Transstory (India) Ltd. Vs ITO (ITAT Visakhapatnam) – The taxpayer was to pay royalty for only seven years and in respect of certain specified product, the royalty payable by the two group companies in China was for 20 years and it was based on sales of all the products. The only basis of adjustment made by the TPO is variation in rates of royalty paid by the taxpayer vis-a-vis the two group companies in China.
In the case of R&D cess on royalty, the CIT(A) had given a categorical finding that under Section 3(2) of Research and Development Cess Act, 1986 the cess was payable to the Central Government by an industrial concern which imports technology. There was no material to controvert the above finding and R&D cess liability was payable by the taxpayer who imports technology. The Tribunal upheld the decision given by CIT(A) relating to adjustment on account of payment of R&D cess. The Tribunal held that the royalty calculation, and the period for which the royalty was paid by the taxpayer was materially different from that of the two group companies of the JV partner, and thus the adjustment should be deleted.
M/s. Transstory (India) Ltd. Vs ITO
Decided by- ITAT Visakhapatnam
ITA No. 540/Vizag/2009
Assessment Year: 2006- 07
Date of Decision- 14.07.2011
ORDER
Per Shri S.K. Yadav, Judicial Member:-
This appeal is preferred by the assessee against the order of the CIT(A) on a solitary ground that CIT(A) has erred in denying the deduction u/s 80IA eligible to the assessee in respect of the works executed by it for Government of Karnataka and Government of Andhra Pradesh.
2. We have heard the rival submissions and carefully perused the orders of the authorities below and documents placed on record. The facts in brief borne out from the orders of the lower authorities are that assessee is a company and it formed joint venture named “Navayuga Transtoy (JV)” (herein after to be referred as J.V.) which bid for the contract. The Irrigation Department of Andhra Pradesh awarded the contract to JV, which became entitled to execute works worth Rs. 664.50 crores. As per the terms of the JV, the assessee was to execute 40% of the work in Navayuga, the other constituent partner was to execute 60% of the works awarded. The assessee was therefore to execute work worth Rs. 265.80 crores, out of which works valued at Rs.18.12 crores were executed during the A.Y. 2006-07. Both the constituent partners of the JV raised bills on the JV for quantity of work as certified by technical consultant appointed by the State Government. The JV in turn raised a consolidated bill on the Irrigation Department of Andhra Pradesh Government without making any additions. The Department makes the payments to the JV, which shares the payment in accordance with the bills raised by each. The JV files its Income Tax returns separately but does not claim any deduction u/s 80IA(4) therein.
