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, Vs. G4S Security Services (India)
Circle 12(1), Pvt. Ltd.,
New Delhi. Panchwati,
82A, Sector-18,
Gurgaon.
PAN : AAACG1625G
(Appellant) (Respondent)
Assessee By : Shri Arun Bansal, CA
Department By : Shri 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 assessment year
2009-10.
ITA No.3160/Del/2013
2. The only effective ground is against treating royalty payment
of `8,64,67,558/- as revenue expenditure against the AO's point
of view of such amount being capital expenditure.
3. Briefly stated, the facts of the case are that the assessee
paid, inter alia, royalty of ` 8.6 crore to its Associate enterprise
M/s G4S Regional Consultancy Services and claimed this 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 addition for this sum.
The ld. CIT(A), relying on certain orders passed by the Tribunal in
identical circumstances in the assessee's group concerns, and
also the affirmation of some of such orders by the Hon'ble Delhi
High Court, decided the issue in assessee's favour. The Revenue
is aggrieved against treating such royalty as revenue
expenditure.
4. After considering the rival submissions and perusing the
relevant material on record, it is observed that the assessee paid
royalty @ 1% of the sales effected by it pursuant to an Agreement
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ITA No.3160/Del/2013
which was made on 27.12.2007. This Agreement, a copy of which
is available on record, makes it clear that its duration is five years
subject to further renewal. Clause 5.2 of the Agreement provides
that it may be terminated at any time by mutual consent of the
parties. Clause 2.1 of the Agreement makes it explicitly 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 character of
royalty paid by the assessee to its Associated enterprise is
nothing, but revenue. The Tribunal in several cases of the
assessee's group concerns has held such amount to be revenue in
nature. Copies of such orders have been placed on record. The
ld. CIT(A) has recorded a categorical finding in para 5.6 of the
impugned order that the Hon'ble Delhi High Court has also
decided this issue in assessee's favour by dismissing the
Revenue's appeals for assessment years 2002-03, 2003-04 and
2005-06. The ld. DR could not point out any distinguishing
feature from the facts of the instant case vis-a-vis the other years
decided by the Tribunal deciding the issue in the assessee's
favour. In view of the availability of so many precedents on this
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ITA No.3160/Del/2013
issue by the Tribunal in identical circumstances, we uphold the
impugned order.
5. In the result, the appeal is dismissed.
The order pronounced in the open court on 14.08.2014.
Sd/- Sd/-
[H.S. SIDHU] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 14th August, 2014.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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