Commissioner of Income Tax-Iv v. Hero Honda Motors Ltd

SANHV KHANNA, J.; For detailed order, see ITA No. 694/2011 titled Commissioner of Income Tax-IV versus Hero Honda Motors Limited, pronounced today. (SANHV KHANNA) JUDGE (V. KAMESWAR RAO) JUDGE FEBRUARY 3,2015 VKR + IN THE HIGH COURT OF DELHI AT NEW DELHI ^s^opm1T 625/2012 Reserved on Date of deeision: November,2014 February,2015 a Through Mr RohitMadan,Mr. P. Roy Chaudhuiy &Mr. RucliirBhatia,Advocates. versus hero HONDA Ti nnah Mr AiayVohra,Sr. Advocatewith Ms.KavitaJha&Mr.VivekBansal, Advocates. HON'BLEMR. JUSTICEV. J/o ™s comnaondec.ston/*"twoo.ddisposeofthe^eset.1 .ppeaisrdedhy theReveatrere.ata.to AssesstrteatYea.. OO.t 2O N, 02 and2002-03. Theseappealsratpugnedthe orderdated 6 Apt passedhy the hreo.eTax AppellateTrlhuaal(Trlbuaal,for short. Th substaatialquestio..ofla» requiredto be decidedaad adat.ttedfor heat. by orderdated20^''April,2012reads as under.- "Whetherthe IrrcomeTaxAppellateTribunalwas ri^ht in holding that the payment made to Honda Mo Limited under the "know how" agreement da e

2.6.1995 is revenue expense and not partly or who y capitalexpense?"

