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2014 (5) TMI 1042 - AT - Income TaxNature of payment made to M/s. Pyramid Saimira Entertainment Ltd. - goodwill v/s goodwill gesture - Revenue v/s capital - Held that:- The assessee has not been able to show as to who authorised M/s. Pyramid Saimira Entertainment Ltd., to receive payment from the assessee to be disbursed to the exhibitors who have actually suffered the loss. There is nothing on record to show whether the payments have been actually received by the persons who have suffered losses. Therefore, from the records, we find that M/s. Pyramid Saimira Entertainment Ltd., has no locus standi. The assessee made the said payments to protect its goodwill in the market. The assessee has to operate and do business in the market in future as well, the assessee had to maintain its goodwill. The assessee has not been able to show from the agreements dated February 16, 2008 or supplementary agreement dated July 28, 2008 that the said payment is made in accordance with the covenants of agreement. A perusal of records, as well as the assessee's own admission make it absolutely clear that the payment was not made to discharge any legal liability. The payment was made either voluntarily or out of pressure from the market forces but it was certainly not out of business obligation. The assessee made the payment in the form of compensation to stay afloat in the business The assessee has not been able to show that the payments were actually received by the persons who suffered losses. This casts a shadow over the genuineness of the payment. Even if the payment is believed to be genuine, the same is held to be capital in nature and thus cannot be allowed under section 37 of the Act. - Decided against assessee.
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