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2016 (7) TMI 1694 - AT - Income TaxNature of expenses - Royalty payment - capital or revenue expenditure - AO treated it as a capital expenditure - A.R. submitted that the assessee has been incurring royalty expenditure every year, by virtue of license agreement entered into between the assessee and company in Germany - HELD THAT:- On perusal of the order passed by this Tribunal for Assessment Year 2004-05 we observe that the co-ordinate bench of this Tribunal has analyzed the agreement and the nature of the amount paid by the assessee pursuant to the agreement. It has also been observed therein that the royalty payment is a running expenditure incurred by the assessee every year. D.R. / Ld. A.O. has not been able to bring out contrary facts, we are in agreement with the submissions of the learned counsel for relating to disallowance of royalty amount is covered in favour of the assessee by the order of the Coordinate Bench of the Tribunal rendered in assessee's own case as followed the decision of Sarda Motor Industrial Ltd [2009 (9) TMI 159 - DELHI HIGH COURT] held assessee has not obtained any benefit of enduring nature. The royalty is payable on the basis of volume of sales year to year. In the event of termination of agreement has to discontinue uses of material provided return everything in this respect. Hence it cannot be said that any benefit of enduring nature accrued to the assessee - DR only contended that the agreement also provided training to the assessee's employees, which cannot be returned in any case. We do not find any cogency in this aspect of this agreement as training expense of employee cannot be treated as capital expenditure. - Decided against revenue.
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