¶2• The respondent-assesseeHero MotocoiTLimited,earlierImown as Herd HondaMotorsLimited,was ajointventurebetweenthe Hero Group ITA 694, 696, 698,699/2011&625, 633/2012 ^ and Honda licencedby Honda. mannfectuteand sale of mo ^ ,,e ", f9S4, «Mcb «as mv.sed by collaborationcontractd agreementswere valid second and third and Hondathereupon for a period often years. 3,^4 entered into another ^"",,"ed in the present technical assistance agreem ^ -'•-•"trr:::— raisedIS whetherroyaltyp tinn raisedby the Revenueis ri^fttrp Anothercontentionraisea uy or partlycapitalexpen • nvahle under the agreement "., " ..a., -« ™ ••" aawd T' Jwte, mi f" \ by the Revenuerelatesto payme items arise for the same was buttheseaspectsh^^^ considerationinAssessm and raised in the appeals preterrea 10 2002-03. • cthe relevantclausesofthe 'licenceand Beforewe criticallyexaminethe releva technical assistance agreement' dated 2-June. 1995 " ™ ' rr know-how. Afrequentand prim y ^ capital and revenue expenditure,s the enduring nsLssee incurs expenditurewhich gives enduringbenefitmthe cap : distinctfrL expenditureof concurrentand reoccurringnaturein reverefield,it is treatedand regardedas capita.^ tc3t is applied on the basis of commercialprinciplesand^not. astia.t-ITA 694, 696, 698,699/2011&625, 633/2012 694, 696, 698,699/2011&625,633/2012 ITA Page 3 of; ITR 1(SC) exempUfiedthat whenthe an advantageofendnmgbene^t•^ ,,, natureofadvantageeonsi ere ^ management to conduet assessee's trading or moreprofitability,whileleavingthe assessee'sbusrnessmore "t fixed capitaluntouc e. . ^ indefinitefuture. The test o though the advantagemay en ur conclusive test; it enduring benefit is, thereore, camrot be applied impetuo y p^.^^t.mal, :: r- - - common sensical and down sent case we have to considerwhetherthe 4, In the facts of t epre ^ informationand expendituremcuri-edon acquisi10 know-howwouldsatisfytheendurmg businessapparatus,in rightacquiredhad enabledfire assessestrading practicalandcommercialsense. •Xeclmicalmformationandhnov.howmei^^^^^^^^ characteristicsas distinctfrom tangi e as person over aperiodof time or — nansferownershipor grantalicence ^ limitedrights,whileretainingownershipriglrts. i",.,-... »-*" -• "•'"f,:t» WO.IJ . .»» .»! " ~ "'l " " ownership. its relevancein determiningwhetherthe \4 The aforesaidaspect and r" eap.ta, expenditurewas to acquiretec mca commissionerof or revenuefieldwas elucidated y ^j",aed,(1968) 69 ITR Income'Tax,BombayCitfIversus ^ pecember, 1967 is 692 (SC). This judgment question/issue.In the saidcase, ioeessantlycitedandappliedto deede^^9 tire assesseecompanyhad procuredto formulae, scientific p""peny, to produce licensed property rights inIndia. Inspiteofthe factdiatthe preparationstodto promomtltor^ ,ghtand SwissCompanyha 8™ t^nts listed in Scheduled,to ucenee"in the territoryofIndia " o3e ^ ".heuse, exercisetodvendttom— rhetrademartosetoutmSche^ ^ courtheld that what was conferre assessee,it was observed,was no ^ infonnationwas not to trademarksetc. As per the agreemen, . be divulgedto third partieswtoout accessto thetechnicaltoowle ge an ,rdtrademarksforaliimtedptom^ ^ - assetofitsbusiness,nor did^m1^ , advantageof ™ .o^toessas amanufacturertod rely draw for tire purpose ,,as no ^ upon tire technical knoweg ,,3oiutelyin favouroftheIndian attemptto partwithtechnicaltaowe g fo,- all assessee.It was not acase of transfei Thus,theexpendlmreincurredwas revenuein nature. ITA 694,696, 698,699/2011&625,633/2012 • 1? •• fmds resonancein subsequentdecisions T The aforesaidlegalpositronfind n Hin CITvs. BrilishIndianCorp. Ltd. ) ofthe SupremeCourtmCI and CIT 51 (SC), CIT vs. Indian Oxygen ^ vs. Wavin(India)Hi- (1999)2 wiow-howandwhatwas granted outrightsaleoftechnicalinformation^an was non-exclusiveor ose the loiow-howafter (supra),the Indiancompany was terminationofagreement. "f time for use of know-how Absenceof stipulationas to dum^» etc., and whetherit wouldbe etermi^ whetherit isacaseofouttiglfttr»^ Ini^tstries ^ideredhyl^e-Ihr , the said case, the Indian Ud. vs. CIT (1981) 127 ^on-transferableatrd non-assessee had been ^,"owledgeand secretprocessfor assignablelicencein respect "tcept tuanufactureof sealed ^gteement, it was obseiwed with the consent of terminatedat end of oontemplatedthatit wouldcontmueunl s^^ 10 years and at end of succee mg ^ inferencethat yearswas consideredto be notun u g jy the division bench aoine lasting advantage was obtaine