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dated 01.07.2008, the assessee had paid royalty of Rs.6,33,74,362/- to DIC Asia Pacific Pvt Ltd.

Similarly the assessee had also entered into a technical collaboration agreement dated 01.04.2007 with DIC Corporation, Japan; in terms of which the assessee was permitted to use the technology for manufacture & sale of poly-resins only in Indian territory. In consideration for use of technology, the assessee was required to pay royalty @ 3 of the net sales of poly-resins to DIC Corporation, Japan.

license to any third parties and shall not make the licensed information available to any third parties. Similar terms & conditions as set out in the License Agreement dated 01.07.2008 with DIC Asia Pacific Pte Ltd. was present in the Technical Collaboration Agreement dated 01.04.2007 with DIC, Corporation Japan. The agreements with DIC Asia Pacific Pte Ltd. & DIC, Corporation Japan are therefore pure license agreements which granted mere right of use of the licensed technical information. The assessee had neither purchase any technology or knowhow nor did it derive any enduring benefit from the royalty paid to the licensors. The royalty paid is therefore revenue in nature and hence rightly Assessment Years: 2010-11 M/s. DIC India Ltd.

Assessment Years: 2010-11 M/s. DIC India Ltd.

TPO or ld. AO justifying the royalty payment as eligible as revenue expenditure. Hence no enquiry in this regard was made by the ld. AO. The ld. AO in the instant case had simply adopted the adjustment to ALP suggested by the ld. TPO and he did not make any independent enquiry with regard to royalty payment. With regard to the allowability of this expenditure in earlier years, he contended that no examination was carried out earlier by the revenue and hence pursuant to elaborate examination carried out this year, if the stand taken earlier had to be changed, then the same should. not be taken as violation of principle of consistency. He argued that since no view at all was taken by the ld. AO, there is no question of he taking one of the possible view. Hence the case laws relied on in this regard stands defeated. On merits, he stated that the Hon‟ble Supreme Court in I.A.E.C. Pumps Ltd case simply relied on its previous decision in CIBA of India Ltd case reported in 69 ITR 692 (SC). He argued that the royalty is paid by the assessee for right to sell the finished goods manufactured using the technical knowhow, whereas the technical collaboration agreement fees is for right to use the technical knowhow which is in the form of „fee for technical services‟ (FTS). The decision in CIBA India Ltd supra dealt only with FTS and not royalty. Hence the reliance on the said decision is misplaced. He in turn placed reliance on the decision of the Hon'ble Madras High Court in the case of CIT vs Southern Switchgear Ltd reported in (1984) 148 ITR 273 (Mad) in support of his contention.

9.1. We find from pages 27 to 29 of the Paper Book, a copy of the approval, from Government of India, Ministry of Commerce & Industry , Department of Industrial Policy & Promotion Secretariat for Industrial Assistance vide approval No. 8(2001)/719(2000)/PAB-IL , New Delhi dated 3.1.2001 , of technical collaboration agreement dated 5.12.2000 . Later the technical collaboration agreement was renewed with effect from 1.7.2008 with DIC Asia Pacific Pte Ltd, Singapore with the same terms and conditions. Similarly there was yet another License Agreement entered on 1.4.2007 between the assessee and DIC Japan on same terms and conditions as in earlier agreement except with change in percentage of royalty agreed upon, which is not in dispute before us. Hence royalty was paid by the assessee to DIC Asia Pacific Pte Ltd, Singapore and to DIC Corporation, Japan. We also find from the Fixed Assets Schedule as on 31.3.2010 (relevant to year under appeal) that there has been a minor addition of Rs 6.58 crores to Plant & Machinery which is hardly 5.23% of Gross Block of Fixed Assets as on 31.3.2010. Hence it could. be safely concluded that no new activity by setting up of a new business venture was carried out by the assessee Assessment Years: 2010-11 M/s. DIC India Ltd.