PCIT (Central-3) Vs Montage Enterprises Pvt. Ltd. (Supreme Court of India)
The matter arose from the Revenue’s appeal concerning the Assessment Years 2005-2006 and 2006-2007. The questions raised included whether the assessee was justified in reallocating expenditure and income on account of royalty from the Jammu Unit to the Corporate Division, whether the assessee was entitled to deduction under Section 80IB of the Income Tax Act, 1961 in respect of sub-licence fee if the first question was answered in the Revenue’s favour, and issues relating to additions under Section 68 and the reduction of the licence fee disallowance from Rs. 9 crores to Rs. 6 crores concerning the Malanpur Unit.
Read HC Judgment in this case: Delhi HC Upholds Deletion of Section 68 Addition on Genuine Trade Advances
The assessee manufactured and traded flexible packaging material in roll and pouch form. It had acquired technical know-how for manufacturing an improved sachet pouch and paid royalty of Rs. 4.25 crores while receiving sub-licence income of Rs. 1.96 crores. The assessee had manufacturing units at Malanpur, Jammu, and Noida. The original income declared for the relevant assessment years was Nil. Following a search and seizure operation conducted on 23.02.2006 in respect of M/s. Flex Group of Companies, proceedings were initiated against the assessee through a notice issued under Section 153A of the Income Tax Act.
