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TMI Blog2015 (6) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, unless there is any cogent material or evidence to demonstrate that the payment is capital field, the expenditure in question required to be treated as revenue expenditure. As we have mentioned earlier, there is nothing on record whatsoever, to suggest that the assessee derived any enduring benefit by making the payment for this compensation. Hence the payment in question having been made to enhance the supplies and in connection with supplies receipt during the normal course of business, was revenue in nature. - Decided in favour of assesse. - ITA No. 578/Del/2008 - - - Dated:- 27-3-2015 - I. C. Sudhir, JM And Pramod Kumar, AM,JJ. For the Appellant : P Dam Kaunajma For the Respondents : Khirender Mohan Gupta Vikas Bansal ORDER Per: Pramod Kumar: 1. By way of this appeal the Assessing Officer has challenged the correctness of the ld. CIT(A) s order dated 8th October, 2007 in the matter of assessment under section 143 (3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), for the assessment year 2004-05 on the following grounds :- 2. On the fact and in the circumstances of the case, the learned CIT(A) has erred in deleting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of payment vide letter dated 19.05.2004 addressed to Shri Mohan V. Kamat, in pursuance of the agreement were also filed. The expenditure was claimed as revenue item and admissible deduction under section 37(1) of Income Tax Act, 1961. Whereas written submission is based on certain judicial pronouncements without stating the background of the settlement, the copy of the settlement reveals a few relevant facts. L T was supplier of seat frames trim covers to the assessee company. The business arrangement between the two parties was discontinued some time back. In pursuance of the agreement, L T was under obligation to cease the use of intellectual property including trade mark of Lear, return all original documents, samples, publicity material to Lear. It was out of court settlement between the parties. The following facts emanate from the written submission and the agreement :- (a) Actual dues in respect of supplies by L T to Lear which form part of the compensation, have not been stated. The quantum of business with L T in last few years and the standing of L T in this field, has not been brought on record to substantiate reasonableness genuineness of the compensation. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in a view to have business advantage to the assessee company. The assumption by the Assessing Officer that by discontinuing the procurement of supplies from M/s L T, the assessee company had assimilated all the manufacturing processes in its own unit was a fact which was not true. It was merely a presumption. In fact, after discontinuing the procurement from M/s L T, the assessee company had purchased the similar supplies from other vendors which was advantageous too. Although such details were not available on the record because same was not called by the Assessing Officer but this fact has been reiterated by the A.Rs of the assessee company before me. It is also true that after cessation of the procurement of supplies from M/s L T, no new capital asset has been generated by the assessee company. There has not been any preservation of any capital asset on account of discontinuation of the Procurement Deed entered by the assessee company with M/s L T. Therefore, the observation of the Assessing Officer that the discontinuation of the Deed has resulted into benefit to the assessee company of enduring nature, is contrary to the facts. Making a lump sum payment which would eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed factual matrix of the case as also the applicable legal position. We have noticed that there is no dispute about the bonafides and commercial expediency of the compensation having been paid to the erstwhile vendor. While the necessity and bonafides of expenditure is not in dispute, the only objection which has been taken by the A.O. in declining the deduction of this expenditure is that the said expenditure is capital in nature and, as such, does not constitute permissible deduction under section 37(1) of the Act. In this view of the matter, all that we required to adjudicate in this appeal is, whether or not expenditure in question can be treated as revenue expenditure. In the light of this position let us now revert to the facts of this case. There is no dispute that the compensation has been paid to an erstwhile vendor and it is so paid in accordance with the agreement dated 18th June, 2003 entered into by the appellant with the said vendor. A copy of this agreement was also placed before us at page nos.58 to 62 of the compilation of papers. As evident from the said agreement, the settlement was arrived at because the assessee had discontinued the business arrangement with th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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