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2014 (12) TMI 1107 - AT - Income TaxDisallowance on trade mark fee deleted – Revenue expenses or not - Right to use the trade mark acquired by the assessee was an intangible asset as defined u/s 32 or not - Held that:- CIT(A) rightly deleted the disallowance of ₹ 55,70,045/- on account of trade mark fee by holding that it was a revenue expenditure and without considering that “right to use the trade mark” acquired by the assessee was an intangible asset as defined u/s. 32 - following the decision in THE COMMISSIONER OF INCOME TAX-IV NEW DELHI Versus G4S SECURITIES SYSTEM (INDIA) PVT. LTD. [2011 (7) TMI 65 - DELHI HIGH COURT] - under the terms of the agreement, the ownership rights of the trade mark and knowhow throughout vested with G4F and on the expiration or termination of the agreement the assessee was to return all G4F knowhow obtained by it under the agreement - The payment of royalty was also to be on year to year basis on the net sales of the assessee and at no point of time the assessee was entitled to become the exclusive owner of the technical knowhow and the trade mark - hence, the expenditure incurred by the assessee as royalty is revenue expenditure and is therefore, relatable u/s 37(1) – Decided against revenue. Disallowance of license fee deleted – Revenue expenses or not - assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 or not – Held that:- CIT(A) rightly deleted the disallowance of license fee by holding it as revenue expenditure and without considering that the assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 – Following the decision in COMMISSIONER OF INCOME TAX Versus M/s ASAHI INDIA SAFETY GLASS LTD. [2011 (11) TMI 2 - DELHI HIGH COURT] - it cannot be said that the expenses brought about in an enduring benefit to the assessee - the mere fact that the assessing officer records that the expenditure, in financial year 1997-98 (assessment year 1998-99), was incurred towards what he terms as an “on-going project” would not ipso facto give it a colour of capital expenditure - after noticing the submission of the assessee that the expenditure incurred in the AY was for removing deficiencies which were found in the software installed in the earlier assessment year, and that, out of a sum of ₹ 1.71 crores a sum of ₹ 49 lacs was incurred to modify, customize and upgrade the software installed, while the balance expenditure was used for development and implementation – it returned a finding that the expenses were incurred to upgrade and run the system – thus, the order of the CIT(A) is upheld – Decided against revenue.
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