The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the amount paid as License Fees to the consultant/ doctors abroad under a business arrangement is allowable as deduction under the provisions of the Income Tax Act, 1961.
Assessing Officer in the instant case, disallowed the assessee’s claim in respect of license fees paid to Consultant/Doctors abroad by holding that the license fees paid and claimed as an expenditure by the appellant company ought to have been borne by the Consultant/Doctors abroad. He was of the view that it was not necessary for the appellant to meet the expenditure on account of license fees.
Before the authorities, the assessee has contended that it is a business arrangement between the assessee and the consultants/doctors. If the assessee does not pay the license fee on behalf of the doctors, he has to compensate the doctors by making the additional payment for the services.
The first appellate authority allowed the above contention and granted relief to the assessee.
Upholding the first appellate order, the Tribunal said that “it is an arrangement between the appellant and the consultant doctors with regard to remunerations and the license fees to be paid. If the appellant takes the responsibilities of making the payment of license fee on behalf of the Doctors and paid a lesser remuneration, this arrangement should not have been doubted by the Revenue authorities unless and until the arrangement is held to be in contravention to the provisions of law.”
“We, therefore, find no infirmity in the order of the CIT(A) who has rightly allowed the claim of the assessee. Accordingly, we confirm the order of the CIT(A),” the bench said.
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