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2016 (6) TMI 685 - AT - Income TaxAllowability of franchise expenses - Held that:- As decided in the assessee’s own case for AY 2007-08, it has been held that these franchise expenses is held to be revenue in nature. Revenue did not cite any other decision contrary to the above or did not point out any change in the facts and circumstances of the case. In view of this respectfully following the order of coordinate bench in assessee’s own case we hold that franchise fees debited under the head “Market Development Expenses” is a revenue expenditure in nature. - Decided in favour of assessee. Disallowance of market development expenses - revenue v/s capital - depreciation claim - Held that:- For the purposes of determining whether the expenditure incurred on services is capital expenditure or revenue one needs to look at the nature of services received by the assessee and not the other terms and conditions attached therein. Further looking to the tenure of the contract, right of termination with the parties and conditions attached on termination of the contract , it does not suggest in any manner that assessee has acquired any benefit which is of enduing nature except the services. We do not find any support on reading of that definition that market support services and customer support services creates any right in favour of the assessee. Further, in assessee’s own case for AY 2003-04 as well as in AY 2005-06 and AY 2006-07 the similar expenditure are allowed as deduction. To prove this ld AR submitted that copies of the Assessment orders passed u/s 143(3) of the Act where no such disallowance have been made. These facts are not controverted by revenue. Though the provisions of res judicata does not apply to income tax proceedings, however, rule of consistency provides that unless there is change in facts and circumstances of the case there has to be consistency in approach of the revenue as well as assessee. Hon’ble Supreme Court in case of Excel Industries Vs. CIT [2013 (10) TMI 324 - SUPREME COURT] has once again reiterated the above principles, therefore even on that principal the disallowance of market development expenditure of customer relation management services cannot survive. In view of above we reverse the finding of the ld CIT(A) confirming disallowance holding that payment made for services rendered by CRMI are capital expenditure.However, the depreciation allowance granted by the lower authorities on franchise fees and market development expenditure considering them as intangible asset is directed to be withdrawn.- Decided in favour of assessee.
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