p^noiple held that once conclusionwas reac e paymentmade for ",nt madefor acquisitionofassetsand pay betweenapayment ^ p^l,3 mto only use of intellectualproperty rig . ^ ^ insignificance.Payment Similarly,whether period, it will be only jt,,,finthe absenceofother paymentwas fn, acquisitionof a capital facts, help decide whetherth g ^ Q. c.1^ fi^^/2012 ,TA 694, 696, 698,699/2011&625,633/2012 , , e But the natureand characterof the asset ,ssetor an enduringadvanag^ ^",yes an acquired, whether it rs perm determinative.In the sard assesseeto tun its businessmore - r. of any loiowledgeor as.etan iTjT fl982f Idd hflf 240 lo rn.eulEusineerin, ^ ^ manufacturing in nature. UTriveni Engineering ' ^company manufacturing ,BcO, the Indian assessee ^ actionwhh turbines and other machinery. ^,"ofactureof turbinesand obtainingtechnical ,are paiby treated as revenue sugar mill inachmei7 or forwardfor two years,andti^ expenditurein oneyear and party g^^mrd tvrittenoffin threeyears. Revenue courtobservedthat that the expenditurewas of capita n ofknowhowor thetestto be appliedwas wheth ^^,ovant t,e paymentwas for mere ng^ ,,e clausesofthe agreement,^ madem •sold','absoluteproperty a . closer scrutiny and reading the tBo agreement, but ™ ^re agreementwasforaperiodof 10 agreementasawhole, 8 ..jorthv^ith".The agreementwas limited years,but, it couldbe terminae to India.Thoughthe data,towmg. oem ^ tteated as absolute prope.^^^^ ,,oreby continued and remain assesseewas to that it wasacaseofgr-toflicencefor us ^ observecompleteconfidentialitywith regai uot assign the agreement, without written ^ manifestedthatthe rightwas only alimit , ITA 694,696,698,699/2011&625,633/2012 of absolute transfer of it was held drat teohnologieal ^ ,,oomeobsoleteatrd uselessunless technicalknowhow and mfoimati ' . Has been followedby the Delhi ,0. The aforesaidratro and reasonrng c;"u rnurt in AMI. Commssioner /• ."""mentwas o High court in AMI C«—- J ^ ::™autonratrcrenewalandrightto continue "«.» -ao.P— 21 i. M.- «P--fa" »-"• an exclusiveriglrtto manu confidentialityclause on However, drere was —,,d p^ies. ^ was conununicatronor disci^re^ obseiveddratthe informationan ^3,3,, changingtechnologica eve ,, spanoftime.Thepaymenthad ^ ^ ,f the business,and therefore,held that the expenditure the profitmakingprocess. .3,3,,33,of roustbe treatedas revenue. , ,95 ^pcl). Cjr vs. Bhai Sunder ,,3^ i"""x Reference can also be made to therein referring to a IndustriesLtd. (2008) 173 Taxm j^cquiredfor use oftechnical ' that if a licencewas acquiieulu circular,it was observe ^ ^ .3,, ^^..ronce iroowhowfor alimitedperio ,, ,Pc an asset of enduringnaure^^ ^ decisionofthe Supieme q-^e .X 00/i TTT? 342 wherein it has been nei ^ CIT (1997) 224 ITR . capital oi revenueexpenditure,woulddp P TO694, 696,698,699/20118.625,633/2012 Iptelvnew plantwithcompletelynew piocess assessee had obtainedacompletelynew and tectaology; whether the expen i i knowhow for betterroeirt of the pro u produced;is itacaseof improvisatronandp Ltnessoratrewbusr"ess;whed.ertheass^-ft-^^^^^^ •.ri to return plans and designs dul period was recmred to manufacturetheproductm , ."h eonditionsofthe agreement effecton aconstructionofvarious erm 5,rislons A e"stbe considered. Similarreasoningcan nnoi^) 171 Taxman 81 lueij "",Sm2 propertyrightsremainwith • dicatesthatwhatwas grantedwasamerelicence,as ,e foreignparty,It.—,- ^"",,"hality as to the assessee wa i"f""mion or assigned the , knowhow and could for agreementwidtoutprior cotrsent. In —g-^-^-^^^.d—yellving world of sclenee and technology. Decisionm Whetherthe-w.^ ,hus,Sci-i/lc T" «L(suPta) dealt with the issue, whetherdepreciation Bigg. ffouse (P) Ud( S"p^.o",e shouldbe allowedon mtangi P CourtmScientificEngg (supra)had theexpenditurewascapitalorrevenueinnature. 11 Adetaileddispussiononthesaidaspectisto befoundrnthedecision iTrfr^ r70091 176 Taxman355 lueij, ofthiscourtinCITvs. J.K.SyntiieticsIt .i2m^^ whereinthe principlesto distinguishcapla an ^ ,TA694,696,698,699/2011a625,633/2012 ,, i:ve to refer to clauses5and 6 .no We would only litre set out in paragraph38. we thereofwhichreads as under:- , .f T•,cense which aceords ..(V) expendituremcuned for g.an icess"toteehnicai "rdina,ii,be treated techniealknowledgeand 'nforma ^ - o-e"uld.raveto e.oael,look at tbe the gram from the enau, attendantcireumstances,suchas.- . (a) thetenureoftheLicence. ' •nt ifany in the licenseeto createfurtheiiig

