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2015 (7) TMI 285 - AT - Income TaxDisallowance of ‘Royalty’ paid to Nike to use the brand name - CIT(A) deleted the addition - Held that:- CIT(A) has rightly observed that it is settled law that if expenditure brings into existence a capital asset or gives any advantage of enduring nature to an assessee, it can be treated as capital expenditure as relying on CIT-XIII, New Delhi Vs Sierra Industrial Enterprises [2010 (7) TMI 70 - DELHI HIGH COURT] i.e, assessee's predecessor in business from whom such license was acquired upon the merger of the company with the assessee. - Decided in favour of assessee. Addition being interest payment u/s. 40A(2)(b) - CIT(A) deleted the addition - Held that:- CIT(A) took in to consideration the fact that similar disallowance of the interest which the assessee paid @15% where in respect of the very same persons were also made in the preceding assessment year 2007-08 for the same reason that such persons are paid interest @ 15% whereas in the opinion of the AO interest payment ought to have been @ 12%. Ld. CIT(A) while deciding in favour of assessee took note of the fact that that the said persons were not the only parties to whom interest @ 15% were paid by the assessee and therefore it cannot be said that the assessee in any manner tried to pass on benefit to a class of close associates as its cost and deleted the disallowance.CIT(A) has observed that in order to make a disallowance u/s 40A(2)(b) it is necessary that the Assessing Officer should establish that the benefits given to the related parties are more than the fair market value and if the assessee is making payments to other persons @ 15% then there is no special favour which is being given to the related parties and then disallowance is not warranted. Further, the ld CIT(A) has taken note that the Assessing Officer has not been able to establish as to what was the market rate of interest thus, he opines that there is no justification in making a disallowance of ₹ 4,64,757/- u/s 40A(2)(b) and ordered it’s deletion. - Decided against revenue. Addition on account of advertisement and promotion expenses - CIT(A) deleted the addition - Held that:- CIT(A) rightly relied on the decision of case of Adidas (2009 (9) TMI 918 - DELHI HIGH COURT) wherein AO disallowed the advertisement expenses by holding that by advertising is promoting/building the Brand of the Licensor and thus it is not wholly and exclusively for the benefit of the assessee. The Tribunal deleted the disallowance by holding that it was a commercially accepted practice and incurred on grounds of commercial expediency.to arrive at the impugned decision, which needs no interference, so the decision of the Ld CIT(A) deleting the ad-hoc disallowance is upheld - Decided against revenue. Addition on account of foreign travel expenses - CIT(A) deleted the addition - Held that:- AO has made the ad-hoc disallowance simply by stating that there may be personal element involved in the said expenditure which is purely a guess work, when the assessee has submitted the list of employees and the purpose of visit was clearly mentioned in it. In such circumstances the AO could not have made the adhoc disallowance without making out a case to disprove the claim of the assessee that it’s employees had gone to foreign country for the purpose of business. Therefore we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the same - Decided against revenue.
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