TMI Blog2016 (7) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... 288/-, thus, total capital of assessee comes to ₹ 21,41,405/-. Further, assessee has interest free unsecured loan of ₹ 5 lacs from Shri Joginder Singh. These amounts/funds are sufficient to cover up the interest free advances given to the family members in a sum of ₹ 14,25,000/-. Hon'ble Punjab & Haryana High Court in the case of Kapson Associates [2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT ] held that " when assessee having sufficient interest free advances to cover interest free advances, no disallowance under section 36(1)(iii) could be made". Following the above judgement and considering facts of the case, set aside the orders of authorities below and delete the addition - Decided in favour of assessee Addition paid on account of franchise fees as capital expenditure - Held that:- In the way of obtaining franchise for educational program and paying licence fees, no capital asset came into existence and there was no advantage of enduring benefit to the business of the assessee. Since there is no existence of any asset and no enduring benefit have been taken by the assessee, therefore, authorities below were wholly unjustified in considering it to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. In order to minimize the expenses, common advertisements are arranged by the Associates through advertisement agencies which was common for all the parties including the assessee. The expenses incurred by the Association on behalf of the Regional Centres are subsequently recovered by it from them as their share in common expenditure. The payment of ₹ 10,56,169/- was made by assessee to the Association as reimbursement of its share of common advertisement expenses incurred by that association. It was made clear that association was not an advertisement agency and relationship between payee and payer was that of an Association and its member and not that of contractor and contractee as contemplated under section 194C of the Act therefore, no TDS is liable to be deducted. The contract was entered into between Association and the Advertisement Agency and payment has been made by the association to the advertisement agency. The assessee only reimbursed its share of expenditure to the association. The assessee submitted details in respect thereof and it was submitted that no addition could be made against the assessee because there is no relationship of contractor and contractee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the ITAT and ld. CIT(Appeals), Patiala in the case of M/s Vaishno Maa Computers (supra) which have decided identical point in issue. The ld. CIT(Appeals) did not pass the reasoned order in this matter, therefore, order is violation of Section 250(6) of the Income Tax Act. In this view of the matter, I set aside the orders of authorities below and restore this issue to the file of ld. CI T(Appeals) with direction to re-decide this issue in the light of evidence and material on record produced by assessee and in the light of order of ITAT Chandigarh Bench and ld. CIT(Appeals) Patiala in the case of M/s Vaishno Maa Computers (supra). The ld. CIT(Appeals) shall give reasonable sufficient opportunity of being heard to the assessee. In the result, ground No. 1 of appeal of the assessee is allowed for statistical purposes. 7. On ground No. 2 assessee challenged the disallowance of ₹ 1,07,600/- on account of interest. The Assessing Officer found that there are advances made by assessee to four persons in a sum of ₹ 14.25 lacs to Mrs. Goldy Kamboj (wife), Mrs. Harpreet Kaur (sister), Shri Sukhbir Singh (nephew) and Smt. Surinder Kaur, mother-in-law of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is allowed. 10. On ground No.3, assessee challenged the addition of ₹ 6,50,000/- paid on account of franchise fees as capital expenditure. The Assessing Officer noted that the assessee in the Profit Loss Account has debited a sum of ₹ 6,50,000/- on account of franchise fees paid to Indian Institute of Hardware Technology Ltd., Bangalore. The Assessing Officer asked the assessee as to why the same be not treated as capital expenditure as the same has brought advantage of enduring nature. The assessee submitted that amount has been paid for affiliation to IIHT Ltd. for Patiala and Chandigarh centre. It is only licence fees which is not refundable at all. It was submitted that assessee is yearly paying royalty even for Patiala and Chandigarh centre in addition of this lumpsum charges paid once for all. It is only licence fees which do not have any enduring benefit. The Assessing Officer did not accept contention of the assessee and found that assessee has been appointed for a period of three years and IIHT affiliation fees is one time fees paid towards technical transfer and licence from IIHT for a period of the franchise agreement which does not include the affilia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of revenue expenditure. 13. PB-89 is order of ITAT Chandigarh in the case of M/s Vaishno Maa Computers in which the Tribunal considered the identical issue in departmental appeal in which the ld. CIT(Appeals) deleted the addition made by Assessing Officer on account of disallowance of licence fees expenses. The assessee made a claim of deduction in Profit Loss Account for making payment towards licence fees to M/s PTU and CAL-C. The assessee claimed that it has merely acquired the use of licence to operate distance educational program for its educational centres. It was, therefore, claimed that it is revenue expenditure in nature. The ld. CIT(Appeals) in his findings noted that assessee had merely acquired the user of a licence to operate distance educational program of two institutions. The payment made for renewal of licence every year/three years was for usage and could not be held to be capital expenditure. The Tribunal dismissed departmental appeal. The assessee in the Paper Book has filed copy of the Memorandum of Understanding between assessee and IIHT Ltd. at page 82 of the Paper Book which supports the contention of the assessee that assessee obtained licence f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
