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TMI Blog2013 (5) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The Ld.CIT(A) has erred on the facts and circumstances of the case and in law in holding that royalty payment had no linkage with the spreading over of income received from fees on enrolment of the students though as per the agreement, 20% of the gross course fees was required to be paid as royalty. 3. The appellant craves leave to add, alter or amend any ground of appeal raised above, at the time of hearing." 3. Mr.Sukhveer Choudhary, the Ld.Sr.D.R. supported the order of the AO whereas Shri CS Aggarwal, Sr.Advocate supported the order of the First Appellate Authority. After hearing rival contentions we hold as follows. 4. On the first issue i.e. addition on account of royalty of unaccounted receipts, the facts are as follows. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee for other expenses. c) The claim of royalty expenses as shown by the assessee disclosed distorted presentation of profits. d) Royalty expenses are direct charge on the gross course fees and it does not stand to reason that it should be fully accounted for when the fee itself is being deferred to the subsequent year. 6. Aggrieved the assessee carried the matter in appeal. 7. The First Appellate Authority considered the Clauses in the License agreement and thereafter applied the decision of the Hon'ble Delhi High Court in the case of CIT vs. City Consumer Financial Services and upheld the claim of the assessee. 8. Aggrieved the Revenue is in appeal before us. 9. Article V of the License agreement reads as follows. 'ARTICLE 5: C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from the students enrolled for a two year programme and the same was not offered as income during the year on the ground that it is an advance and the income accrues only in the second year of the programme was not justified. The royalty payment is linked with the enrollment of the students and fee chargeable on such enrollment. It is not linked with the income offered in the profit and loss account. The appellant is following an accounting principle on the basis of which, the fees received for second year from the students enrolled for two year programme was carried forward to the next year along with element of expenses involved in the administration of the second year programme which are set off against the corresponding income ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above said Tribunal decision is not applicable. 30.1. Now in this case, we find that the expenditure has actually been incurred ;by the assessee in the impugned financial years. The commission become due and payable to the agents as soon as the business is procured by them. Under no circumstances, the amount is liable to be returned to the assessee. It is also evident from the documents regarding Assessing Officer's enquiry and assessee's response that Assessing Officer has duly examined the aspect and found that in the current period the amount paid as commission is not at all linked with the loan disbursement during the year. It is also evident that amount paid as commission in a particular year can in not way be claimed as refund by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid judgement was that the expenditure is to be allowed in the year in which it was incurred. Only at the instance of the assessee who wanted to spread over, the court had agreed to allow the assessee the benefit to the company over the entire period. The ratio of this judgement was thus summarized in the following manner:- "What follows from the above is that normally the ordinary rule is to be applied namely, revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the appellant claims that expenditure in that year, the IT department cannot deny the same. However, in those cases where the appellant himself wants to spread the expenditure over a period of ensuring years, it can be allowed only if the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the expense towards stamping as well as commission paid to the agents is debited in whole in the year in which it is incurred and could not be treated as advertisement expense. Para 16: The Commissioner of Income Tax (Appeals) was unimpressed with this argument and found that the assessee was spreading over the income during the number of years that the financing is spread over and, therefore, expenditure on the aforesaid counts was required to be spread over. The ITAT, however, denounced this reasoning of the Commissioner of Income Tax (Appeals) and accepted the plea that the expenditure incurred had nothing to do with the period of length of time and had no linkage, whatsoever, to any period, the entire expenditure was allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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