Itxa/343/2011 Of The Commissioner Of Income Tax-18,Mumbai v. M/S. Jewel Of India, Mumbai

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.343 OF 2011 The Commissioner of Income Tax-18, Mumbai ..Appellant. V/s. M/s. Jewel of India ..Respondent. Mr. D.K. Kamwal for the appellant. Mr. J.D. Mistri, senior Advocate with A.K. Jasani for the respondent. CORAM : J.P. DEVADHAR AND A.R. JOSHI, JJ. DATED : 13TH JANUARY, 2012 P.C. :- 1.Whether the ITAT was justified in holding that the payment made by the assessee to the Nehru Centre under the nomenclature "goodwill" is revenue expenditure, is the question raised in this appeal. 2.The assessment year involved herein is AY 1999-2000. 3.By a Conducting Agreement dated 7/4/1987 entered into with the Nehru Centre, the assessee agreed to carry on restaurant business at the said Centre on payment of royalty and licence fees for a period of 10 years from 1/10/1988 as mutually agreed. The said agreement was renewable for a further period of 10 years at the option of the assessee. 4.Accordingly, on exercising the option, by an extension agreement dated 24/2/1997, the validity of the earlier agreement was extended for a further period of 10 years from 1/10/1996 upto 30/9/2006 on enhanced monthly compensation which was bifurcated into royalty, licence fees and goodwill. It is the case of the revenue that the amount paid as goodwill cannot be allowed as business expenditure. The CIT(A) as also the ITAT have held that the amount paid as 'goodwill' was nothing but the rent for user of the business premises and hence allowed as business expenditure. 5.It is relevant to note that the revenue in AY 1998-99 as also in AY 2000-01 and 2002-03 has accepted the contention of the assessee that the goodwill is rent paid for user of the business premises and hence allowable as business expenditure. There is no reason as to why in AY 1999-2000, the revenue declines to consider the amount paid as goodwill represents the rent paid by the assessee for user of the business premises. In fact, the record shows that the income tax officers officer has from time to time issued certificates under Section 197(1) of the Act, to the effect that the amount paid by the assessee to the Nehru Centre as 'goodwill' is in fact the rent paid and hence the assessee is not required to deduct tax at source while paying the rent as good will to the Nehru Centre. Therefore, having accepted that amount paid as goodwill is nothing but rent, it is not not open to the revenue to take contradictory stand without any basis. 6.Moreover, the Tribunal in para 20 of its order has recorded a finding that the goodwill, if any, belonged to the assessee as the restaurant business was run by the assessee and not by the Nehru Centre. If the goodwill belonged to the assessee, then there was no question of the assessee acquiring the goodwill from the Nehru Centre and consequently, there was no question of the assessee paying for the goodwill. In these circumstances, the decision of the ITAT in holding that the amount paid as goodwill in fact represents the rent paid to the Nehru Centre for user of the business premises hence allowable as business expenditure cannot be faulted. 7.In the result, we see no merit in the appeal and the same is dismissed with no order as to costs. (A.R. JOSHI, J.) (J.P. DEVADHAR, J.)