TMI Blog2023 (11) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... l terms. The payment was to be made on annual basis and the same was based on fixed percentage of net sales turnover. Upon termination of the agreement, the benefits / licenses / services were to lapse and the assessee was to return the manuals, reports etc. No new asset was acquired by the assessee. The assessee merely acted as user. Therefore, it could not be said that the rights acquired by the assessee were enduring in nature. CIT(A), in our considered opinion, has clinched the issue in the correct perspective and therefore, the same would not require any interference on our part. Appeal filed by the Revenue is dismissed. - Shri V. Durga Rao, Judicial Member And Shri Manjunatha, G., Accountant Member For the Appellant : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal, while deleting the additions made towards disallowance of royalty payments, the disallowance of depreciation claimed on the vehicles and disallowance made under section 14A r.w. Rule 8D, the ld. CIT(A) confirmed the addition made towards disallowance of non-deposit of employees contribution towards ESI. 4. Aggrieved, the Revenue is in appeal against deletion of addition made towards disallowance of royalty payments. The ld. DR has submitted that the royalty payments made by the assessee was capital in nature and hence not allowable as revenue expenditure. 5. On the other hand, the ld. Counsel for the assessee has submitted that the issue is squarely covered in favour of the assessee by the decision of the Coordinate Benches of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ademark etc. The payment of royalty was based on percentage of net annual sales turnover and it was payable annually. However, the licensor shall continue to have the ownership of the trademark, trade-names, patents etc. The assessee had only a limited right to use the same in India. Upon termination of the royalty agreement, all rights benefits granted under the license shall lapse and assessee was to return all manuals, reports etc. without making any copies. Similarly, as per the management service agreement, ISS A/S Denmark provided various support services in the field of operation management, human resource management, support towards corporate finance, legal affairs etc. which were to be remunerated on Annual basis as fixed percent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le High Court of Madras in the case of CIT V/s Hitech Arai Ltd. (368 ITR 577) wherein similar expenditure was held to be revenue expenditure. Similar was the ratio of decision in CIT V/s Panasonic Carbon India Co. Ltd. (TCA Nos.552 of 2010 ors. Dated 12.07.2010). On the basis of all these decisions, it was held by Ld. CIT(A) that there was no transfer of any rights or assets. The assessee merely uses the benefits / licenses / services of ISS A/S Denmark. The termination clause provides for return of such benefits or licenses or services. The royalty as well as management service fees was paid in proportion to sales turnover. Therefore, the disallowance as made by Ld. AO was to be deleted. Aggrieved, the revenue is in further appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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