(b) the right, if any, m in favourofthirdparties, . • . • partingwith a confidentia

(c) the prohibition,i any parties information received under withouttheconsentofthe heenso, trptn^fersthe "fruitsof research

(d) wlreterthe Licencetransfers ofthelicensor,"oncetor all , • oaf the Licence the licensee is

(e) whether on expii^ obtained required to ^retuin ^^^^oreven thoughthe licensee underthe Licence o ^ product, in respect of, "tTess--ritnowledgewas obtained during the which subsisteneeottheUcerroe. tt,wbedtera",seo.totpro.ss«^ by the licensor od be would ordiuarily be aLss to such secret process construedas capitalmnature. COnSUU&Ll ".r nnnld use the technical knowledge

(vi) the fact^ that assessee for the purposesof its obtainedduringthe tenuieo expired, and in that sense, business after the ^ has been categorically resulting in an endnrmg a ^ by itself, passageoftimebecomeobsolete ,TA694, 696, 698,699/20118. 625,633/2012 . +1 o riprkion of the Bombay High The said decisionmakes referenceto the decisi ^ loe sdiu u ^ Engineermg & Court in Commtdone, of Income Tax v. Tata g r Pvi m (1980) 123 ITR 538 (Bom) where paymentwas LocomotiveCo Pvt Ltd ^ made to the foreign collaboratorm respec information reciuired for manufacture of automohve products. T liningadoptedby DivisionBenchofthe BombayHr^ Courtwas to the effectthatteclmicallcnowhowmade availableunder an agieemen not stand on the same footing as protectedrights of aregisteredpaten •••mto use in limited sense was granted. It was not holder, as mere ng materialwhetherassesseecoulduse the knowno ^ agreementon the ground that this aspect was wholly —ua^ • • n on other grounds/reasoningrecorded in the sai express no opinion on otner g decision.) • T-TA "NTn I4'b0/2010 titled CIT vs. PecentlYthe DelhiHighCourtin ITANo. 1450/2Uiu J -A A n99^''Aunust2012, observedthat when ModiRevlonPvL Ltd., decidedo ' .r nit would - Q ; p fnr use of know-how, it wouio. royaltywas paid for alimitedpurpose,i.e. for use Kn be revenue in nature as the entire benefitof know-how was mean manufactureofproducts. It was notamatterwhereassesseeha undertakethe manufacturethroughacontractor. In the sai case, olrshipof the brand, remainedproperty of the foreign party and a licence to operate in adefined territory was granted. Expenditurewa. allowedundersection37(1)ofthe Act.Thiswas inspiteofthefacttha originallicencewasforindefiniteperiodandthe supplementaryagre^ did not indicateaterminuo ,uo. It was, however, obseiwed agreementcouldbe terminatedand upon such expirationor teimmahon. Therewasno vestingofknow-howor goodwillintheIndianassessee. ITA 694, 696, 698,699/2011&625,633/2012 if? Learnedcounselfor the assesseehas ^so referredto decisionsut • ^ • (m ltd (1981) 127 ITR 409 (AP), ElectricalImdmtnes(P) Pw, U ^0091 254 ITR 294(Guj), CIT vs. Jyoti Carbon Lid, (2002) 294 iiiv v 170021255 ITR 345(Guj),S.if.f.Tookltd. vs. CIT ElectricMotorsad. (2002)2t, ^ m i,d (2000)

(1999)237 ITR 684 (Mad),CIT vs. SouthernPressings(P)L ( ) 242 ITR 67 (Mad)and CITvs. B.N. Bias&Co. (P) Ud. (m 190(Cal). We neednotspecificallydilateany moreon the sarc aspec m a O-oflaw as expoundedabove. However,we wouldlike view ofthepositionoflaw as expou noRat 148 to referto the decisionin Cirvs; SotrtfcOTSM..fcfcg<K"-T •( ITR272 (Mad)reliedonby therevenue. In the saidcase,the assesseela for settingup ofafactoryand operationthereof. Theforeigncompany ta treednotto manufactureproductsinIndiaor giverighttoathirdperson to do the same. Referringto the clausesofthe agreement,theHighCom Held that technicalknowledge so secured had resulted man en uimg advantageandbenefit,as the samewas availableevenafterterminationo trtreementsincethe factory and its operationwould havecoi—. The durationof the agreementwas 5years but the method, production plcedure,etc. wouldremainwith the Indianassesseeand, th.eforem enduringbenefit/advantagewas acquired. There was also con eimei exclusive right to manufacture and sell the articles, » independentright securedand was of an enduringnature. Accm gy A-iinwpflas caoitalexpenditure.Noticeably, 25% oftheroyaltypaidwas disallowe as capi P • hwas obseiwedthat fire entire royalty was foi acquisition^ p,"Uegeto manufacrnreand sellthe productsand,therefore,it was pa y capitalandpartlyrevenuein nature. Theaforesaiddecisionwasuphel y^ the SupremeCourtbyashortorderobservingthattheyweienotpeisua ! l!::that the view of dre High Court was erroneousvideW... ITA 694, 696, 698,699/2011&625, 633/2012 2-4 A

