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2020 (9) TMI 1190 - AT - Income TaxNature of expenditure - Expenditure on payment of franchisee fees - assessee company has acquired the rights for the sale of products belonging to the specific brands - revenue or capital expenditure - HELD THAT:- In this case, the assessee entered into various Agreements with various parties as discussed earlier which is the payment of franchisee fees - The above payments based on certain percentage of sales by the assessee. The parties with whom the assessee has entered into Agreement has not transferred any business or commercial rights with enduring benefits to the assessee. The assessee cannot be said to have any enduring benefit by entering into these agreements. These are in the nature of day to day operations of the assessee's business. Being so, the CIT(Appeals) justified in allowing the expenditure as revenue expenditure. This position is fortified with the decision in the case of Jonas Woodhead & Sons Ltd. Vs.CIT [1978 (11) TMI 44 - MADRAS HIGH COURT]. Hon'ble Madras High Court in the case of CIT Vs. TVS Ltd [1976 (11) TMI 40 - MADRAS HIGH COURT] held that when the payment made by the assessee to a company was in the nature of license fees which constitute an item of allowable expenditure in the computation of profit and gains and it cannot be a capital expenditure. In our opinion, the findings and reasons given by the CIT(Appeals) to allow the claim of the expenses in regard to franchisee on the Agreement entered by the assessee is a revenue expenditure and it cannot be construed as a capital expenditure. Hence the appeal of revenue is dismissed.
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