TMI Blog2020 (9) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... ing benefit by entering into these agreements. These are in the nature of day to day operations of the assessee's business. Being so, the CIT(Appeals) justified in allowing the expenditure as revenue expenditure. This position is fortified with the decision in the case of Jonas Woodhead Sons Ltd. Vs.CIT [ 1978 (11) TMI 44 - MADRAS HIGH COURT] . Hon'ble Madras High Court in the case of CIT Vs. TVS Ltd [ 1976 (11) TMI 40 - MADRAS HIGH COURT] held that when the payment made by the assessee to a company was in the nature of license fees which constitute an item of allowable expenditure in the computation of profit and gains and it cannot be a capital expenditure. In our opinion, the findings and reasons given by the CIT(Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brands with Bossini Garment Limited, Vinicciladies Specialities Centre Sdn Bhd, Basic Properties BV and Josef Seibel Asia Pacific Limited. On appeal, the CIT(Appeals) observed that the franchisee has not transferred any rights in the trademark or any other IP to the assessee In other words, the franchisors remain the owners of the know-how, patents, trademarks, designs, brand names, etc and the assessee only possesses the right to use and not the right to transfer the right to use. The assessee has neither obtained any new asset of which it is the owner nor has acquired any rights which are freely transferable. Further, since the usage of such rights by the assessee is restricted to the period of agreement and for the purpose of sale franch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as entered into Agreement has not transferred any business or commercial rights with enduring benefits to the assessee. The assessee cannot be said to have any enduring benefit by entering into these agreements. These are in the nature of day to day operations of the assessee's business. Being so, the CIT(Appeals) justified in allowing the expenditure as revenue expenditure. This position is fortified with the decision in the case of Jonas Woodhead Sons Ltd. Vs.CIT 224 ITR 342 wherein it has been held that - The Courts have applied different tests like starting of a new business on the basis of technical know-how received from the foreign firm, exclusive right of the company to use the patent or trademark which it receives from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue expenditure merely because the payment is required to be made on a certain percentage of the rates of the gross turnover of the products of the income as royalty. In the facts and circumstances of the case the High Court was fully justified in answering the question whether the Tribunal was right in holding that 25% of the amount paid by the assessee as royalty was capital expenditure in favour of the Revenue and against the assessee.-Jonas Woodhead Sons (India) Ltd. vs. CIT (1979) 10 CTR (Mad) (FB) 150 : (1979) 117 ITR 55 (Mad) (FB) : TC 16R.1270 affirmed. 6. Further the co-ordinate bench of this Tribunal in the case of DCIT Vs. TTK Health Care Limited, the Hon'ble Bench of Chennai in ITA 1921/Mad/2016 Dt.8.9.2016 held in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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