The Income Tax Appellate Tribunal (ITAT), Delhi Bench directed the Assessing Officer to allow the credit of TDS to Honda Motorcycle and Scooters India.
The Appellant, Honda Motorcycle and Scooters India Pvt. Ltd. is a subsidiary of Honda Motor Company Ltd,. Japan, Group and is engaged in the business of manufacture and sale of motorcycles and scooters. The international transactions and specified domestic transactions entered by the assessee with its AE during the year under consideration.
The issues raised in this case pertained to additional account export Commission; Addition on account of royalty on sales to its AEs and Disallowance of expenditure being incurred under corporate social responsibility; Disallowance of expenditure on signages; Disallowance of sales tools expenses; Capitalisation of Royalty; Disallowance of claim of deduction of expenses in respect of Technical know-how; and Claim of TDS.
The tribunal consists of Judicial Member Suchitra Kamble and Accountant Member N.K. Billaiya while addressing the issue of payment of royalty on sales to its AE held that the assessee has made payment of royalty as per the technology know-how agreement dated July 13, 2000.
Therefore, it is not justified to disallow royalty on the exports made to the AEs and consequently the tribunal deleted the addition made by AO/TPO by determining ALP of Royalty on exports to the AEs at ‘Nil’.
The tribunal while addressing the issue of disallowance of CSR expenditure directed the AO to delete the impugned addition. However, the tribunal clarified that the amount of Rs.50,000 being paid to Brahma Kumaris need not be deleted.
The tribunal while addressing the issue of disallowance of expenditure on signages noted that the expenditure was incurred on signage for display of the name of the assessee at the dealer’s premises. However, once the same is fixed at dealers site then it was held that it does not satisfy the test of ownership with the assessee and the expenditure is to be allowed as revenue expenditure.
The tribunal further directed the Assessing Officer to allow the running Royalty as business expenditure in entirety.
“Under technical knowhow agreement dated 13.07.2000 the assessee was entitled to use technical know-how provided by Honda Motor Company Limited Japan for manufacture and sale of two-wheelers and parts in India and was not authorized to sell its products or part in any other territory than in India without the prior written consent of HMJ. The assessee entered into a separate export agreement dated 13.07.2000 under which HMJ accorded consent to the assessee to export specific models of two-wheelers to certain countries on payment of export commission at the rate 5% of the FOB value of such exports,” the tribunal said.