INDIAWIN SPORTS P.LTD, MUMBAI V. ASST CIT CEN CIR 35, MUMBAI

ITA 5290/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2405 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C S NAIK
• Assessee Lawyers: ARVIND SONDE
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I, BENC H MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM ./ ITA NO.5290&5291/MUM/2014 ( / ASSESSMENT YEAR :2009-2010 & 2010-2011) INDIANWIN SPORTS PRIVATE LIMITED, COURT HOUSE, 3 RD FLOOR, LOKMANYA TILAK MARG, DHOBI TALAO, MUMBAI- 400002 VS. ACIT, CC-35, ROOM NO.104, AAYAKAR BHAVAN, MUMBAI-400020 ./ ./PAN/GIR NO. : AADCR 8195 F ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI ARVIND SONDE /REVENUE BY : SHRI B.C.S.NAIK / DATE OF HEARING : 25/05/2016 /DATE OF PRONOUNCEMENT 22/07/2016 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDER OF CIT(A), MUMBAI, FOR THE ASSESSMENT YEARS 2009-2010 & 2010-2011, IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.AC T. 2. IN BOTH THESE APPEALS THE ASSESSEE IS AGGRIEVED FOR DECLINE OF ANNUAL PAYMENT BEING FRANCHISE FEES PAID TO BCCI TO PARTICIPATE IN THE INDIAN PREMIER LEAGUE (IPL) BY HOLDING THE SAME AS CAPITAL IN NATURE FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF OWNING, MANAGING AND OPERATING 'MUMBAI INDIAN' TEAM OF INDI AN PREMIER LEAGUE ITA NOS.5290&5291/14 2 (IPL). THE ASSESSEE HAS BEEN GRANTED PERPETUAL FRAN CHISEE FOR THE 'MUMBAI INDIAN' TEAM. THE ASSESSEE IS FRANCHISE HOL DER OF IPL I.E. INDIAN PREMIER LEAGUE. THE IPL IS SUB-COMMITTEE OF BCCI WH ICH MANAGES TWENTY-20 FORMAT OF CRICKET IN INDIA. THE MUMBAI IN DIAN TEAM WAS BOUGHT IN AUCTION BY THE ASSESSEE FOR RS,441 CRORES. THE F RANCHISE AGREEMENT WAS SIGNED BETWEEN BCCI-IPL AND M/S.RATHIPRIYA TRAD ING PVT. LTD. (OLD NAME OF THE ASSESSEE) ON 10.04.2008. THE ASSESSEE FILED ITS RETURN OF INCOME U/S.139(L) FOR THE A.Y. UNDER CONSIDERATION ON 25.09.2009 AT A LOSS OF RS,42,88,55,466/-. ORDER U/S.143(3) OF THE ACT W AS PASSED BY THE A..O ON 30.12.2011 AT ASSESSED LOSS OF RS.7,90,25,660/- AFTER MAKING CERTAIN ADDITIONS ADDITIONS/DISALLOWANCES. THE AO DISALLOWE D CLAIM OF DEDUCTION OF RS.44,76,00,000/- BEING ANNUAL FRANCHISE FEES PA ID BY THE ASSESSEE TO THE BOARD OF CONTROL FOR CRICKET IN INDIA (BCCI) HO LDING THE SAME TO BE CAPITAL IN NATURE. 4. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF AO AFTER OBSERVING THAT PAYMENT SO MADE WAS CAPITAL IN NATUR E. THE CIT(A) FURTHER OBSERVED THAT THE AO OUGHT TO HAVE ALLOWED DEPRECIA TION ON THE COST OF RIGHTS PAID FOR THE YEAR AMOUNTING TO RS.44.76 LAKH S. AGAINST THE ABOVE ORDER OF CIT(A) THE ASSESSEE IS IN FURTHER APPEALS BEFORE US. