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2018 (7) TMI 63 - AT - Income TaxDisallowance of trademark and license fee - Allowable revenue expenditure - capital expenditure or revenue expenditure - Held that:- One-time consolidated amount paid can be considered as a payment for use of the trademark in the business of assessee. Since it has an enduring benefit and is applicable till assessee ceases to be a subsidiary of GRM Holding/GMR Group, we are of the opinion that this amount is to be treated as ‘capital asset’ and depreciation on that u/s. 32(1)(ii) is allowable. It is admitted that without acquiring the aforementioned trademark and license, assessee would have had to commence business from scratch and through the gestation period and by acquiring aforesaid business rights/ license, assessee could incidentally boost its revenues. Onetime consolidated payment is in the nature of ‘intangible asset’ as specified in Section 32(1)(ii) and are accordingly eligible for depreciation on the cost at which they are acquired. Thus, the amount of ₹ 3,37,50,000/- is to be considered as capital asset u/s. 32(1)(ii) and necessary depreciation is to be allowed. There is no dispute with reference to commercial expediency or with reference to being capital in nature. AO and CIT(A) disallowed the entire amount as capital expenditure, but they failed to consider whether the said amount is eligible for depreciation u/s. 32(1)(ii). AO to allow depreciation on the amount of ₹ 3,37,50,000/- treating it as capital asset and allow the balance amount of ₹ 35,90,480/- paid towards annual recurring license fee as revenue expenditure, in tune with the amounts allowed in later years. Assessee’s grounds are accordingly considered allowed partly.
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