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2010 (7) TMI 70 - HC - Income TaxRevenue expenditure versus capital expenditure – nature of payment of royalty - the assessee had obtained a licence from Nike company for sourcing, marketing and sale of footwear and apparel of Nike brand in India. In accordance with the licence agreement, which had been approved by RBI, royalty @ 5% of domestic sale was paid for use of trademark Nike – Held that: - It is settled law that if expenditure brings into existence a capital asset or gives any advantage of enduring nature to an assessee, it can be treated as capital expenditure. - both the CIT(A) and ITAT have concluded that royalty payable was related to the sales made during a particular year and accordingly the expenditure was of revenue nature. - as the assessee ceased to have any right to use technical information and/or trademark upon termination of agreement, there was no advantage of enduring nature derived by the assessee from the said agreement - royalty fee is a revenue and not a capital expenditure.
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