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE TH ROUGH THE ORDERS OF AUTHORITIES BELOW AND ALSO DELIBERATED BY THE JU DICIAL PRONOUNCEMENTS CITED BY THE LD. AR DURING THE COURSE OF HEARING BE FORE US. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAD DEBITED RS.44 .76 CRORES PAID TO THE BCCI-IPL AS FRANCHISEE FEES FOR THE IPL AND CLA IMED THE SAME AS ITA NOS.5290&5291/14 3 REVENUE EXPENDITURE FOR THE AYS UNDER CONSIDERATION . IT WAS OBSERVED THAT THE APPELLANT HAD ENTERED INTO FRANCHISEE AGRE EMENT DATED 10.04.2008 WITH THE BCCL-IPL AND HAD GOT FRANCHISE RIGHTS FOR THE MUMBAI INDIAN TEAM FOR THE TERM OF THE LEAGUE. IN THE CURR ENT YEAR, THE APPELLANT HAD PAID RS.44.76 CRORES TO THE BCCI-IPL ON THIS AC COUNT. AS PER THE TERMS AND CONDITIONS OF AGREEMENT PAYMENT WAS TO BE MADE ANNUALLY AS PER THE CONTRACTUAL OBLIGATION OF THE ASSESSEE TO E XPLOIT THE FRANCHISEE. THIS WAS AN ANNUAL PAYMENT SPREAD OVER THE PERIOD O F RIGHT GRANTED AND DIRECTLY RELATED TO THE EARNING OF INCOME EACH YEAR . THIS ANNUAL FRANCHISEE FEES WAS PAYABLE IN 2 PARTS I.E. RS.13,42,80,000/- AS LEAGUE DEPOSIT ON OR BEFORE 2ND [AN AND RS.31,33,20,000/- ON THE DATE OF THE FIRST MATCH IN THE LEAGUE IN EACH YEAR. THE LEAGUE DEPOSIT WAS REF UNDABLE, IF LEAGUE DID NOT TAKE PLACE AND IN THAT EVENT THE FRANCHISEE IS NOT REQUIRED TO PAY THE FRANCHISEE FEE. THE PAYMENT WAS AN ANNUAL CHARG E AND HENCE THE FRANCHISEE FEE WAS CLAIMED AS BUSINESS EXPENDITURE. REFERRING TO CLAUSES 1, 2 AND 11 OF THE SAID AGREEMENT, THE ASSESSEE HAS RIGHT TO OPERATE THE FRANCHISE OF THE IFL AND HAS RIGHT TO TERMINATE THE AGREEMENT, IF THE MATCHES DO NOT TAKE PLACE FOR TWO CONSECUTIVE YEARS . THE AGREEMENT BETWEEN THE PARTIES CAN BE TERMINATED BY THEM WITH IMMEDIATE EFFECT BY GIVING NOTICE TO OTHER PARTY ON BREACH OF ANY CLAUS E IN THE AGREEMENT. THUS, THE ASSESSEE, IN THE LIGHT OF ABOVE TERMINATI ON CLAUSE, HAS NOT RECEIVED ANY ENDURING BENEFIT BY PAYING ANNUAL FRAN CHISE FEES. THOUGH IT WAS GRANTED SOME RIGHTS, BUT 'CENTRAL RIGHTS' WHICH ARE CRUCIAL FOR MANAGING AND OPERATING THE TEAM, ARE RETAINED BY TH E BCCI AS STIPULATED ITA NOS.5290&5291/14 4 IN CLAUSE 4.1 OF THE FRANCHISE AGREEMENT. THE RIGHT S EXERCISED BY THE ASSESSEE ARE SUBJECT TO PRIOR DECISION AND ACKNOWLE DGEMENT OF BCCI AS CATEGORICALLY STIPULATED IN CLAUSE 4.3 OF THE AGREE MENT. HENCE, THE ASSESSEE WAS NOT GRANTED ANY ABSOLUTE RIGHT BUT ONL Y A LIMITED ONE. 6. FROM THE RECORD WE FOUND THAT DURING F.Y. 2007-0 8 (LE. A.Y. 2008- 09), THE ASSESSEE HAS PAID RS.20,00,00,000/- ON 20. 