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| The Tax Publishers2019 TaxPub(DT) 3739 (Del-HC) INCOME TAX ACT, 1961
Section 37(1)
ITAT had rightly drawn a distinction between the royalty payments made by assessee to principal during its formative years and those made in subsequent years when the assessee was fully operational. While the former payments were characterised as capital expenditure, the latter could not and were rightly treated as revenue expenditure.
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Business expenditure - Royalty and lump sum fee paid by assessee - Capital expenditure OR revenue expenditure - Allowability
Revenue raised the appeal before this court holding that ITAT/CIT(A) erred in deleting the addition made by AO treating the amount of royalty and lump sum fee paid by assessee as capital expenditure, instead of revenue expenditure as claimed by assessee. Held: ITAT had rightly drawn a distinction between the royalty payments made by assessee to principal during its formative years and those made in subsequent years when assessee was fully operational. While the former payments were characterised as capital expenditure, the latter could not and were rightly treated as revenue expenditure. For the earlier assessment year 2008-09, this Court in (ITA 480/2017, dt. 9-5-2018) had remanded the matter to the ITAT for a fresh determination of the above issue, it cannot be said that for the present assessment year, ITAT had not given cogent reasons for treating the expenditure as a revenue expenditure.
REFERRED : The CIT-LTU v. Honda Cars India Ltd. in (ITA 480/2017, dt. 9-5-2018) The CIT-LTU v. Honda Cars India Ltd. in (ITA No. 480/2017, dt. 2-8-2017)
FAVOUR : In assessee's favour
A.Y. :
INCOME TAX ACT, 1961
Section 14A
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