DCIT, CHENNAI vs. M/S. SHRIRAM CHITS TAMILNADU PVT.LTD., CHENNAI

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ITA 2743/CHNY/2016Status: DisposedITAT Chennai10 February 2017AY 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 held that royalty payment for using a logo is a revenue expenditure allowable under Section 37(1). The pendency of an appeal before the High Court does not warrant a different view, especially when the Tribunal has consistently allowed such payments in the assessee's own case.

What were the facts?

The Revenue appealed against the CIT(A)'s order allowing royalty payment as a revenue expenditure. The Revenue had disallowed the royalty payment, allowing only depreciation, as their appeal on a similar issue was pending before the High Court.

What were the issues?

Whether royalty paid for the use of a logo is a deductible revenue expenditure. Whether the pendency of a High Court appeal on a similar issue justifies disallowing a claim.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH

For Respondent: Shri ANR Jayaprathap, Advocate
Hearing: 01.02.2017Pronounced: 10.02.2017

सुनवाई क� तारीख/Date of Hearing : 01.02.2017 घोषणा क� तारीख/Date of Pronouncement : 10.02.2017 आदेश आदेश /O R D E R आदेश आदेश PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-15, Chennai dated 27.06.2016 and pertains to the assessment year 2013-14. The only issue arises for consideration is disallowance of royalty paid by the assessee.

2.

Ms. Kabila, the Ld. Departmental Representative submitted that the assessee claimed an amount of ₹74,68,980/- as royalty said to be paid to Shriram Ownership Trust. According, to the Ld. D.R., even though, this Tribunal found the payment royalty as a revenue expenditure, now the appeal filed by the Revenue is pending before the High Court. Therefore, to keep the matter live to the extent of ₹74,68,980/- was disallowed after allowing depreciation of ₹24,89,660/- at the rate of 25%.

3.

On the contrary Shri ANR Jayaprathap, the Ld. counsel for the assessee submitted that the very same issue, royalty payment was allowed by this Tribunal in the assessee’s own case for the assessment year 2012-13 in by an order dated 29.07.2016.

4.

We have considered the rival submissions on either side and perused the material available on record. This Tribunal in the assessee’s own case in found that for using the logo which belongs to Shriram Ownership Trust, the assessee has to necessarily make payment. The payment was made on the basis of the turnover. In similar circumstances, this Tribunal found that the royalty payment has to be allowed as revenue expenditure under Section 37(1) of the Income Tax Act, 1961 (in short ‘the Act’). In view of the above, this Tribunal is of the considered opinion that the CIT (Appeals) has rightly allowed the claim of the assessee. Mere pendency of the appeal before the High Court is not a reason for taking a different view. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the same is confirmed.

5.

In the result, the appeal of the Revenue stands dismissed.

Order pronounced on 10th February, 2017 at Chennai.

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