TMI Blog2012 (11) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... ere distinct entities dealing at arm's length and it certainly could not be urged that the payment was made for any consideration other than business & held in favour of the assessee that the payment of royalty in question was a revenue expenditure - appeal decided in favour of assessee. - I.T.A. No.1522/Ahd/2012 - - - Dated:- 12-10-2012 - Shri D.K. Tyagi, And Shri Anil Chaturvedi, JJ. Department by : Shri D.K.Singh, Sr. D.R. Assessee by : Shri Kalpen P. Shah ORDER PER : D.K. TYAGI, JUDICIAL MEMBER This is Revenue s appeal against the order of ld. CIT(A)-XIV, Ahmedabad dated 13.04.2012. 2. The only effective ground in this appeal is as under:- The Ld. CIT(A)-XIV, Ahmedabad has erred in law and on facts in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) CIT V/s.AshokaMillsLtd.-218 ITR 526 (Guj) (v) CIT V/s. Gujart Carbon Ltd. - 254 ITR 294 (Guj) It is most relevant to mention here that all the above decisions of different Courts relied upon by Hon'ble ITAT are pertaining to the period prior to 01/04/1998. With effect from 01/04/1998 "Franchise" has specifically been incorporated within the specific provision of section 32(1) (ii) of the I. T. Act as intangible asset. Thus, it is amply clear that the payment of franchise fees by the assessee during the asst. year 2009-10 is falling out of the ambit of all the above decisions of different Courts relied upon by Hon'ble ITAT. It is also relevant to mention here that the order of Hon'ble ITAT in the case of the assessee for the asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment or it is linked with turnover does not change the nature of expenditure. In view of the above, the explanation of the assessee is not acceptable because the expenditure towards obtaining Franchisee (intangible asset) which has been shown by the assessee as recurring royalty/fees is held as capital expenditure within the ambit of provisions of section 32(1) (ii) of the Act. Thus, the assessee plea to consider the same u/s. 37(1) is rejected. Thus, the franchise expenditure of Rs.6405460/- is disallowed and added to the total income of the assessee. Since the recurring royalty/fee (Franchise fee) has been held as capital expenditure, the assessee is eligible for claim of depreciation @ 25% on the said asset i.e. recurring royalty/f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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