Brief of the Case
ITAT Delhi held in case of DCIT v Hitz FM Radio India Ltd. that expenditure related to licence fee and royalty which helps merely in facilitating the assessee’s trading operations or enabling the management to be carried more effectively is revenue in nature even if advantage may endure for an indefinite future.
If Further held that when the amount is unpaid for three years and the liability exists in accounts then it can’t be said that the liability is finished under Limitation Act due to passing of prescribed time mentioned under the statute.
Facts of the Case
- The assessee is in the business of FM Radio broadcasting. The records revealed that they have paid license fee, royalty to the Govt. Of India which assessee claims to be a Revenue Expenditure but according to AO it is a capital expenditure as it is an intangible asset for the tenure of 10 to 20 years which gives enduring benefit. Therefore, the amount was added to the income of the assessee.
- Another issue was related to the deletion of addition of amount u/s 41(1) of Income Tax Act, 1961. In the present facts of the case the AO observed that there was an agreement of the assessee with a company which was responsible for generating profits as well as conducting the business operations for which they were charging form the Assessee. The Assessee had not paid the amounts due to which the outstanding debts were created which they were not forced to pay as the other company was not able to generate revenue for the Assessee. The AO observed that the Company has not demanded its money from the assessee since last three years. Therefore, no liability exist as the time mentioned in the Limitation Act, 1963 has been passed.
Held by Ld. CIT(A)
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