Payment made under Franchise & Management Agreement for availing technical know-how, coupled with technical consultancy services, for setting-up new and distinct business could be considered as capital expenditure

Ansal Housing & Construction Ltd. Vs DCIT

ITAT Delhi

(ITA Nos. 3192/Del/08 & 4595/Del/05

Dated- 9 Sept 2011 

Assessee had commenced restaurant business during the financial year ending 31.3.2002, relevant to A.Y. 2002-03,. In order to extend the business in the field of hospitality and for operating the restaurant, t entered on 17th August 2000. In terms of that agreement, invoices of Rs. 18,75,195/- were raised by RSW Hotel Management Services Ltd. in the financial year ending 31st March, 2001.  Since the business of restaurant commenced during the financial year ending 31-3-2002, the aforesaid amount of Rs. 18,75,195/- was accounted as expense in the books of account and, accordingly, deduction was claimed in the return of income for that year. Under the provisions of the Income-tax Act, the expense is, however, allowable as deduction in the year of accrual of expenses, which for the same will assessment year viz. 2001-02.

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