01.2008 AS DEPOSIT (WHICH WAS IN TERMS OF CLAUSE 7.1 OF FRANCHISE AGRE EMENT) FOR THE MATCHES TO BE HELD IN APRIL, 2008 AND THE SAME HAS BEEN SHO WN AS 'ADVANCES RECOVERABLE IN CASH OR KIND OF FOR VALUE TO BE RECE IVED' IN THE AUDITED FINANCIAL STATEMENT OF F.Y. 2007-08. DURING THE AY. UNDER CONSIDERATION, THE ASSESSEE HAS PAID RS.24,76,OO,000 (NET OF SERVI CE TAX) ON 05.05.2008 (IN TERMS OF CLAUSE 7.2 OF FRANCHISE AGR EEMENT) AND DEBITED THE AGGREGATE AMOUNT OF RS.44,76,00,000/- (I.E. RS. 20,00,00,000 + RS. 24,76,00,000/-) UNDER THE HEAD 'FRANCHISE FEES' IN ITS PROFIT & LOSS ACCOUNT. FOR THE MATCHES TO BE HELD IN APRIL, 2009, THE ASSESSEE IS SAID TO HAVE PAID RS.13,37,82,643/- AS DEPOSIT AND GROUPED THE SAME UNDER THE HEAD 'PREPAID EXPENSES' IN THE BALANCE SHEET FOR TH E YEAR ENDED 31.03.2009. THE EXPENDITURE OF RS.44,76,OO.,000/- I NCURRED BY IT FOR MAKING PAYMENT OF THE FIRST INSTALMENT TO THE BCCI- 1PL IN TERMS OF CLAUSE 7 OF THE AGREEMENT WAS NOT FOR THE PURPOSE OF ACQUI SITION OF ANY ASSET BUT FOR AN ANNUAL RIGHT TO MANAGE THE FRANCHISE. THE PU RPOSE OF THE EXPENDITURE TO BE INCURRED UNDER THE AGREEMENT BY T HE ASSESSEE HAS BEEN STATED IN CLAUSE 6 OF THE AGREEMENT AS CONSIDE RATION FOR THE RIGHT TO OPERATE THE FRANCHISE AND TO BE A MEMBER OF THE LEA GUE. THE TOTAL ITA NOS.5290&5291/14 5 EXPENDITURE OF RS.44,76,00,000/- PAYABLE IN YEARLY INSTALMENTS OF RSA4,76,00,000/, FOR TEN YEARS WAS CLEARLY FOR THE PURPOSE OF SECURING FRANCHISE RIGHT FROM BCCI. THUS PAYMENTS MADE BY TH E ASSESSEE - WERE FOR THE ANNUAL BENEFITS ONLY NOT EXTENDING BEYOND O NE YEAR. ITS RIGHT TO OPERATE AND MANAGE THE TEAM IS SUBJECT TO PRIOR PAY MENT OF ANNUAL FRANCHISE FEES; IF THE ASSESSEE FAILS TO MAKE THE P AYMENT, THEN IT WOULD NOT BE ALLOWED TO PARTICIPATE IN IPL THUS, THE ASSE SSEE HAS MADE THE ANNUAL PAYMENTS TO EARN THE ANNUAL INCOME. THE NATU RE OF TRANSACTION/PAYMENT CLEARLY DEMONSTRATES THAT THE A SSESSEE IS NEITHER OBTAINING ANY ENDURING BENEFIT BY MAKING PAYMENT OF ANNUAL INSTALMENT THESE PAYMENTS ARE GIVING RISE TO ANY ASSETS. THESE PAYMENTS ARE MERE ANNUAL PAYMENTS TO BCCI-IPL TO GIVE A RIGHT TO THE ASSESSEE TO PARTICIPATE IN THE MATCHES WITH ITS TEAM. THEREFORE, THE ANNUAL FRANCHISE PAYMENT WAS A REVENUE EXPENDITURE. 