2022 (9) TMI 1 - AT - Income Tax

Nature of expenditure - Disallowance of royalty claim - revenue or capital expenditure - HELD THAT - Similar issue on an identical fact was subject matter in appeal before the Tribunal for the assessment year 2016-17 2019 (11) TMI 42 - ITAT CHENNAI CIT(Appeals) has rightly found that the payment made by the assessee is in the revenue field. In fact, similar addition made by the Assessing Officer for the assessment year 2002-03 was deleted by this Tribunal. The CIT(Appeals) by placing reliance on the order of this Tribunal in Shriram Tamil Nadu Pvt. Ltd. allowed the claim of the assessee. DR could not controvert the above decision of the Tribunal by filing any higher Court s decision having modified or reversed the order of the Tribunal. Respectfully following the above decisions of the Tribunal, the ld. CIT(A) has rightly deleted the disallowance made by the Assessing Officer towards payment of royalty. Thus, we find no reason to interfere with the order passed by the ld. CIT(A). Accordingly, the ground raised by the Revenue is dismissed.

Summary

Issues:
- Delay in filing the appeal by the Revenue.
- Disallowance of royalty claim by the Assessing Officer.
- Justification for royalty payment and its treatment as capital expenditure.
- Admissibility of the appeal and decision on the disallowance of royalty payment.

Delay in filing the appeal:
The Revenue filed an appeal against the order of the ld. Commissioner of Income Tax (Appeals) 15, Chennai, regarding the deletion of disallowance of royalty claim. The appeal was delayed by 331 days, but the Assessing Officer filed an affidavit for condonation of delay, stating it was not wilful. The delay was condoned, and the appeal was admitted for adjudication.

Disallowance of royalty claim:
The assessee, a non-banking finance company, claimed royalty payment of &8377;49,08,44,590 to Shriram Ownership Trust, which was classified as a payment to a related party. The Assessing Officer disallowed &8377;36,81,33,443 of the royalty payment, allowing depreciation on the rest. The ld. CIT(A) deleted the disallowance based on the decision of the ITAT in the assessee's own case for earlier assessment years. The Revenue appealed, arguing against the CIT(A)'s decision.

Treatment of royalty payment as capital expenditure:
The Tribunal referred to a previous decision regarding a similar issue on royalty payment. The Tribunal held that the payment for the right to use a logo cannot be treated as capital expenditure. The Tribunal confirmed the CIT(A)'s decision to delete the disallowance of royalty payment based on the earlier decision and found no reason to interfere.

Admissibility of the appeal and decision on royalty disallowance:
The Tribunal dismissed the Revenue's appeal, stating that the decision of the CIT(A) to delete the disallowance of royalty payment was correct. The Tribunal followed the earlier decision and found no grounds to reverse the CIT(A)'s order. The appeal filed by the Revenue was ultimately dismissed on 29th July 2022 at Chennai.