(199S) 2.32 ITR .s. J^asc™.d«edb, Switchgear • ^ S*''S''"'' •. «d (2009)319 359, The decision1 ^ MotorIndustna theDelhiHighCourt" ^ facts. "Kl09(Del)-d-sdisting .a «utispi-dhelote>.j;-^J;^^^^^^^""a,,^The tenn riDted 2"'^ n those patents, utility agi-eement stood defined to mea 'intellectualproperty ng intellectual property HE • t^pitents and other mrei to manufacturingot rtdels design patents thereofor to man Lctlyto theproductsorthelicens^P pa^tH . the productsand their ptopertyrightsrelating0*^= nti;inodels,designpatentsan terin - rZal property limited to dravrtugs, stand p^nducts or U •Kand directionmaps etc. directy term manuals ai manufacture of i rtini t nf or necessary fo^^ any technical parts thereof, ct^.^ov/-lioNV technical information' was to m product 01 rLmationtrot includedin-;::,le ofproductorlicensedparts linensedpartor wasnecessaryfor orwoul^ «hiehtheHondaownedatfoe ^^^^^^nent,The^n^ ownfrom timeto tune urin as expressly spe t anCts' meant two-wl^eelei developmentcodes, v. . " rat and (h).identifiedby dcensorsd J ""herclauses(a) an ( sloped an 198s, KCCA. etc. which

(e), dw manufactureunder the earlier a^^^ pursuant to inolude additionalmodels or yp .p,, n new ."30del ehange' as speet^d r,r CQR 699/2011St 625, bfi3/ ITA 694, 696, 698,b ,esponde.tassessee.Uhaewdeve P .,"P Si.Ua.y.t.e^ ,as»a.eby a ttaougb«fehanew mode ""t lumted ebangemany partmenUm.y .d meaebeasewas .ppeaeanee,struemre,charactenst ^,,",ded • •.t to anew model agreement. The ag subjectto a new engaged mm ,,st the respondent assessee ws ^",,,ee utanubacturlng,assembling,se .gj ,,e earl.er wheelers and their parts as J ,,Psequen eollaborationagreement date ,,3po"den .. t thereto which confened ana distribute,, amendmenttttereto ",""fseture.assemble, sell, ussessee a right and hcen ,epalrandservicetwo/threewheel . r>fthe agreementwere. IS The othertermsofthe agr •• tdby the licensorto the respondentassesses

(1) Rightsand licensesgrane . (enable,withouttireiig t o , "ere ettCusWe, ,,",Ue the ^""1: - rights and dutiesunder the agreement productor pa s ^",,,ectly. (orthetermofthe agreement,i.e. 10 years (« ^"^--^ldl"^':::;;,jaJune.1994. fromthe effectivedate01/ fromthe effectivedate01/

(3) The Agreement defaultingparty,if d ai e ^ (orthwlthby aparty, if tte other party Pagei3 of 20 PA694, 696, 696,69S/mU8.a«,633/201/ mereedwith, or was adead, o. iaddecd. changein shareholdingown r fi-ip Qsicemctrt,i-upan expirationof termmation. due to eau ^^^ufacture,assemble, , t pmsesseecould contm obligations, respondentassess cf then deliver servicesbut indudingpaytnentofroyalty. .areeventofpre—— ro defanltofperformanceo^oj^^^^ ,"a oh. ^"•^""''''TrToLcts and the parts, as well as tire tts dispositions0 information. .rtellectnalpropertyng ^^^

(6) Purtherin the eventof propertiesmconneclron ropronrptlyretnrnalldocu.^-^^^^^^ and all r,hh the agreement »^ andconfrdent.alityclanses. rntormationreceive un ^^^.3 factories and other Honda had right to access .e re.^^^ ^..^er facilities for rverebeingcompliedwith conditions/obligationsn