7. LD. AR PLACED ON RECORD ORDER OF ITAT HYDERABAD BENCH IN ITA NO.1043/HYD/2013, ORDER DATED 28-10-2015, PASSED IN THE CASE OF DECCAN CHARGERS SPORTING VENTURES LIMITED, WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES IT WAS HELD THAT ANNUAL FRANCHISE FEES SO PAID WAS REVENUE IN NATURE. 8. AS AN ALTERNATE IT WAS CONTENDED BY LD. AR THAT ASSESSEE BE ALLOWED DEPRECIATION ON THE COST OF INTANGIBLE ASSE TS AS CONTEMPLATED U/S.32(1)(II) OF RS.447.60 CRORES. IN SUPPORT OF I TS CLAIM OF DEPRECIATION ON THE ENTIRE VALUE OF INTANGIBLE ASSETS, LD. AR PLACE D ON RECORD ORDER OF THE COORDINATE BENCH IN THE CASE OF INDIAN CEMENTS LTD. , ITA ITA NOS.5290&5291/14 6 NO.1343/MDS/2010, ORDER DATED 1-1-2016, WHEREIN CLA IM OF DEPRECIATION U/S.32(1)(II) WAS ALLOWED ON THE ENTIRE COST OF INT ANGIBLE ASSETS. 9. WE HAD CAREFULLY GONE THROUGH ORDERS OF THE CO-O RDINATE BENCH IN CASE OF M/S. DECCAN CHARGES (SUPRA) WHEREIN EXACTLY SIMILAR ISSUE DECIDED BY TRIBUNAL IN ASSESSEES FAVOUR AFTER OBSE RVING AS UNDER: BEFORE CONSIDERING THE CLAIM OF ALLOWABILITY OF DE DUCTION, IT IS NECESSARY TO DECIDE WHETHER THE AFORESAID FRANCHISE RIGHT IS A CAPITAL ASSET ELIGIBLE FOR DEPRECIATION OR IT IS A REVENUE EXPENDITURE. AS PER CLAUSE 3 OF THE FA, THE IMPUGNED AGREEMENT SHALL CO ME INTO EFFECT UPON SIGNATURE AND SHALL CONTINUE FOR SO LONG AS TH E LEAGUE CONTINUES SUBJECT TO TERMINATION, SUSPENSION OR RENEWAL AS PR OVIDED (THE TERM). AS PER CLAUSE 4 OF THE FA, THE FRANCHISEE (APPELLANT) HAS ACKNOWLEDGED AND AGREED THAT BCCI-IPL OWNS THE CENT RAL RIGHTS AND THE BCCI HAS ALL PERVASIVE RIGHTS TO EXPLOIT PRESEN T AS WELL AS FUTURE CENTRAL RIGHTS. THE CENTRAL RIGHTS INCLUDES MEDIA R IGHTS, UMPIRE SPONSORSHIP RIGHTS, TILE SPONSORSHIP RIGHTS, OFFICI AL SPONSORSHIP RIGHTS, STADIUM ADVERTISING RIGHT, GAMES RIGHTS ETC. THE FR ANCHISEE WOULD BE ALLOWED TO ENJOY ONLY THOSE RIGHTS WHICH BCCI-IPL W OULD ACKNOWLEDGE. ANOTHER VERY IMPORTANT CLAUSE LAID DOW N IN THE FA [CLAUSE 7.1 (B)] IS THAT FROM AND INCLUDING 2018 ON WARDS, FOR INDEFINITE PERIOD, AN AMOUNT EQUAL TO 20 PER CENT O F THE FRANCHISEE INCOME RECEIVED IN RESPECT OF SUCH YEAR SHALL BE PA ID TO BCCI-IPL BY THE FRANCHISEE APPELLANT. FURTHER, FRANCHISEE SHALL HAVE NO RIGHT TO ASSIGN OR TO SUB-CONTRACT OR OTHERWISE DELEGATE THE PERFORMANCE OF ANY RIGHT OR OBLIGATION UNDER THE AGREEMENT WITHOUT PRIOR WRITTEN PERMISSION FROM THE BCCI-IPL. POWERS TO TERMINATE T HE AGREEMENT IS MOSTLY TILTED IN FAVOUR OF THE BCCI-IPL (CLAUSE 16 OF FA). FRANCHISEE SHALL ALSO NOT SUB-LET OR SUB-CONTRACT THE FRANCHIS EE RIGHTS WITHOUT PRIOR