DCIT 13(1)(2), MUMBAI vs. PREMIER OPTICALS P. LTD, MUMBAI

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ITA 5378/MUM/2016Status: DisposedITAT Mumbai21 February 2018AY 2013-143 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, following its own prior rulings. It held that the royalty payment made by the assessee was revenue expenditure, not capital expenditure.

What were the facts?

The Revenue appealed the deletion of disallowance of royalty payments claimed as expenditure by the assessee. The assessee paid royalty to use a brand name, claiming it as revenue expenditure.

What were the issues?

Whether royalty payment made by the assessee for the use of a brand name is a revenue expenditure or a capital expenditure.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, G Bench, Mumbai

Before: Shri C.N. Prasad & Shri A.L. Saini

For Appellant: Shri V. Vidhyadhar
For Respondent: Shri Pankaj Jain
Hearing: 19.02.2018Pronounced: 21.02.2018

This appeal has been filed by the Revenue against the order of the CIT(A)-21, Mumbai dated 26.06.2016 for A.Y. 2013-14.

2.

The only grievance in the appeal of the Revenue is that the CIT(A) is not justified in deleting the disallowance of expenditure claimed on account of royalty payment relying on the decision of the Tribunal in assessee’s own case for assessment years 2008-09 and 2009-10.

3.

The learned counsel for the assessee at the outset submits that the issue in appeal is decided in assessee’s own case by the Tribunal for assessment years 2008-09 to 2011-12 holding that royalty payment made by the assessee is revenue expenditure. The learned counsel for the assessee, referring to the order of the Tribunal in assessee’s own case for A.Y. 2011-12, which is placed at page 14 of the paper book, submitted that the Tribunal held that royalty payment made by the assessee is revenue

M/s. Premier Opticals P. Ltd. expenditure following the order of the Tribunal for assessment years 2008- 09 and 2009-10.

4.

The learned D.R., on the other hand, vehemently supported the order of the Assessing Officer.

5.

We have heard the rival submissions and perused the orders of the authorities below and the decision of Coordinate Bench in assessee’s own case for assessment years 2008-09 to 2011-12 which are placed in the paper book. The only issue in the appeal of the revenue is whether the royalty payment made by the assessee is capital expenditure or revenue expenditure. The assessee made payment of royalty to Lawrence and Mayo India Pvt. Ltd. and the said amount was claimed as revenue expenditure by the assessee contending that it was doing the business of dispensing opticians and royalty at 1% of the turnover has to be paid to Lawrence and Mayo India Pvt. Ltd. for using their brand name and therefore is an allowable expenditure. However, the AO during the current assessment year as well as in the assessment years right from 2008-09 negated the claim of the assessee and treated such expenditure as capital expenditure and allowed depreciation. When the matter was carried to the CIT(A) as well as the Tribunal in earlier years the Coordinate Bench held that royalty payment made by the assessee is revenue expenditure. Therefore, respectfully following the said decision of the Coordinate Bench we uphold the order of the CIT(A) in holding that the payment made by the assessee towards royalty to sister concern Lawrence and Mayo India Pvt. Ltd. is revenue expenditure.

6.

In the result, the appeal filed by the Revenue is dismissed.

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