2012 (4) TMI 218

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....al was right in law in deleting the settlement charges of Rs.5,50,750/- and legal expenses of Rs.1,65,500/- incurred by the assessee for getting a Consent Decree from the High Court ?" The assessee was owning and conducting a hotel. The bar and restaurant of the hotel was handed over by the assessee to one Jairam N. Shetty pursuant to an agreement dated 11 July 1976, to be managed and conducted by him against a monthly payment of Rs.8,500/- as royalty. The agreement was initially for a period of 15 years with an option of renewal for 5 years. In 1979, litigation ensued between the assessee and the conductor. In a suit which was instituted before the City Civil Court, consent terms were arrived at in terms whereof, a consent decree was pa....

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....sessee could remove the hindrance and obstruction in the conduct of the business in the premises by payment of the settlement amount. This was a matter of commercial expediency and since the obstruction in the conduct of the business was removed by payment of the settlement charges, the expenditure was of a revenue nature. 4. Under the agreement dated 11 July 1976, the assessee granted a licence and permission to the conductor to conduct and manage the restaurant business. The agreement records that the assessee had been carrying on the business of running the restaurant for some years and had acquired goodwill therein. Under the agreement, the assessee granted to the conductor a licence and permission to conduct and manage the restauran....