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2019 (5) TMI 1008

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..... evenue expenditure as claimed by the Assessee - HELD THAT:- ITAT has rightly drawn a distinction between the royalty payments made by the Assessee to the principal during its formative years and those made in subsequent years when the Assessee was fully operational. While the former payments were characterised as capital expenditure, the latter could not and were rightly treated as revenue expenditure. For the earlier AY 2008-09 this Court [2018 (5) TMI 1875 - DELHI HIGH COURT] has remanded the matter to the ITAT for a fresh determination of the above issue, it cannot be said that for the present AY i.e. 2010-11, the ITAT has not given cogent reasons for treating the expenditure as a revenue expenditure. - ITA 45/2019 & CM APPL. 2652/2019 ( .....

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..... U v. Honda Cars India Ltd.) 4. As far as the question at 2.5 is concerned viz., whether the ITAT erred in deleting the addition of ₹ 31,80,007/- made by the AO under Section 14A of the Act, the issue stands answered against the Revenue by the decision in Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Del). 5. The only question, urged by the Revenue in the present case which remains to be considered reads as under: 2.1 Whether the ITAT/CIT(A) erred in deleting the addition of ₹ 1,59,74,53,889/- made by the Assessing officer treating the amount of royalty and lump sum fee paid by the assessee as capital expenditure instead of revenue expenditure as claimed by the Assessee? 6. The Court has heard the counsel for the parties. 7. It is po .....

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..... the Assessee s operations commenced. The ITAT therefore accepted the Assessee s contention that it had to be treated as revenue expenditure.. 9. The ITAT has given the reasons for its conclusion in para 33 of the impugned order which reads thus: 33. We have considered the rival submission and perused the relevant material on record. In the present case, payments are made pursuant to the agreement dated 01/04/2005. At the time of the agreement was executed, the assessee was in existence in operation for more than 10 years. Thus, it cannot be said that the technical knowhow given under the agreement was for setting up of the business of the assessee. It was also brought to our attention that a coordinate Bench of this tribunal in assessee .....

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..... the ground of appeal of the Revenue. 11. Mr. Bhatia then urged that the ITAT has not discussed the clauses of the agreement dated 1st April 2005. The Court in fact finds that in paragraph 26 of the impugned order while setting out the submissions of learned counsel for the Assessee, the clauses of the said agreement have been set out. What appears to have weighed with the ITAT is the distinction between the royalty payments made during the initial phase of the Assessee s operations, which formed subject matter of the judgment of the Supreme Court and the subsequent AYs including the AY in question more than ten years after the Assessee commenced operations. 12. Mr. Chopra has also drawn the attention of the Court to a clarificatory order p .....

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