Tribunal upholds decisions on franchise fees, depreciation, and royalty income.

The Tribunal upheld the CIT(A)'s decisions on the disallowance of franchise fees and excess depreciation on computer peripherals, as well as the addition of royalty income. The judgments were pronounced on 12.12.2014.

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Issues Involved:
1. Disallowance of franchise fee.
2. Disallowance of excess depreciation on computer peripherals.
3. Addition of royalty income.

Detailed Analysis:

1. Disallowance of Franchise Fee:
The Revenue challenged the allowance of franchise fee as a revenue expenditure by the CIT(A), arguing it was capital in nature. The Tribunal noted that this issue was previously decided in favor of the assessee by the Hon'ble Delhi High Court for the Assessment Year 2003-04. The High Court distinguished the case from the Southern Switchgear Limited case, emphasizing that the franchise fee was a recurring payment based on sales turnover, not a lump sum, and did not result in the acquisition of any enduring asset or right in the trademark. The franchise fee allowed the assessee to use the trademark 'Dominos' without acquiring ownership, thus constituting a revenue expenditure. The Tribunal followed this precedent and dismissed the Revenue's ground.

2. Disallowance of Excess Depreciation on Computer Peripherals:
The Revenue contested the CIT(A)'s decision to allow 60% depreciation on computer peripherals. The Tribunal referred to its earlier decision in the assessee's case for Assessment Year 2008-09, where it upheld the CIT(A)'s allowance based on the Delhi High Court's ruling in BSES Yamuna Power Ltd. The Tribunal noted that there was no stay on this High Court decision by the Supreme Court, thus binding the Tribunal to follow it. Consequently, the Tribunal dismissed the Revenue's ground on this issue.

3. Addition of Royalty Income:
The assessee appealed against the addition of royalty income received from D P Lanka Pvt. Ltd. The Tribunal referred to its earlier decision in the assessee's case for Assessment Years 2007-08 and 2008-09, where it upheld the addition. The Tribunal noted that the royalty income had accrued to the assessee, and the assignment of this income to a bank as part of a settlement did not prevent its taxability. The Tribunal applied the principle that income application after accrual does not negate the accrual itself, thus supporting the addition made by the A.O. and dismissing the assessee's ground.

Conclusion:
The Tribunal dismissed both the Revenue's and the assessee's appeals, upholding the CIT(A)'s decisions on the franchise fee and depreciation on computer peripherals, and affirming the addition of royalty income. The judgments were pronounced in the open court on 12.12.2014.

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