2016 (6) TMI 1250

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....d.CIT(A) has erred in law and on facts in deleting the addition made by the AO on account of payment of royalty of Rs. 70,40,105/- without appreciating the fact that the assessee failed to established nexus between the services rendered and services required for the business and also to furnish necessary evidences. 2. The Ld.CIT(A) has erred in law and on facts in deleting the addition made by the AO on account of expenditure on seminar expenses of Rs. 35,29,028/- treating the same as capital expenditure. 3. The substantive grievance of the revenue in ITA No. 1560/Ahd/2012 for A.Y. 2009-10 which read asunder:- 1. The Ld.CIT(A) has erred in law and on facts in deleting the addition made by AO on account of payment of royalty of Rs. 71,7....

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....that the assessee has debited an amount of Rs. 70,48,105/- to the Profit and Loss account on account of payment of royalty. The assessee was asked to explain and justify the claim of this expenditure. 8. Vide letter dated 02.11.2010, the assessee explained that the royalty expenditure is about 5% of the turnover of trading items which has been given as per the agreement. It was further explained that a similar payment was also made in the immediately preceding year. The assessee supplied the copy of the agreement. It was explained that the assessee is doing trading business of Pyridium Brand which is owned by Asia Pacific Pharmaceutical Investment Pvt. Ltd. who had purchased trade mark right from Pfizer. The assessee entered into a Brand L....

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....as not come up for the first time. It was also there in the earlier assessment years. A perusal of the order of the First Appellate Authority shows that in earlier years, a similar disallowance was deleted by the Appellate Authorities. We also find that the royalty payment is pursuant to an agreement which was before the Assessing Authority, we do not find any logic/reason in making the disallowance. Since the First Appellate Authority has followed the findings given in earlier assessment years, no interference is called for. Ground no. 1 is accordingly dismissed. 15. On further probe, the A.O. found that the assessee has claimed expenses of Rs. 35,29,098/- on account of training and seminar as against expense of Rs. 3,41,154/- claimed in ....

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....consideration. Though the specialized training benefit may occur to the assessee in future as well as but that itself may not be a ground for treating the expenditure as capital expenditure. It is for the smooth carrying on the business of the assessee. Neither any specific asset has been created by the assessee nor any enduring benefit has been gained. The CIT(A) was justified in deleting the disallowance as capital expenditure. " 19. As no distinguishing decision has been brought on record in favour of the revenue. Respectfully following the precedence, we hold that the ld. CIT(A) was justified in deleting the disallowance as capital expenditure. Ground no. 2 is accordingly dismissed. 20. Now the only surviving ground remains in ITA No....