Hindustan Unilever Ltd. vs The Additional Commissioner of Income Tax and Others

This appeal filed under Section 260A of the Income Tax Act, 1961 (the ''Act'') challenges the order dated 10 December 2012 passed by the Income Tax Appellate Tribunal (the ''Tribunal''). The impugned order dated 10 December 2012 of the Tribunal relates to Assessment Year 2006-07.

The appellant-assessee has urged the following questions of law:

"(A) Whether the Tribunal was justified in holding head office expenditure over and above what had already been allocated by the appellant was required to be further allocated for the purposes of computing deduction under section 10A, 10B, 80IC and 80IB of the Income Tax Act, 1961?

(B) Whether the Tribunal ought to have allowed the provision for retirement pension of Rs.81.56 crores as claimed?

(C) Whether the Tribunal ought to have allowed the retirement pension of Rs.25.36 crores actually paid during the year?

(D) Whether the Tribunal erred in not holding that Rs.5 crores paid to Prime Healthcare Products and Rs.4.5 crores to MUL Dentpro (P) Ltd. towards non-compete covenants was allowable as a revenue expenditure under Section 37(1) in the year under consideration?

(E) Whether the Tribunal erred in holding that a disallowance under Section 14A was called for in the facts and circumstances of the case?

(F) Whether the Tribunal erred in confirming the disallowance under Section 14A of the extent of 0.5% of the tax-free income, being excessive unreasonable perverse and as such no person properly instructed in law and on facts could have arrived at?

(G) Whether on the facts and in the circumstances of the case the Tribunal ought to have held that no adjudication in terms of Section 145(2) of the Act can be made in respect of that part of the purchase price that represented the cenvat credit available on the goods purchased by the appellant as the same was not a duty that was paid or incurred by the appellant?" (Reframed during the course of hearing.)

Question ''B'' and ''C'' are not pressed by the Appellant.

Regarding Question ''D'', the Tribunal by the impugned order has remanded to the Assessing Officer the issue of the nature of non-compete fees of Rs.5 Crores and Rs.4.75 Crores paid to Prime Health Care Products and M/s. MUL Dentpro (P) Ltd. respectively. However, while restoring the issue of the nature of payment of non-compete fees i.e. revenue or not, the impugned order observes "This non-compete fees can not be considered as revenue expenditure as it is paid in the same agreement by which the contract which terminated.....". Further it states, "However since the AO and DRP did not examine the agreement and did not consider the nature of payment in its correct perspective we are of the opinion that claim of Rs.5 crores has to be reexamined by the Assessing Officer by giving an opportunity to the Assessee." Similar observations are found in the impugned order in respect of payment of non-compete fees of Rs.4.75 crores to M/s. MUL Dentpro (P) Ltd. Thus ex facie there is contradiction in the above observations found the impugned order. It is clarified that the Assessing Officer would consider the issue on remand without being influenced in any manner by the observation of the Tribunal in respect of the nature of the non-compete fees. As held by the Tribunal, the Assessing Officer would, while considering the issue on remand, keep in view the decision of Special Bench of the Tribunal in the case of Tecumse India Pvt. Ltd. Vs. Additional Commissioner of Income Tax (ITA No. 3759/Del/2003) and also other decisions which may be relevant to the issue under consideration. In view of the clarification, Question ''D'' as urged also does not give rise to any substantial question of law.

Regarding Question ''E'' and ''F'', Mr. Pardiwalla, the learned Senior Counsel appearing for assessee states that the same are not being pressed in the present facts for Assessment Year 2006-07.

Appeal is admitted with regard to Question ''A'' and ''G''. To be heard along with Income Tax Appeal No. 409/2013.