Honda Motorcycle and Scooters India Pvt. Ltd. Vs DCIT (ITAT Delhi)
Facts-
The appellant, Honda Motorcycle and Scooters India Pvt. Ltd., is a subsidiary of Honda Motor Company Ltd., Japan. As per the agreement, the assessee is liable to pay the royalty of goods manufactured.
Conclusion-
Royalty payment-
It is not in dispute that the goods which are exported by the assessee were manufactured using the technical know-how provided by Honda Motor Company Ltd., Japan under an agreement dated 13th July 2000. The assessee has sold the goods to the Associated Enterprise on principal to principal basis and has received sales consideration. The royalty is payable on the basis of the goods manufactured. Accordingly, addition made by the AO/TPO by determining the arms’ length price of royalty on exports to the Associated enterprise at ‘NIL’ is deleted.
Capitalization of royalty-
Limited right to use the know-how, without any ownership right, was acquired and as the know-how was used in the existing business of manufacturing through dealer, the royalty expenses were incurred for the purpose of business.
Additional ground-
There is no merit in the contention of the revenue that where the assessee itself had not claimed as deductible in its hands, the same cannot be allowed by the additional ground of appeal. Accordingly, the additional ground of appeal is allowed.
Export commission-
We are of the concerned view that the assessee has successfully demonstrated not only the benefits but has also shown that the profitability is higher. Accordingly, the addition on account of export commission was deleted.
FULL TEXT OF THE ITAT JUDGEMENT
1. 7463/Del/2018 and 7464/Del/2018 are two separate appeals by the assessee preferred against two separate orders dated 30.10.2019 framed u/s. 143 (2) r.w.s. 144C of the Act pertaining to A.Y. 2013-14 and 2014-15 respectively.
2. Since common grounds are involved in both these appeals, therefore, they were heard together and are being disposed of by this by this common order for the sake of convenience and brevity.
3. Since underline facts in the issues are identical in both the years. We have considered the facts of A.Y.2013-14 for disposing all these appeals.
4. The common grievance can be summarised as under :-
1. Addition on account of export Commission
2. Addition on account of royalty on sales to its AEs
3. Disallowance of expenditure being incurred under corporate social responsibility
4. Disallowance of expenditure on signages
5. Disallowance of sales tools expenses
6. Capitalisation of Royalty
7. Disallowance of claim of deduction of expenses in respect of Technical know-how
8. Claim of TDS
5. Representatives of both the sides were heard at length. Case record carefully perused and with the assistance of the counsel we have considered the relevant documentary evidences brought on record in the form of paper book in the light of Rule 18 (6) of the ITAT Rules.
6. On the agreement of both the representatives we have considered the facts of A.Y.2013-14 since facts of A.Y. 2014-15 are identical.
7. Appellant is a subsidiary of Honda Motor Company Ltd,. Japan,Group and is engaged in the business of manufacture and sale of motor cycles and scooters. The details of the international transactions and specified domestic transactions entered by the assessee with its AE during the year under consideration which are as under :-