(3) ffnowhow,technical—- ^ ^^,,3,Hy the husiness information was 0rema^^ ^^",,,"cefor propertyofHonda and was 0 ^^3 ""t rc he Hondaby the respondentass.se. ^ny divulged, communicatedor y^d. Respondentwas to mannerwhatsoever,exceptas expressyp ,r,e9a,ess,sss,sss/mrr--s,e3S/zors 2- • "to keepthe said infomiationsecretand take all necessaryprecau ^ the present agreement. Th for protectionofsecrecy. "aintamintert.a,regn,.ionsand^^^^ The informatron con ^ fo, hte approvedsub-contractorstvh purpose of manufacWre.asse ^ ^^foeontractorsto — ^'1"™:: al—tiai. •treatan informatronas sec. _ en exp.ration (p^Theaforesaidrightsandohiigationsweretopersrs orterminationoftheagreement. ^ nt to use or causeor permituse by y

(10)Therespondentassesseewas n foformation third party, totellectual property rrght orevidedunderthe agfcement. ^ ewas not to claim any title or propertyrrgh an Ice ofthe agreement. Upontermination whatsoeverduringthe exrs aresultof defaultofthe respondentassessee. ropehyorinterestwhatsoevercouldbeciarmed. . . respondentassesseebecameaware or • et" propertyrrghtofHondainlndiabyathrrdparty.

(13)Therespondentwas^ ;-rXolty and/orsale form to Hondaregardingma ol ofparts or products. Hondawa^a accounts,financialstatementsand records. . Lactionsascontemplatedundertheagreement. ,TA 694,696,698,699/20118,625,633/2012 , , jiot written consent, responaentconta trot,— ^ aitecUyor tnatreetiyor— - agent or any other or otherwise deaintg tn irranufactnting,assembhng. two/threewheelersofotherpat -::-j RuimingRoy^^^y- ^under the new a, ^Moaei fee' was agreenrent.P—^,,,,on stipniatedthe amonn^o payments. The agreemeirt "f usi "odel fee payable in respee ^ 10,00,000/-was payablemtr the ,rst 60 days of the ^^--1 ,,,, "1 Honda Government^^-^'^YVtletJeimiealhtfottnationnecessaryfor deliveringto theresponden ^fter the .watmfaetureand assembly, an had partiescortftrmedmwrittngth eommeneedon commerc.albasts, whicheverwasearlier. ^^ b. Royalty was running and multiplyingthe rate ''•'•'r irx:::'.' specified m Bxhibii warehousesalesprice. r -d terms and conditionsand applyingthe • 15, Readmgthe aforesaidterm ",,houwerefor rightto expounded,ithasto beheldthatthepayments. Pag0 16of20 ITA694, 696, 698,699/2011&625,633/2012 , . , vnowbow and information. Tde or rather for access to thetaowho«or technical owcrshipaad the mtellectuap "3pondent irformation«ere nevertransfe b, Tlrecrvrtershlp^-^^^^^^^^ Honda. Theproprietorshrpmth ,3e on the respondentassesseebut ony^ i"tarrgible strictand stringentterms were gr^te^^^ ,be . continued to remain the ^..gpondentassesseefor day to informatiorr.etc.weremadeava.a^ "s bay mnnlngandOP^ sales had already commence was not exactly new. M of the fns aaber the agreementdated 24 - • oontrnu.ty * « n"- ;• I. "".».. »"» •' "" " "«»-M '»" .. V- '• »• f-~' .*• » agreementmerely penmtted ptoprietorshipand ownership paymentofroyaltyand that after 10 yearsand tightwas nevergrantedor trans jospondentassesseecould still after returningthe jlowhow and informationwould be a have continuedto use tec ic automobile industry, ttWia, and inconseTuentra,;^;;J^p:,onearethedayswhenone teclmologyupgradationis cons ^ ^ob or two manufacturersernoyedmonop^^ of out-of-date models. indeterminate wart an ... artloiow-howis injectedeveryyear TTTbttdC.tltoheepup andupgradewouldresultm :r::-:l-msales.-Tersistentupgradationandcuttingedge Page17 of20 ,TA694, 696, 698,699/2011&625,653/2012 ^6 ""irementin the competitivemarket technologyis .mandateattdbusittessreq ,Pt«o/threewheelers. Model fee. subieetmatter of PP^ ." 2001-02 is .merelyRs.4.09lakhs an ^ ,ears. crores. The said royalty pa.d to assessment-year2001-02was R• • .,^,,,",mal Hortda. if pa.d f-tiEbt to nse of m^ ponble propertyright, would poss.bly 3^, Ore sa.d TaxationAvoidanceAgreemen ^^3 absolute paymentmightnot be taxablernM^a^ by arrd completetransferof ' f3permanentEstablishme.tt(See Horrdatothelndianassesseema between Mdicles7andl2ottheDo«bleTaxat.on Indiaa.td,Tapan). "ear 2000-01.Revenuehas also •

