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2015 (9) TMI 1186 - HC - Income TaxPrint distribution and the subsequent compensation paid due to the loss incurred by the theater owners in exhibiting the films "Kuselan" and "Kathanayakudu" by the assessee/appellant - revenue v/s capital expenditure - whether the payment made by the assessee to PSEL, by way of compensation as goodwill gesture to maintain its goodwill, should be treated as revenue or capital in nature? - Held that:- The Tribunal holds that payments made by the assessee is to protect its goodwill in the market and even if the payment is believed to be genuine, even then the same has to be held to be capital in nature and, therefore, cannot be allowed under Section 37 of the Act. However, on the other hand, the Tribunal holds that the assessee had made the payment in the form of compensation to stay afloat in the business. This would satisfy the contention of the assessee that the payment was made for the purpose of staying afloat in the business, made voluntarily and it is a commercial expediency. This finding of the Tribunal, on the face of it, appears to be in support of the assessee that because of commercial expediency, to stay afloat in business, the said amount was paid. The above findings of the Tribunal clearly depicts the dual stand taken by the Tribunal in its order and a paradox. The Tribunal has taken divergent views, one by holding that the expenditure is capital in nature, supporting the department and, on the other hand, has reasoned that it is compensation paid to stay afloat in business, meaning thereby commercial expediency. In any event, the assessee has, under the agreement, shown the reason for payment in question and we have extracted the said reason in the earlier part of the order. However, the said aspect has not been discussed by the Tribunal. It is an issue on fact on which the Tribunal ought to have given its finding as to whether the agreement and the payment justified the plea of commercial expediency to stay afloat in the business. The finding of the Tribunal ought not to be mutually destructive, one that supports the view of the Department and the other leaning on the view of the assessee. We, therefore, hold that on facts the Tribunal should be called upon to address the issue as to whether the payment made by the assessee, as goodwill, is capital in nature or is it a payment made for the purpose of staying afloat in business as a measure of commercial expediency. This Court is of the considered opinion that the Tribunal has to record its finding on these questions of fact and, therefore, the matter should be remanded to the Tribunal. Thus without going into the questions of law raised, this appeal is disposed of and the matter is remanded to the Tribunal for fresh consideration in the light of the discussion as above. - Decided in favour of assessee for statistical purposes.
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