- (1.) THE present appeal is filed by the Department under Section 260A of the Income Tax Act, 1961, against the order dated 17.11.2006 passed by Income Tax Appellate Tribunal, Lucknow in I.T.A. No. 75/LUC/2004 for the assessment year 2001 -02.
(2.) THE relevant facts of the case are that on 11.06.1998, the assessee company was incorporated under the Companies Act. During the assessment year under consideration, the assessee company has entered into an agreement on 06.03.2001 with M/s Globsyn Technologies Limited (in short GTL) and paid Rs. 40 lacs to carry on business of acquiring, setting up and running schools, colleges training and professional institutions etc. in the State of Andhra Pradesh. Under the said agreement, the assessee company was appointed as an enterprise partner for setting up of I.T. Learning Centres. GTL was already engaged in the business of I.T. Learning, services, portals and net learning. The said agreement was valid for a period of 4 years from 06.03.2001 with an option to renew the same on payment of non -refundable association fee of Rs. 17.50 lacs. The assessee company had made a total payment of Rs. 40 lacs to GTL comprising of one time lump sum non -refundable amount of Rs. 35 lacs as association fee and Rs. 5 lacs towards cost of advertisement. The assessee has claimed the said expenditure as revenue expenditure, but the A.O. treated the same as capital expenditure, which was confirmed by the first appellate authority. However, the Tribunal vide its impugned order has accepted the claim of the assessee and treated the said expenses as a revenue expenditure. Being aggrieved, the Department has filed the present appeal.
(3.) WITH this background, Shri R.K. Upadhyay, the learned counsel for the appellant -Department submits that the expenditure incurred by the assessee was the capital expenditure. For the purpose, he supported the order passed by the A.O. as well as CIT(A). It is also a submission of the learned counsel that the original business of the assessee was trading of shares and setting of I.T. Learning Centres is a new line of business, so the expenses incurred were capital in nature. For the purpose, he relied on the ratio laid down in the following cases : - (a) Oberoi Hotels Pvt. Ltd Vs. CIT, 1999 236 ITR 903; (b) CIT Vs. Jaipur Mineral Development Syndicate, 1995 216 ITR 469; (c) R.S. Radha Kishan Kapoor Vs. CIT, 1963 47 ITR 938; and (d) CIT Vs. Arawali Constructions Co. (P.) Ltd, 2003 259 ITR 30. Lastly, he made a request to set aside the impugned order.;