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2014 (10) TMI 988 - ITAT CHANDIGARHRoyalty payment - capital expenditure - whether transaction between Shri Tarun Mohan, Prop of M/s Phoneytunes.com and the company whereby 2% of sale consideration has been paid as royalty, is a sham transaction? - Held that:- Phoneytunes.com had invented technology of creating ring tones and it can be down loaded by individual mobile user and for this invention the company has agreed to pay a royalty @ 2%. The Revenue has rejected this contention in the absence of any documentary evidence. It has to be appreciated that in case of intellectual property, it is not necessary that there would be a documentary evidence because invention is a technology and stored in the computer. The last allegation of revenue is that this is a colourable device used by the assessee to reduce the profits. We have already seen that this is not a colorable device but a pure and simple transaction through which the business of phoneytunes.com have been sold to the assessee-company and the assessee-company has agreed further to give royalty @ 2%. Secondly it is very important that the assessee-company and Tarun Mohan have duly paid the taxes on full amounts received against royalty and have not been set off against any losses etc. It is absolutely clear that the assessee-company has paid royalty for the particular invention which belonged to phoneytunes.com and therefore in our opinion, the claim for payment of royalty deserves to be allowed - Decided in favour of assessee.
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