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TMI Blog2015 (6) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... re highlighted and stated to justify the conclusion. In view of the aforesaid reasoning, we are not inclined to issue notice on the first question/issue raised by the appellant Revenue. - Decided against the revenue. Dis-allowance of excess depreciation on computer peripherals - We find that similar issue in the case of assessee was decided by Tribunal [2014 (10) TMI 657 - ITAT DELHI] for Assessment Year 2008-09, in favour of assessee. The facts in the present appeal remains the same, therefore, respectfully following the Tribunal order, Ground NO.2 is also dismissed. - Decided against the revenue. Accrual / Addition of royalty income - This issue has also been decided by ITAT in the case [2014 (10) TMI 657 - ITAT DELHI] of assessee itself in Assessment Year 2007-08, 2008-09.The facts relating to this issue are that during assessment proceedings the A.O. observed that an amount of ₹ 9,59,881/- was not recognized as income by the assessee. The A.O. held that the said income had accrued to the assessee, therefore, he made addition thereof. The Hon'ble Tribunal in I.T.A. No. 4626 in the case of assessee itself vide its order dated 17.10.2014 has decided similar issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early distinguishable. In the said case the assessee had entered into a collaboration agreement with a foreign company under which later had provided technical aid and information for manufacture of low tension and high tension switchgear etc. and the right to sell the said products. The foreign company had also agreed to post the Indian assessee with latest and modern developments in the said fields, including transformers. As per the agreement, the Indian assessee had agreed to pay lumpsum amount of 20000 Sterling in five equal installments of 4000 Sterling each. In these circumstances, it was held that 25% of the payment made was capital in nature, while-balance 75% was revenue expenditure in the hands of the Indian assessee. Aforesaid decision of the .Madras High Court was affirmed by the Supreme Court in Southern Switchgear Limited versus Commissioner of Income tax and Another, (1998) 232 ITR 359 (SC). The facts found by the Commissioner of Income-Tax (Appeals) and the Income-Tax Appellate Tribunal in the present case after referring to the agreement entered into between the respondent-assessee and the USA based party are entirely distinct and different. The respondent-assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the source and manner of its payment; (iii) the test of once and for all payment i.e., a lump sum payment made, in respect of a transaction in an inconclusive test. The character of payment can be determined by looking at what is the true nature of the asset which is acquired and not by the fact whether it is a payment in lump sum or in an installment. In applying the test of an advantage of: an enduring nature, it would not be proper, to look at the advantage obtained, as lasting forever. The distinction which is .required to be drawn is, whether the expense has been incurred to do away with what is a recurring expense for running a business, as against, an expense undertaken for the benefit of the 'business as a whole; (iv) an expense incurred for acquisition of a source of profit orincome would in the absence of any contrary circumstances, be in the nature at capital expenditure. As against this, an expenditure which enables the profit making structure to work more efficiently leaving the source or the profit making structure untouched, would be in the nature of revenue expenditure. In other words expenditure incurred to fine tune trading op rations to enable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the expenditure is in the nature of capital or revenue. 3. Similar view was also expressed by the Delhi High Court in Commissioner of Income Tax versus Salora International Limited, (2009) 308 TTR 199 (Delhi). The Commissioner of Income Tax (Appeals) and the -tribunal have rightly come to the conclusion that; (i) no new asset came into existence on account of payment of franchise fee and (ii) the rights under the agreement were only for the tenure of the agreement and no enduring benefit, was derived by the assessee, Further, it was not an expenditure incurred for acquisition of source .of profit, but enabled the respondent-assessee to run the business profitably. The fixed assets of the assessee remained untouched and no enduring asset came into existence. As already noted above. the brand or the trademark in question was not owned by the respondent-assessee. 4. We have also examined the order passed by the Assessing Officer. Other than relying upon the decision of the Madras High Court in the case of Southern Switchgear Limited (supra), there is no discussion relating to the factual matrix to justify his conclusion that 25% of the franchise fee should be treated as cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that an amount of ₹ 9,59,881/- was not recognized as income by the assessee. The A.O. held that the said income had accrued to the assessee, therefore, he made addition thereof. The Hon'ble Tribunal in I.T.A. No. 4626 in the case of assessee itself vide its order dated 17.10.2014 has decided similar issue against the assessee by holding as under: 9. We have heard both the parties and have perused the record of the case. 10. The undisputed facts are that the assessee earlier Known as Domino's Pizza India Pvt. (DPIP) Ltd's, wholly owned subsidiary company ( DPBVI ) had entered into a Master Franchise Agreement with Domino's Pizza International Inc. USA to develop Pizaa's stores under the brand name of Domino in Sri Lanka. The wholly owned subsidiary of the appellant company DPBVI thereafter established another wholly and subsidiary in Sri Lanka named and styled as DP Lanka (P) Ltd. ( DPLPL ). M/s. DPLPL raised the loan of 45 million Sri Lankan Rupees from a bank at Sri Lanka. Later on dissolution of the subsidiary company of the appellant company namely M/s. DPBVI, Franchise rights were assigned from DPBVI to the appellant company under a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Apex Court we are of the opinion that there is accrual of income to the appellant. The assignment of the income by the appellant cannot waive the liability under the Act. The accrual of the royalty would take place as soon as Pizza is sold by M/s. DPLPL in Sri Lanka. The accrual of royalty is not dependent upon the repayment of loan by the Sri Lankan company to the Ceylon Bank. The assessee's liability to pay to the Sri Lankan Ceylon Bank arises because the assessee stood as a corporate guarantor for the loan from the Sri Lankan I Ceylon Bank to the Sri Lankan entity. The utilization of the royalty money by the Sri Lankan entity to the Ceylon Bank will not affect the accrual of royalty to the assessee. The subsequent payment thereof of Sri Lankan Bank is only the application of that accrued royalty for and on behalf of the assessee. 14. In such circumstances the addition made of ₹ 6, 17,289/- is upheld and the said ground of the assessee is rejected. 9. We find that the issue is similar in the present case. Following the above tribunal order in the case of assessee itself we dismiss this ground of appeal of assessee. 10. In view of above, appeals filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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