THE ASSESSEE IN EARLIER YEARS. RESPECTFULLY FOLLOWING THOSE ORDERS WE DO NOT FIN D ANY MERIT IN THE GROUNDS TAKEN BY THE REVENUE. 5. IN THE RESULT THE APPEAL IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 FEBRUARY 2010. SD/- SD/- (D.R. SINGH) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 18TH FEBRUARY 2010. SP SATIA COPY OF THE ORDER FORWARDED TO:- 1. HONDA SIEL CARS INDIA LTD. GAUTAM BUDH NAGAR ( U.P). 2. DY. CIT CIRCLE NOIDA. 3. CIT(A) 4. CIT 5. DR ITAT NEW DELHI. ASSISTANT REGISTRA R.