Travel Food Services Delhi Terminal 3 Pvt. Ltd. Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) in Delhi has ruled in favor of Travel Food Services Delhi Terminal 3 Pvt. Ltd., deleting a ₹17.95 lakh disallowance on royalty expenses for the assessment year 2017-18. The company, which operates food and beverage outlets at Delhi’s Indira Gandhi International Airport, had its return of income scrutinized by the Assessing Officer (AO). The AO disallowed 25% of the royalty charges, citing a Supreme Court judgment in the case of Southern Switchgear Ltd. vs CIT. The CIT(A) had upheld this disallowance, prompting the company to appeal to the ITAT.
During the hearing, the assessee’s representative argued that the disallowance was unjustified, as identical issues in previous assessment years (AYs 2012-13 to 2015-16) had been decided in the company’s favor. In those years, the CIT(A) had deleted similar disallowances, concluding that the facts of the Southern Switchgear case were not applicable. The CIT(A) had instead found the circumstances to be closer to those of CIT vs Sharda Motor Industrial Ltd., a judgment by the jurisdictional High Court. The tribunal noted that in those prior cases, the CIT(A) had determined that the royalty payments were for a fixed period and did not create any lasting capital benefit, making them revenue expenditure. The assessee’s counsel also highlighted that the Revenue had not filed any appeals against those previous orders, allowing them to reach finality.
