The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) has recently while dismissing an appeal filed before it by the Revenue Department, held that royalty expenditure is revenue in nature and not capital expenditure, and hence that the same should be taxable accordingly.
The aforesaid observation was made by the Tribunal, when an appeal was preferred before it by the Dept. against the order dated 04-09-2018, of the CIT(A)-6, Pune, for assessment year 2014-15.
The very ground of the said appeal being the question as to whether, on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition of Rs. 19,89,99,599/- considering the royalty expenditure of Rs. 19,8,99,599/- as revenue expenditure against the capital expenditure as held by the Assessing Officer (AO), the following was the observation of the Tribunal:
“The ground of the appeal being the disallowance of homologation expenditure as to whether it is capital expenditure or revenue expenditure, we find that this issue has also been considered by the Tribunal in assessee’s own case in ITA No. 495/PUN/2017, wherein it was held by the Tribunal that Homologation expenses are revenue expenditure, based on the Hon’ble Supreme Court’s decision in Empire Jute Co. Ltd. Vs. CIT (1980) 124 ITR 1 (SC).”
“The ld. D.R could not bring on record any contrary decision favouring the Revenue. Therefore, on the same parity of reasoning in the same facts and circumstances, we dismiss this ground of appeal also raised by the Revenue” – The Bench added.
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