WRITTEN PERMISSION OF THE BCCI-IPL. FURTHER, AS PER CLAUSE 10.1 OF FA, THE APPELLANT DOES NOT HAVE ANY RIGHT TO ASS IGN OR DELEGATE THE PERFORMANCE OF ANY RIGHT OR OBLIGATIONS UNDER THIS AGREEMENT. THE SAME VESTS WITH BCCI-IPLONLY. PERUSAL OF THE ABOVE CLAUSES REVEAL THAT UNDER THE TERMS OF THE AGREEMENT, APPELLANT CO MPANY NEVER ENJOYS THE PROPRIETARY RIGHTS. THE PROPRIETARY RIGH TS CONTINUE TO VEST IN THE BCCI-IPL. THEREFORE, APPELLANT CANNOT BE REG ARDED AS HAVING ACQUIRED EITHER WHOLLY OR ANY PART OF PROPRIETARY R IGHTS BY OR UNDER THE AGREEMENT. THEREFORE, IN VIEW OF THE ABOVE FACT S AND CIRCUMSTANCES, FRANCHISE RIGHT CANNOT BE TREATED AS CAPITAL ASSET. 6. WE AGREE WITH THE ABOVE ORDER OF THE LD. CIT(A) AS THE AMOUNT WAS NOT FOR ACQUIRING CAPITAL RIGHTS. IT IS FOR CONDUCT ING THE MATCHES ON YEARLY BASIS. IF ASSESSEE HAS NOT PAID THE AMOUNT, IT LOSES THE RIGHT TO CONDUCT THE MATCHES. ACCORDINGLY, LD. CIT(A) HAS CO ME TO CORRECT ITA NOS.5290&5291/14 7 CONCLUSION THAT THE RIGHT ACQUIRED BY ASSESSEE IS N OT A PERPETUAL RIGHT AND THE EXPENDITURE PAID ON YEARLY BASIS IS REVENUE EXPENDITURE. 6.1. HE ALSO ANALYSED VARIOUS CASE LAW VIDE PARA 5. 3.4 AND 5.3.5 AS UNDER: AGAINST THE ABOVE FACTUAL GROUND, THE ISSUE FOR AD JUDICATION IS WHETHER THE ABOVE FRANCHISE RIGHT CONSTITUTES CAPIT AL ASSET ENTITLED TO DEPRECIATION. NO DOUBT, SECTION 32(1) INCLUDES FRAN CHISE RIGHT AS PART OF THE INTANGIBLE ASSETS ENTITLED TO DEPRECIATION. THE MAIN REQUIREMENT FOR CONSIDERING WHETHER THE FRANCHISE RIGHTS CONSTI TUTE A DEPRECIABLE ASSET IS THAT SUCH FRANCHISE RIGHT SHOULD BE OWNED WHOLLY OR PARTLY BY THE APPELLANT. MERELY BECAUSE FRANCHISE RIGHTS ARE TREATED AS INTANGIBLE ASSETS, IT DOES NOT MEAN THAT ANY OR ALL PAYMENTS MADE TOWARDS FRANCHISE RIGHTS WOULD BECOME CAPITAL PAYME NT AND SUCH RIGHTS CONSTITUTE A DEPRECIABLE ASSET. IT HAS TO BE DETERMINED ON THE BASIS OF ACTUAL RIGHTS CONFERRED ON THE ASSESSEE. I S IT A RIG LIT OF OWNERSHIP OR MERELY A RIGHT TO USE. THE FORMER WILL BE CAPITAL, WHILE THE LATTER WILL BE IN THE REVENUE FIELD. ANALOGY CA N BE DRAWN FROM THE FOLLOWING INSTANCES: (I) TECHNICAL KNOW-HOW IS AN INTANGIBLE ASSET AND ENTIT LED TO DEPRECIATION U/S 32. HOWEVER, IF AN ANNUAL FEE IS P AID FOR THE USE OF TECHNICAL KNOW HOW AND RIGHT TO USE TECHNICA L KNOW HOW CEASES ON THE TERMINATION OF SUCH AGREEMENT, TH EN THE ANNUAL PAYMENTS MADE ARE REVENUE IN CHARACTER AND A RE ALLOWABLE AS DEDUCTIBLE EXPENDITURE. THE HON'BLE SU PREME COURT IN THE CASE OF CIT