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TMI Blog2025 (2) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Member For the Assessee : Sh. Harpreet Singh, CA (Amicus Curie) For the Revenue : Sh. Rajesh Kumar Dhanista, Sr. DR ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of the Commissioner of Income Tax Appeals-13, New Delhi ['Ld. CIT(A)' for short] dated 03/07/2019for the Assessment Year 2013-14. 2. The Grounds of Appeal are as under: - "1. That the order of Hon'ble CIT(A) is bad, both in law and on facts. 2. That the Hon'ble CIT(A) had erred in upholding royalty payment of Rs. 19,94,078 paid by the appellant to 'Choice Hotels Licensing BV' for grant of franchisee rights and use of brand name as capital expenditure without properly appreciating the facts of the case, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition has been deleted by the Tribunal for the Assessment Year 2014-15 in assessee's own case in ITA No. 7575/Del/2018. Mr. Harpreet Singh, CA has been considered as Amicus Curie in the present appeal and Bench extends token of appreciation to him for assisting the Bench. 5. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authorities, sought for dismissal of the Appeal. 6. Heard and perused the material. The only ground urged by the Assessee in the present Appeal is regarding disallowance of royalty payment of Rs. 19,94,078 paid by the Assessee to Choice Hotels BV licensing for grant of franchisee rights and use of brand name. The similar disallowance has been made for the Assessment Year 2014-15 as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is as under: "The Appellant provides the Franchisee to individual hotel properties for use of the above said brands It also provides a complete spectrum of Hotel operating and technical services like Hotel Development, Project Planning, Technical and Pre-opening Service s, Reservations System, Sales and Marketing Support, Human Resources Support, Quality Assurance Inspections, Financial Planning. The Appellant receives fees from Hotel properties in the name of franchisee fees, marketing fees, management operation fees etc." 11. Based on the above, the ld. CIT(A) held that the Assessee is no t engaged in manufacturing business, the business of the Assessee is running the hotel. Hence, the technical know-how, project plannin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been provided complete spectrum of Hotel opera ting and technical services like Hotel Development, Project Planning, Technical and Preopening Services, Reservations System, Sales and Marketing Support, Human Resources Support, Quality Assurance Inspections, Financial Planning. The payment of royalty is on annual basis and it is paid for the purpose of "franchise to operate and maintain hotels in an assigned territory and use its brands such as Quality, Com fort, Sleep inn, Cambria suits." It is a fact that payment of royalty to Choice B. V. was for the use of brand name or trademark. The Assessee accepted non-exclusive right and obligation to operate the franchise and to maintain the franchised hotel in the territory, subject to the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5), 55 taxmann.com 230 wherein it was held that the payment of royalty for right to use or access to technical knowhow and information is revenue expenditure. 17. The ld. CIT(A) has valiantly tried to bifurcate the annual royalty paid into "onetime benefit" as one part and "recurring benefit" on the other part as some manuals and SOPs are provided. The royalty paid was meant for the standardization of operations and utilization of brand name. The assessee is precluded from using the brand unless the royalty is paid. Simply by the virtue of provisions of some manuals and SOPs, the amount paid cannot be treated as capital expenditure in nature unless it results in acquiring of a capital receipt. The ld. CIT(A) though tried to be logical, er ..... X X X X Extracts X X X X X X X X Extracts X X X X
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