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2014 (11) TMI 263 - ITAT DELHITreatment of service income earned – Income from other sources or business income – Held that:-The issue has already been decided in assessee’s own case for the earlier assessment year, decided in ITO, Ward 18 (4), New Delhi Versus Yum! Restaurants (India) Private Ltd. [2014 (4) TMI 532 - ITAT DELHI] - the word “business” is one of wide import and which means an activity carried out continuously and systematically by a person by the application of his labour and skill with a view to earn income - the assessee is receiving the income from parent company i.e. YRI and not making payment to it – the AO miserably failed to appreciate the facts and circumstance - The assessee has been offering income from consultancy etc. as a business income - It has duly been accepted by the department since 1998-99 - The AO without assigning any valid reason concluded that it is an income from other sources – the First Authority has considered this issue in right perspective – Decided in favour of assessee. Royalty expenses disallowed - Whether there was any technology transfer to the appellant under the Technology License Agreement with YRAPL – Held that:- The issue has already been decided in assessee’s own case for the earlier assessment year, decided in ITO, Ward 18 (4), New Delhi Versus Yum! Restaurants (India) Private Ltd. [2014 (4) TMI 532 - ITAT DELHI] - The AO has misread the approvals granted by the Govt. of India while arriving at a conclusion that assessee has not been remitting the payment as per the approvals - In the approval SIA has used expression “royalty as well as fee for technical services” loosely and interchangeably - Apart from all these things, the tax rate for remitting a royalty as well as fee for technical service is 15% plus the research and development cess - The assessee has paid both these amounts while remitting the payment - The expense is directly related to its business - It has been incurred wholly and exclusively for running the franchises within India – Decided in favour of assessee. Hypothetical disallowance of the administrative expenses – Held that:- The issue has already been decided in assessee’s own case for the earlier assessment year, decided in ITO, Ward 18 (4), New Delhi Versus Yum! Restaurants (India) Private Ltd. [2014 (4) TMI 532 - ITAT DELHI] - The CIT(A) deleted the disallowance - YRMPL was incorporated on 8th June, 1999 - It is a 100% owned subsidiary of the assessee - It has been incorporated to carry out advertisement, marketing and promotion activities of the assessee as well as various franchise - The assessee had entered into a tripartite agreement with its franchise and YRMPL - As per this agreement, the franchise shall pay AMP contribution to YRMPL and assessee may not pay a separate contribution - YRMPL was to carry out the activities on no profit no loss basis - The AO has disallowed the expenses which are attributable to YRMPL but in fact, he ought to have not disallowed any such amount because ultimately it is the assessee who has to contribute for all these sums - The assessee can bear the cost of administrative expenses to be incurred by YRMPL or it can separately remitted the amount to YRMPL towards such cost - it is the assessee or its franchise who has to contribute this amount - Decided in favour of assessee. Lease rent disallowed - Rent free accommodation obtained for its managing director – Held that:- The issue has already been decided in assessee’s own case for the earlier assessment year, decided in ITO, Ward 18 (4), New Delhi Versus Yum! Restaurants (India) Private Ltd. [2014 (4) TMI 532 - ITAT DELHI] - These disallowances have been made by invoking the provisions of section 40A(2)(b) of the Act is on account of excessive rental paid to the related parties - The payment has been made to the persons who are covered by section 40A(2)(b) of the Act - In the case of M/s. Mezbaan Hoteliers Pvt. Ltd., it is well established that payments had been made in excess for which such goods and services were available - the assessee company has extended extra peculiar benefits to its Managing Director who is covered by the provisions of section 40A(2)(b) of the Act – thus, the order of the CIT(A) is upheld – Decided against assessee. Tax depreciation disallowed - Actual physical possession of the fixed assets relevant or not for the claim of tax depreciation - Fixed assets sold in past years relating to the Delhi restaurant outlets - Held that:- The issue has already been decided in assessee’s own case for the earlier assessment year, decided in ITO, Ward 18 (4), New Delhi Versus Yum! Restaurants (India) Private Ltd. [2014 (4) TMI 532 - ITAT DELHI] - The AO has highlighted certain discrepancies in the maintenance of WDV of the assets as well as identification of each asset - There may be some shortcomings but that does not mean that assessee was not having any assets and they were not used for the purpose of business - AO ought to have identified each item and find out how that item is treated in the block of assets, if it is established that those assets were not used for the purpose of the assessee’s business then he should make out a care for disallowance of depreciation - By making general observation, he cannot deny the total claim of the depreciation of the assessee - CIT(A) has already directed the AO to give effect outcome of 1999-2000 - The depreciation disallowed in asstt. year 1999- 2000 would be considered for disallowance in this year also – Decided in favour of assessee. Software expenses disallowed - Capital expenses or Revenue – Held that:- The issue has already been decided in assessee’s own case for the earlier assessment year, decided in ITO, Ward 18 (4), New Delhi Versus Yum! Restaurants (India) Private Ltd. [2014 (4) TMI 532 - ITAT DELHI] – The AO has allowed annual maintenance charges as revenue expenditure and the expenditure on MIS Project and payment for cheque printing facility has been taken as capital in nature - This nature of expenditure has to be ascertained whether it has been made on the new acquisition of software or on the upgradation of the software – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee.
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