V. LA.E.C. (PUMPS) LTD, 23 2 ITR 316 (SQ HELD THAT USE OF PATENTS AND DESIGNS FOR TEN YE ARS WITH OPTION TO EXTEND OR RENEW THE SAME WAS HELD TO BE A REVENUE EXPENDITURE. THE RATIO IS FULLY APPLICABLE TO THE F ACTS OF THE PRESENT CASE. (II) SIMILARLY, IN CASE OF OTHER ASSETS ALSO WHICH ARE N ORMALLY TREATED AS FIXED ASSETS ENTITLED TO DEPRECIATION, I F AN ASSESSEE TAKES THESE ASSETS ON LEASE OR HIRE, THE PAYMENTS M ADE ANNUALLY FOR THE RIGHT TO USE THESE ASSETS ARE REVE NUE EXPENDITURE. THEY WOULD NOT BE TREATED AS CAPITAL A SSETS ENTITLED TO DEPRECIATION ON THE ANNUAL LEASE PAYMEN TS. RENTAL PAYMENT IN RESPECT OF BUILDINGS, WHICH ARE FIXED AS SETS, TAKEN ON LEASE WOULD CONSTITUTE REVENUE EXPENDITURE. WHAT EVER MAY BE THE PERIOD OF LEASE, THE ANNUAL PAYMENT WILL BE ONLY REVENUE IN NATURE. IN FACT THE MADRAS HIGH COURT IN THE CASE OF CIT V. GEMINI ARTS (P) LTD, 254 ITR 201, FOLLOWI NG THE APEX COURT IN CIT V. MADRAS AUTO SERVICES PVT. LTD, 233 ITR 468 (SQ, HAS HELD THAT UPFRONT PAYMENT OF FUTURE RE NT FOR 47 YEARS WOULD STILL BE REVENUE EXPENDITURE. (III) IN THE CASE OF LEASE OF IMMOVABLE PROPERTY, THE SU PREME COURT HAS HELD THAT ANY PREMIUM PAID FOR ACQUISITIO N OF THE RIGHT TO LEASE WOULD CONSTITUTE CAPITAL PAYMENT BUT NOT A PERIODIC PAYMENT FOR THE ACTUAL USE OF THE PROPERTY [CIT V. ITA NOS.5290&5291/14 8 PANBARI TEA CO. LTD, 57 ITR 422 (SC)]. WHILE TENANC Y RIGHT PER SE IS CONSIDERED AS A CAPITAL ASSET [5.5 (2)], PAYMENT FOR THE USAGE OF SUCH TENANCY RIGHT IS ALWAYS REVENUE EXPENDITURE. (IV) THE KARNATAKA HIGH COURT IN THE CASE OF CIT V. HMT LTD. 203 ITR 820 HAS HELD THAT EVEN THOUGH LUMP SUM AMOU NT PAID AS PREMIUM IN CONNECTION WITH LEASE OF PROPERTY AS LONG AS IT IS TOWARDS RENT FOR THE USE OF THE PROPERTY, IT IS ALLOWABLE AS REVENUE EXPENDITURE. (V) THE SUPREME COURT IN THE CASE OF EMPIRE JUTE MANUFA CTURING CO, [124 ITR 1 (SC)] HAS HELD THAT EVEN IF THE PAYM ENT GIVES BENEFITS FOR A PERIOD OF TIME IT WILL BE IN THE REV ENUE FIELD ONLY, IF IT IS INCURRED IN CONNECTION WITH DAY TO D AY OPERATION AND DOES NOT AFFECT THE CAPITAL STRUCTURE OF THE AS SESSEE. (VI) EXPENDITURE ON TECHNICAL KNOW-HOW, EVEN IF OF ENDUR ING CHARACTER IS REVENUE EXPENDITURE IF ITS IMPACT IS O N THE RUNNING OF BUSINESS [CIT V MRF LTD, 144 ITR 678 (MA D)). (VII) ACQUISITION OF GOODWILL OF BUSINESS IS ACQUISITION OF CAPITAL ASSET AND THEREFORE, ITS PURCHASE PRICE WOULD BE CA PITAL EXPENDITURE. WHERE, HOWEVER, THE TRANSACTION IS NOT ONE FOR ACQUISITION OF GOODWILL, BUT FOR THE RIGHT TO USE I T, THE EXPENDITURE WOULD BE REVENUE EXPENDITURE [DEVIDAS VITHALDAS & CO V. CIT, 84 ITR 277 (SC)]. 