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2024 (1) TMI 699 - HC - Income TaxNature of expenses - royalty paid by the assessee towards the use of logo - revenue or capital expenditure - Whether royalty is to be treated as intangible asset of capital nature and consequently the royalty payment is a capital expenditure? - HELD THAT:- As decided by a common judgment dated 30.06.2022 passed by this court in T.C.A.No.755 of 2009 etc. batch in respect of the assessee's own case [2022 (6) TMI 1428 - MADRAS HIGH COURT]. Every expenditure incurred to acquire some right over intangible asset, cannot be ipso facto termed as capital expenditure. The nature of the assets, right, information or technical know-how that is transferred, must be such that without which the transferee could never commence the business. As rightly contented by the learned senior counsel appearing for the assessees, the benefit granted by the licensor is not enduring in nature in the present cases. AO without appreciating the terms of the licence agreement and ascertaining the nature of the expenditure incurred by the assessee companies, disallowed the deduction of royalty payment and allowed the depreciation at 25% treating it as capital expenditure. Appellate authorities, while deleting the disallowances made by the assessing officer, have rightly treated the royalty payment as revenue expenditure. Once the payment of royalty is treated as revenue expenditure, automatically, it goes without saying that the assessees would be entitled to 100% deduction. Therefore, we need not interfere with the orders passed by appellate authorities. Decided in favour of assessee. Expenditure incurred on Employee Stock Option Scheme - Whether allowable as revenue expenditure? - HELD THAT:- The issue involved herein is squarely covered by the decision of this court in CIT v. PVP Ventures Ltd. [2012 (7) TMI 696 - MADRAS HIGH COURT] which was followed by the Tribunal while passing the orders impugned herein. In the said decision, this court held the order of the Tribunal allowing the deduction of ESOP expenditure, as an ascertained expenditure. Tribunal was correct in holding that the ESOP expenditure is revenue in nature and the assessee is entitled for deduction. Accordingly, the orders passed by the Tribunal in deleting the disallowances of ESOP expenses by the assessing officer, do not require any interference. No substantial questions of law arises.
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