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IT-Deduction under Section 80 HHC allowable in respect of the addition made on account of the creditors (Click for detail)
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FEMA : Foreign Direct Investment– Reporting of Issue/Transfer of 'Participating Interest/Right' in Oil Fields to a Non-Resident as a Foreign Direct Investment Transaction (Click for detail)
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FEMA : Trade Credits for Imports into India – Review of all-in-cost ceiling (Click for detail)
II. Recent Updates:
1. ASSTT COMMISSIONER OF INCOME TAX Vs. MODI REVLON PVT LTD, ITA NO. 3738 (DEL)/2011, ASSESSMENT YEAR: 2008-09, DATED: 21 OCTOBER 2011, ITAT – DELHI
Whether when the non-resident technology partner does not pass on proprietary right to assessee on transfer of knowhow, the royalty paid by the assessee under a knowhow transfer agreement is revenue or capital expenditure.
The original know-how license agreement was entered into on 14.1.1994 at the time of inception of business of the company and the payments of royalty under that agreement were made till August 2002 i.e. for a period of 7 years from the commencement of agreement as per the approval of the GOI. The payment of royalty in the year under assessment was made in terms of supplement agreement dated 16.9.2003. Hence, there is no question of any fresh input of know-how/technology and the payments are only in respect of continued use of brand name and patents owned by the foreign company.
Hence no benefit of enduring nature is derived by assessee against these payments of royalty. As per various clauses of know-how license agreement vis-à-vis supplement agreement dated 16.9.2003, the royalty payable as net sales of taxes the know-how has been provided by the contract manufacturer in terms of clause 4.01 of the agreement for limited purpose of manufacturing Revlon products only when passing on any property in the sale to the assessee. Obligations of the contract manufacturer were clearly defined in the agreement between the assessee company and the contract manufacturer, according to which obligation relating to royalty payment has not been passed on to the contract manufacturer. The entire benefit of the know-how was meant for manufacturing of the products to be supplied to the company and there was no obligation of contracting manufacturer to pay royalty to the licensor. Since the assessee company was enjoying the complete benefit of the know-how to run its business, the expenditure incurred every year on payment of royalty was revenue in nature and is very much business expenditure. These expenditure cannot be classified as capital expenditure.
(Please click here for judgment)
2. DEPUTY COMMISSIONER OF INCOME TAX Vs. M/S CMR DESIGN AUTOMATION PVT LTD, ITA NO. 493/DEL/2011 A.Y. 2006-07, DATED: 21 JULY 2011, ITAT – DELHI
Whether section 36(1)(ii) is applicable to commission and bonus paid to the director of the assessee company under a Board resolution.
It was clear that the commission and bonus was paid to the assessee company’s director as an incentive and was directly related to the profitability of the assessee company whereby section 36(1)(ii) could not be invoked. The cases followed by the CIT(A) supported the case of the assessee and the CIT(A) had given a correct finding that payments were reward to give the employee an incentive for the good work being done by him. Thus, these expenses were incurred for the purpose of business expediency and for improving the working of the assessee.
(Please click here for judgment)
3. [ Contribution by CA Puneet Goyal, and contributor is available at email-id: capuneetgoyal.delhi@gmail.com ]
ANALYSIS OF AMENDMENTS IN CENVAT CREDIT RULES, 2004 BY FINANCE ACT, 2011 AND BY VARIOUS NOTIFICATIONS ISSUED FROM 01.03.2011 TO 31.10.2011
(Please click here for detail)
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