5.3.5 FROM THE ABOVE LEGAL PRONOUNCEMENTS, IT IS CL EAR THAT THE CHARACTER OF THE PAYMENT WOULD DEPEND ON NATURE OF RIGHTS ACQUIRED AND THE PERIOD FOR WHICH SUCH RIGHTS WAS ACQUIRED BY TH E APPELLANT. ANY PAYMENT MADE FOR OBTAINING A COMMERCIAL RIGHT WOULD BE A CAPITAL EXPENDITURE. BUT PAYMENT MADE PERIODICALLY FOR EXPL OITING SUCH RIGHTS IS REVENUE IN NATURE. THEREFORE, IN THE INSTANT CASE, PAYMENT MADE AT THE FIRST INSTANCE FOR GRANT OF RIGHT TO BE FRANCHISEE CAN BE CONSIDERED AS CAPITAL PAYMENT. HOWEVER, THE SUBSEQUENT ANNUAL PAY MENTS MADE BY THE ASSESSEE ARE CLEARLY FOR EXPLOITING THE RIGHTS AS A FRANCHISEE, WHICH ARE FOR A YEAR AND WHICH CAN BE TERMINATED FOR NON-PAYM ENT OF THE FRANCHISE FEES IN THE SUBSEQUENT YEAR. THEREFORE, T HE FRANCHISE FEE PAID IS REVENUE IN NATURE BECAUSE BY MAKING SUCH ANNUAL PAYMENT THE APPELLANT DOES NOT ACQUIRE ANY RIGHTS OF PERMANENT NATURE. 7. IN VIEW OF THESE JUDICIAL PRINCIPLES WHICH CLEA RLY APPLY TO THE FACTS OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF CIT(A) WHO ANALYSED THE ISSUE ON THE GIVEN FACTS. THERE IS NO MERIT IN REVENUES GROUNDS AND ACCORDINGLY, REVENUES APPEAL IS DISMISSED. ITA NOS.5290&5291/14 9 10. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDIN ATE BENCH ON THE SIMILAR FACTS, WE DO NOT FIND ANY MERIT FOR TREATIN G THE ASSESSEES CLAIM AS CAPITAL EXPENDITURE, WHICH IS ESSENTIALLY REVENUE I N NATURE. ACCORDINGLY WE SET ASIDE THE ORDER OF LOWER AUTHORITIES AND DIR ECT THE AO TO ALLOW ASSESSEES CLAIM OF REVENUE EXPENDITURE. AS WE HAVE ALREADY DECIDED GROUND NO.1 IN ASSESSEES FAVOUR BY HOLDING THAT AN NUAL PAYMENT OF RS.447.60 CRORES BEING FRANCHISE FEES PAID TO BCCI TO PARTICIPATE IN IPL WAS REVENUE IN NATURE, THEREFORE, ALLOWABLE DURING THE YEAR UNDER CONSIDERATION, WE ARE NOT GOING TO ASSESSEES ALTER NATE CLAIM OF ALLOWING DEPRECIATION ON THE ENTIRE VALUE OF INTANGIBLE RIGH TS, WHICH IS ALSO SUPPORTED BY THE DECISION OF CO-ORDINATE BENCH IN C ASE OF INDIA CEMENTS LIMITED, INDIA CEMENTS LIMITED ORDER DATED 01.01.20 16. 7. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 /07/ 2016. SD/- (AMARJIT SINGH) SD/ - (R.C.SHARMA) $ / JUDICIAL MEMBER %$ / ACCOUNTANT MEMBER MUMBAI ; '( DATED 22/07/2016 PS . ASHWINI &'() *)' / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 1 ( ) / THE CIT(A), MUMBAI. 4. 1 / CIT 5. 234 5 , 5 , / DR, ITAT, MUMBAI 6. 46 / GUARD FILE. 2 //TRUE COPY//