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2015 (7) TMI 1374 - ITAT AHMEDABADDisallowance u/s 40(a)(ia) - payment of operation and management charges AND reimbursement of expenses - CIT-A not applying the provisions of Section 40(a)(ia) of the Act in view of his findings that the above referred payments were Revenue in nature, being fees or rent paid for uses of infrastructural facilities and Brand - HELD THAT:- As a look at the agreement between the assessee and the Adarsh Foundation Trust clearly reveals, the payment of 40% of profits each year - whichever is less, is paid by the assessee for grant of operation and management rights under clause 4.1 of the agreement. This is not for acquiring a brand but for use of a brand. The benefit is clearly in the revenue field since the benefit of this payment is on year to year basis and does not result in any enduring or lasting benefit beyond the relevant assessment year - CIT(A) was thus quite justified in holding that the expenses are revenue expenses in nature as these expenses are incurred to earn profits for the year. As regards the Assessing Officer’s grievance that the CIT(A) ought to have disallowed the amount under section 40(a)(ia), it was never the case of the Assessing Officer. In any event, in view of the fact that second proviso to Section 40(a)(ia) has been held to be retrospective in effect, in the case of decision of Rajeev Kumar Agarwal [2014 (6) TMI 79 - ITAT AGRA] It is an undisputed position that the Adarsh Foundation has duly accounted for these payments in computation of its taxable income, section 40(a)(ia) does not come into play on the facts of this case. DR has not pointed out any infirmity in the same. In view of these discussions, and bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. - Decided against revenue.
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