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2014 (10) TMI 657 - AT - Income TaxIncome from royalty from M/s. DP Lanka Pvt. Ltd. – Accrual of income - Whether the assignment of accrual of royalty from the Sri Lankan subsidiary namely M/s. DPLPL results into non-taxability of the royalty income in the hands of the assessee company - Held that:- Following the decision in Provat Kumar Mitter. Vs. CIT [1960 (12) TMI 8 - SUPREME Court] - fundamental principle is that an application of income is an allocation of one's own income after it accrues or has arises, although such application may be under a contract or obligation, whereas diversion of income is that which diverts away or deflects before it accrues to or reaches the assessee and it is received by him only for the benefit of the person who is entitled to the income under an overriding charge or little - there is accrual of income to the appellant - The assignment of the income by the appellant cannot waive the liability under the Act - The accrual of the royalty would take place as soon as Pizza is sold by M/s. DPLPL in Sri Lanka - The accrual of royalty is not dependent upon the repayment of loan by the Sri Lankan company to the Ceylon Bank - The assessee's liability to pay to the Sri Lankan/ Ceylon Bank arises because the assessee stood as a corporate guarantor for the loan from the Sri Lankan / Ceylon Bank to the Sri Lankan entity - The utilization of the royalty money by the Sri Lankan entity to the Ceylon Bank will not affect the accrual of royalty to the assessee - The subsequent payment thereof of Sri Lankan Bank is only the application of that accrued royalty for and on behalf of the assessee – thus, the addition made by the CIT(A) is upheld – Decided against assessee. Expenses on sundry balance written off – assessee was not able to provide the details of the sale to which the amount relates – expenses on meeting the accident expenses of the employee – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been decided in DCIT, Circle 4(1), New Delhi Versus Jubilant Foodworks Pvt. Ltd. [2014 (8) TMI 458 - ITAT DELHI] - The AO has not examined whether the debt has been written off in accounts of the assessee - When bad debt occurs, the bad debt account is debited and the customer’s account is credited, thus, closing the account of the customer - In the case of Companies, the provision is deducted from Sundry Debtors - Following the decision in TRF. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] - no appeal was filed by the revenue against the deletion – Decided in favour of assessee. Classification of expenses - Capital or revenue - Franchisee fee disallowed – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been decided in DCIT, Circle 4(1), New Delhi Versus Jubilant Foodworks Pvt. Ltd. [2014 (8) TMI 458 - ITAT DELHI] - CIT(A) has considered each and every aspect of the matter before arriving at the conclusion as drawn by him - the assessee had acquired only access to the technical information and there was no transfer of ownership with respect to the process and the know-how under the agreement in favour of the assessee - the payment could only be categorized as one made on revenue account - the assessee had acquired right only to use/only access to the technical information and there was neither transfer of ownership with respect to the process and the know-how nor of the brand or the trade mark in question under the agreement in favour of the assessee - Therefore, this payment is in the nature and character of revenue expenditure and not capital – Decided against revenue. Depreciation on computer peripherals @ 60% - Held that:- CIT(A) has deleted the addition following the orders of the Hon'ble High Court in COMMISSIONER OF INCOME TAX Versus BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. [2010 (8) TMI 58 - DELHI HIGH COURT] - The only contention of the Revenue is that it has preferred on SLP against the order of the HC so – revenue could not bring to our notice any interim order of stay by the Hon'ble Supreme Court in respect to the operation of the order of the Hon'ble High Court relied by the CIT(A) granting relief to the assessee - In the absence of the same, Tribunal is bound by the binding precedent laid down by the Hon'ble Jurisdictional High Court - CIT(A) has rightly relied upon the order of the Hon'ble High Court in BSES Yamuna Power Ltd and there was no infirmity in the order of the CIT(A) – Decided against revenue.
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