¶18in the appeal for lakhs paid as technicalguidance challengedthe taxtreatment • has -• -^-"^-^^'nCl^ilantRcvenue.Intheabsertceofany notbeenplacedonrecordby the pp documentandevendetailsas to thematur^.^^^^^^ ca.motadjudicateand dex.dethrs .ssu . eatmentgivenby theTribunalis,therefore, n -ng the courseof hearinghad drawnour ,p. The respondentassessee urmg .",™-..'•"""-" ~ naturehad arisenfor the fir expenditureand. therefore. Tribunalhad held that ^be.r dec.sion reported as ;r;; ^ - «"•«-—t::r" ,TA694,696,698,699/2011a625,635/2012 May 2005. The Delhi Commissionerof Income Tax, deeide ^ on the said -».—- ttryT - - aspeet in the appeal of the Rev dismissed. For ^ ~ UoO.s... e.pe.a..cof the assessmentyeais gied by tee«as allowedas revennee.pen^ theRevenueon the sat ^^3 g,e,"dand reason,as «ouldnot Hke to dectde P ,,e ffiglt court "" ",etherthe Hrglt Court . We do rrot eornmen f","e any under Seetion 260A ol tne additionalquestionoflaw.. • t the eontention ot tire respondent/assesseew.th

¶20We also rejeet th • :""erunderSection263 ofthe Act referenceto the power ,^p,g"edorderthe Tribunal relatingto assessmentyear 2Uti onthesaidquestionheld:- _ ^,3, assessmentyear "Learnedcounselhas ^^^e ^elhiHigh Courtwas 2001-02,the 263 appealbefo ^ourtpassedthe not pressedby the assessee^nd Hon consideration orde'rto the effectthatthe -suewill be op in other years. In our v , expensesbeing acoirect Officerallowing'^odelfee and .ggessmentorder view, there was no eiTOi in pas g ^002-03 is quashed. Therefore,263 -f;r2^ order passed 'by GIT Since we have quas ciT(A)'sconsequential subsequentproceedmgsI.e. AO sand Uit ) ordersthereonare also quashed. Areadingof the aforesaidreasoningclearlyeluc.datesthat the Tr.buna has held that payments made by respondentto Honda were revenue escpendttureand not capital. On the said findingon merh, the Trtbunal observedthat there was no error in the order passed by the Assessmg Officer. Power under Section263 can be invoicedby the Commtss.oner ITA 694, 696, 698, 699/2011&625, 633/2012 onlywhenthe orderpassedby theAssessrngOfficerrs erroneousandnot <>-2^ It is in these circumstances,that no specificquesfionof law ' der Section263 ofthe Act, has beenframedm with referenceto powerunder theappealrelatingto assessmentyear2001-02. In view ofthe aforesaiddiscussion,the substantialquestionsof law •nnsweredrn favouroftherespondentassesseeand agarnstthe appell are Revenue. to costs. ITA j There will be no order as

¶22-The appealsare accordinglydisposed . JUDGE / 694, 696, 698,699/2011&625,633/2012 1\ • •- w 6-:

* IN THE HIGH COURT OF DELHI AT NEW DELHI + INCOME TAX APPEAL NOS. 696/2011. 698/2011, 699/2011, 625/2012 & 633/2012 Reservedon : 10^ November,2014 Date of decision: February, 2015 COMMISSIONER OF INCOME TAX-IV Appellant Through Mr. Rohit Madan, Mr. P. Roy Chaudhury & Mr. Ruchir Bhatia, Advocates. versus HERO HONDA MOTORS LIMITED Respondent ^ Through Mr. AjayVohra,Sr. Advocatewith Ms. Kavita Jha & Mr. Vivek Bansal, Advocates. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO