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TMI Blog2015 (9) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... RCS Fee, Rs. 27,19,446/- Prasar Bharati Fee and Rs. 15,27,756/- Broadcast Fee) to the Govt. of India, Department of Telecommunication (Prasar Bharati etc.) and a royalty of Rs. 1,08,000/- in consideration for grant of licence to operate and provide the services. The assessee claims it to be revenue expenses. 3. The Assessing Officer held that the expenditure on account of licence fee and Royalty is held to be capital expenditure incurred for acquisition of intangible asset in form of licence which is for the tenure of 10 to 20 yrs. And gives enduring benefit to the assessee. After allowing 25% of the depreciation whch comes to Rs. 12,41,742/- (25% of Rs. 49,66,967/-) the remaining amount of Rs. 37,25,225/- was added to the income of the assessee by the Assessing Officer. 4. The CIT(A) held that the RCS license fee is in the nature of a nonexclusive and a non-transferable right to use scheduling and broadcast software. Through this agreement, the assessee could get only the limited right to use the software of RCS for the purpose of scheduling the assessee company's content on its FM Station. Thus, the nature of such license was no difference than the license any user gets for us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the net sales of the assessee and at no point of time the assessee was entitled to become the exclusive owner of technical knowhow and the trademark. Hence, the expenditure incurred by the assessee as royalty is revenue expenditure and is therefore, relatable under Section 37 (1) of the Act....." The AR further submitted that the CIT(A) has taken correct view and the appeal of the Revenue be dismissed. 8. We have gone through all the records and perused the arguments of both the counsels. The ratio laid down in case of G4S Securities India Pvt. Ltd. is clearly applicable in the present case. In the case of Empire Jute Co. Ltd. v. CIT, (1980) 124 ITR 1, the Supreme Court observed that there may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, nonetheless, be on revenue account and the cost of enduring benefit may break down. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for frequency allocation and FM broadcasting and as per Section 196 of the Act, TDS was not required to be made on interest or dividend or other sums payable to Government of India. 14. After going through the records and arguments of both the counsels, first we have to look into the aspect of Section 40(a)(ia) of the Act: "Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head 'profits and gains of business or profession" - (a) In the case of any assessee (i) ----------------- (ia) any interest, commission or brokerage, rent, royalty fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid, on or before the due date specified in sub-section (1) of section 139: Provided ........................................................... Provided further .......... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 98,85,454/-). In addition to this the assessee has to pay the actual cost incurred by M/s AMSIPL ., for conducting the operation on behalf of assessee. This agreement with M/s AMSIPL has resulted into Sundry Creditor of Rs. 5,41,27,375/- (Payable to M/s AMSIPL). The unique feature of the agreement was that M/s AMSIPL is sole responsible for generating the revenue like bringing the advertisement to the assessee, convincing customers etc. on behalf of assessee and for that M/s AMSIPL is charging from the assessee. Since M/s AMSIPL is not able to generate the revenue for the assessee, he is not claiming/forcing the assessee to pay the outstanding debt. In the light of these facts the assessee was asked to submit the year wise break up of outstanding liability. The details submitted by the assessee shows that the liability before 1/4/2004 payable to M/s AMSIPL was Rs. 1,23,94,225/- and the same increased to Rs. 5,41,27,375/-. As per the Assessing Officer, the assessee has not paid these liabilities in line to the agreement with M/s AMSIPL, under which M/s AMSIPL is to bring revenue to the assessee on a profit sharing basis and the assessee has to pay the expenses incurred by M/s AMSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed his assessment order on the detail furnished by the assessee including the agreement with AMSIPL and was of the view that the assessee shall not be able to discharge the said liability until and unless such party in terms of the agreement brings revenue for the assessee in such manner that profit arises from the operation when such party could be paid its dues . It was informed by the AR that since profits were not generated the company could not pay to the creditor and creditor could also not enforce the payment of date till profits and generated. However, the agreement does not prescribe any time limit beyond which the appellant will be free from discharge the liability to the said party and, therefore, it is not correct to assume that such liability has seized to exist. Such liability remained unpaid does not amply that it has seized to exist in view of Limitation Act 1963. The aforesaid liability exist in the books of accounts of both the debtor and the creditor. The Hon'ble Supreme Court in case of Mahabir Cold Storage Vs. CIT [1991] 188 ITR 91 (SC) held that the entries in the books of account of the assessee would amount to an acknowledgment of the liability within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Delhi High Court in the case of CIT Vs. Casio India Ltd [2011] 335 ITR 196 (Del) and CIT Vs. CITI FINANCIAL CONSUMER FIN. LTD. [2011] 335 ITR 29 (Del) hold that the expenditure on publicity and advertisement is to be treated as Revenue in nature allowable fully in the year in which it was incurred. The assessee's case is squarely covered by these judgments as well as the judgment of Gujrat High Court in case of DEPUTY COMMISSIONER OF INCOME-TAX v. CORE HEALTHCARE LTD. [2009] 308 ITR 263 (Guj) which held as under: "14. In relation to the first item, namely, advertisement expenses, it is not in dispute that the expenditure of Rs. 70 lakhs and odd was incurred on a special advertisement campaign. However, that by itself would not be sufficient to determine as to whether the expenditure in question is on revenue account or capital account. The approach of the Commissioner (Appeals) that the expenditure in question was treated as deferred revenue expenditure and hence was capital in nature, cannot be termed to be a correct approach because in so far as the Income-tax Act is concerned, there is no such category of deferred revenue expenditure. Similarly, making of an entry or abs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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