ACIT, New Delhi V. M/s G4S Security Services (India) Pvt. Ltd., Gurgaon

ITA 3160/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81521 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: ARUN BANSAL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI H.S. SIDHU, JM ITA NO.3160/DEL/2013 ASSESSMENT YEAR : 2009-10 ACIT, CIRCLE 12(1), NEW DELHI. VS. G4S SECURITY SERVICES (INDIA) PVT. LTD., PANCHWATI, 82A, SECTOR-18, GURGAON. PAN : AAACG1625G ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI ARUN BANSAL, CA DEPARTMENT BY : S HRI SATPAL SINGH, SR. DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT (A) ON 26.02.2013 IN RELATION TO THE ASSESS MENT YEAR 2009-10. ITA NO.3160/DEL/2013 2 2. THE ONLY EFFECTIVE GROUND IS AGAINST TREATING RO YALTY PAYMENT OF `8,64,67,558/- AS REVENUE EXPENDITURE AGAINST TH E AOS POINT OF VIEW OF SUCH AMOUNT BEING CAPITAL EXPENDITURE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE PAID, INTER ALIA , ROYALTY OF ` 8.6 CRORE TO ITS ASSOCIATE ENTERPRIS E M/S G4S REGIONAL CONSULTANCY SERVICES AND CLAIMED T HIS AMOUNT AS REVENUE EXPENDITURE. THE AO, AFTER CONSIDERING CERTAIN DECISIONS, CAME TO THE CONCLUSION THAT THIS AMOUNT WAS TO BE HELD AS CAPITAL EXPENDITURE. HE, THEREFORE, MADE ADDITI ON FOR THIS SUM. THE LD. CIT(A), RELYING ON CERTAIN ORDERS PASSED BY THE TRIBUNAL IN IDENTICAL CIRCUMSTANCES IN THE ASSESSEES GROUP CON CERNS, AND ALSO THE AFFIRMATION OF SOME OF SUCH ORDERS BY THE HONBLE DELHI HIGH COURT, DECIDED THE ISSUE IN ASSESSEES FAVOUR. THE REVENUE IS AGGRIEVED AGAINST TREATING SUCH ROYALTY AS REVEN UE EXPENDITURE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT TH E ASSESSEE PAID ROYALTY @ 1% OF THE SALES EFFECTED BY IT PURSUANT T O AN AGREEMENT ITA NO.3160/DEL/2013 3 WHICH WAS MADE ON 27.12.2007. THIS AGREEMENT, A CO PY OF WHICH IS AVAILABLE ON RECORD, MAKES IT CLEAR THAT ITS DUR ATION IS FIVE YEARS SUBJECT TO FURTHER RENEWAL. CLAUSE 5.2 OF THE AGRE EMENT PROVIDES THAT IT MAY BE TERMINATED AT ANY TIME BY MUTUAL CON SENT OF THE PARTIES. CLAUSE 2.1 OF THE AGREEMENT MAKES IT EXPLI CITLY CLEAR THAT IT GRANTS THE ASSESSEE A NON-EXCLUSIVE RIGHT TO USE THE TRADE MARK AND TRADE NAME IN THE LICENSED BUSINESS. THE ABOVE FEATURES DEDUCED FROM THE AGREEMENT AMPLY SHOW THAT THE CHAR ACTER OF ROYALTY PAID BY THE ASSESSEE TO ITS ASSOCIATED ENTE RPRISE IS NOTHING, BUT REVENUE. THE TRIBUNAL IN SEVERAL CASE S OF THE ASSESSEES GROUP CONCERNS HAS HELD SUCH AMOUNT TO B E REVENUE IN NATURE. COPIES OF SUCH ORDERS HAVE BEEN PLACED ON RECORD. THE LD. CIT(A) HAS RECORDED A CATEGORICAL FINDING IN PA RA 5.6 OF THE IMPUGNED ORDER THAT THE HONBLE DELHI HIGH COURT HA S ALSO DECIDED THIS ISSUE IN ASSESSEES FAVOUR BY DISMISSI NG THE REVENUES APPEALS FOR ASSESSMENT YEARS 2002-03, 200 3-04 AND 2005-06. THE LD. DR COULD NOT POINT OUT ANY DISTIN GUISHING FEATURE FROM THE FACTS OF THE INSTANT CASE VIS-A-VIS THE OTHER YEARS DECIDED BY THE TRIBUNAL DECIDING THE ISSUE IN THE A SSESSEES FAVOUR. IN VIEW OF THE AVAILABILITY OF SO MANY PREC EDENTS ON THIS ITA NO.3160/DEL/2013 4 ISSUE BY THE TRIBUNAL IN IDENTICAL CIRCUMSTANCES, W E UPHOLD THE IMPUGNED ORDER. 5. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.08.201 4. SD/- SD/- [ H.S. SIDHU ] [ R.S. SYAL ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 14 TH AUGUST, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.