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2021 (2) TMI 847 - AT - Income TaxNature of expenditure - revenue or capital expenditure - amount paid by it to ITC Ltd. at the time of termination of the agreement with ITC Ltd. - second round of litigation before the Tribunal - HELD THAT:- We find merit in the arguments advanced by the ld. Counsel that when there was no addition to the capital asset and no change in the capital structure and there was no asset of any enduring nature involved, but, only an alteration in the mode of earning the money from the hotel, therefore, such compensation paid had arisen out of business necessity and should be allowed as revenue in nature. The assessee, in our opinion, in the instant case, has acquired nothing new of enduring nature as it always held the asset of enduring nature. It was not a case where the assessee was acquiring for the first time something which it did not otherwise own or possess. It was, thus, a change in the method of earning profits from the hotel and not a transfer of any asset. We find merit in the argument of the ld. Counsel that the agreement was terminated on business considerations and as a matter of commercial expediency. The various other decisions relied upon by the ld. Counsel in his synopsis also support his case to the proposition that the payment made to ITC Ltd. is allowable as revenue expenditure u/s 37 of the IT Act. The answer to the question referred to by the Hon’ble High Court to the Tribunal is accordingly answered in the affirmative, i.e., in favour of the assessee.
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