AI Drafter 
TaxTMI 
TaxTMI 
2019 (5) TMI 2053
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....n deleting the disallowance of an amount of royalty paid Rs. 2,97,40,000/-." 2. "Whether in the facts and circumstances of the case, the Ld. CIT(A) erred in allowing the provision for bad and doubtful debts amounting Rs. 72,30,000/- in view of Explanation 1 of section 36(1)(vii) of the Income tax Act, 1961." 2. The brief facts of the present case are that during the course of assessment proceedings, the AO found that the assessee had paid a sum of Rs. 297.40 lacs as royalty to M/s Asian Paints Ltd. in return for license to use of its Trademarks and Technology. Since royalty paid was for use of Trademark and Technology, the AO held that it was a capital expense and could not be claimed as a revenue expense. The AO while placing r....
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.... the appellant to use the Licensor's Trademarks and Technology was non-exclusive, nontransferable and revocable without the right to sublicence. In consideration of the Licence granted, the appellant was to pay a royalty fee of 2% on the net sales value during the term of the agreement. The agreement may be terminated by either party by giving a 24 hours notice in writing to the other party. Upon termination of the agreement for any reason whatsoever, the rights and licence granted to the Licencee shall be revoked and the Licencee shall cease to use the Licensor's Trademarks and technology. 4.4 It is clear from the terms of the agreement that the Licencee, i.e., the appellant, had merely obtained access to technical knowled....
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....ure of its liquid industrial paints and power coatings technology and technical support for the manufacture of its liquid industrial paints and power coatings. As per the said agreement, the effective date of agreement was 1.06.11, which was for a period of 1 year. According to the term of the said agreement, the assessee was to pay a royalty fee of 2% on the net sales value during the term of the agreement. A perusal of the terms of the agreement also shows that the agreement may be terminated by either party by giving a 24 hours notice in writing to the other party and thereafter ipon termination of the agreement for any reason whatsoever, the rights and licence granted to the Licencee/assessee shall be revoked and the Licencee shall ceas....
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....re of any particular item for a specified duration, then the expenditure is of revenue nature. 9. In this case, the payment is made by the assessee only for obtaining access to the information, which does not become the property of the assessee as there is no purchase of technical know how. The title and ownership is with APL only and the same has not been transferred to the assessee. Thus, in this way, the transaction did not result in acquisition of any capital asset or a benefit of enduring nature. The decision relied upon by Ld. AR in the case of CIT Vs. Ciba of India Ltd. (1968) 69 ITR 692 (SC) is squarely applicable to the facts of the present case as under the agreement, the assessee did not become entitle exclusively, even for th....
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....IT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 5.3 of its order and the same is reproduced below:- 5.3 I have considered the facts of the case and the appellant's submissions. It is seen from the appellant's balance sheet that corresponding amount of the provision for doubtful debts debited by the appellant to the. Profit and Loss account also stands reduced from the Trade Receivables /Debtors account on the asset side of the Balance-sheet. The Hon'ble Supreme Court in the case of Vijaya Bank Vs. CIT (2010) 323 ITR 166 (SC) held that in such a situation the assessee was entitled to the benefit of deduction under section 36(1)(vii) of the Act as there was an actual write off by t....
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....f by the assessee in its books. The Hon'ble Supreme Court also reiterated that section 36(1)(vii) of 1961 Act applies both to Banking and Non-Banking businesses. Thus in this way, Ld. CIT(A) had rightly concluded that AO was, therefore, not correct in holding that the decision of the Hon'ble Supreme Court in the case of Vijaya Bank which was rendered in the context of deduction under section 36(1)(vii) of the Act applied only to rural branches of commercial banks as in the present case, the debtors have actually reduced and provisions are actually written off, therefore, the claim of the assessee was allowable. Therefore, Ld. CIT(A) rightly deleted the disallowance of provision for bad debts by relying upon the decision of Hon'b....