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2015 (9) TMI 663 - DELHI HIGH COURTUse of drawings, procedure and trademark of MPL - whether was going to bring an advantage of an enduring nature to the Assessee, therefore, capitalized as royalty paid by the Assessee to MPL also confirmed by CIT(A)? - ITAT was of the view that the CIT(A) was not justified in enhancing the addition made by the AO by capitalising the royalty - Held that:- There was sufficient opportunity for the AO, if he doubted the genuineness of the payment of royalty by the Assessee to MPL, to have conducted a detailed inquiry. The Assessee on its part furnished the agreement between itself and MPL under which it was inter alia permitted to use the trademark 'Macnaught' on its products. The royalty was payable per unit of the product and, therefore, was clearly linked to sales. There was also no doubt that such payment was in fact made by the Assessee to MPL. It is also not in doubt that MPL was not related to the Assessee in any manner. In the circumstances, there should have been some reasonable basis for the CIT(A) to simply conclude that this was a sham transaction and proceed to enhance the disallowance. The interpretation of the agreement by the ITAT appears to be plausible. The Court is not persuaded to hold that the impugned order of the ITAT is perverse. - Decided in favour of assessee.
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