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2014 (9) TMI 624 - AT - Income TaxRoyalty paid treated as capital expenses - Held that:- The amounts were kept by the assessee for use of trademark and knowhow for certain period that too under strict terms and conditions and not for setting up any factory - after the termination of agreement in both the cases, the use of knowhow or trademark was not available to the assessee – the assessee company did not obtain any proprietary or ownership right of trademark or knowhow, no asset was created or acquired - there was no enduring benefit to the assessee and there was no element of capital expenditure in the payment of royalty - The royalty paid to BDF or Dr. Wild & Co. was not for any outright or acquisition of knowhow or trademark or any other asset but was for the use only for a specified period that too under various restrictive covenants - The payment made by the assessee to the Hungarian company on the basis of the collaboration agreements was a capital expenditure incurred by it - the drawings/designs etc. were actually “plant” as defined u/s 43(3) of the Act and would therefore, be a depreciable asset - it is not an admitted fact that the expenditure incurred by the assessee was of a capital nature. – Decided in favour of assessee.
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