GMR AIRPORT DEVELOPERS LIMITED, HYDERABAD,HYDERABAD vs. ITO, WARD-2(2), HYDERABAD, HYDERABAD

ITA 806/HYD/2017Status: DisposedITAT Hyderabad29 June 2018AY 2010-1111 pages
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What did the Tribunal hold?

The Tribunal held that the regular license fees paid on turnover are revenue expenditure and allowable. The one-time consolidated fee is to be treated as a capital asset eligible for depreciation under Section 32(1)(ii) of the Income Tax Act.

What were the facts?

The assessee paid a one-time license fee and regular license fees for the use of a trademark and artistic work. The Assessing Officer disallowed the entire amount, holding it to be capital in nature. The CIT(A) upheld the disallowance.

What were the issues?

Whether the trademark and license fee paid is revenue or capital expenditure, and if capital, whether eligible for depreciation.

Which sections of the Income-tax Act were involved?

Section 32(1)(ii)

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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD

Before: SHRI D. MANMOHAN & SHRI B. RAMAKOTAIAH

PER B. RAMAKOTAIAH, A.M. :

This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-2, Hyderabad, dated 28-02-2017, on the issue of disallowance of trademark and license fee of Rs. 3.73 Crores.

2.

Briefly stated facts are that assessee in terms of trademark and license agreement entered with M/s. GMR Holdings Pvt. Ltd., on 28-03-2009, paid an amount of :- 2 -: Rs. 3,73,40,480/- comprising of Rs. 3,37,50,000/- towards one time initial consolidated fees for use of trademark and artistic works ever since its incorporation on 13-06-2008 and an amount of Rs. 35,90,480/- towards regular license fee payable on the basis of the turnover ac

The order continues below.

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