IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D : NEW DELHI BEFORE SHRI G.D. AGRAWAL, HON BLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No. 964/Del /2013 Assessment Year: 2000-01 ITA No. 965/Del /2013 Assessment Year: 2001-02 Yum!Restaurants (India) Pvt. Ltd., ITO, 2nd Floor, Tower D, Ward 18(4), vs Global Business Park, New Delhi. Gurgaon-122002 (PAN: AAACY1883F) (Appellant) (Respondent) ITA No. 953/Del /2013 Assessment Year: 2000-01 ITA No. 955/Del /2013 Assessment Year: 2001-02 ITO, Yum! Restaurants (India) Pvt. Ltd., Ward 18(4), Gurgaon-122002 vs New Delhi. (PAN: AAACY1883F) (Appellant) (Respondent) Appellant by : Shri Salil Kapoor, Ms Ananya Kapoor,Adv. Respondent by : Shri Amit Jain, Sr.DR Date of Hearing: 21.11.2017 Date of Pronouncement: 20.02.2018 ORDER PER BENCH: These two sets of cross appeals pertain to assessment years 2001-02. ITA 964/Del/2013 is ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 assessee s appeal for assessment year 2000-01 against order dated 30.11.2012 passed by Ld. CIT (A)- XXI, New Delhi whereas ITA 953/2013 is department s cross appeal. ITA 965/2013 is assessee s appeal for assessment years 2001-02 and is preferred against order dated 30.11.2012 passed by Ld. CIT(A)-XXI, New Delhi whereas ITA 955/Del/2013 is department s cross appeal. All four appeals were heard together and are being disposed of through this consolidated order for sake of convenience. 1.1 We now take up respective assessment years one by one. ITA 964/2013 and 953/2013 AY 2000-01 2. brief facts for assessment year 2000-01 are that assessee is company incorporated under provisions of Companies Act, 1956 and is engaged in business of franchisee of Pizza Hut and KFC Restaurants for which it appointed various franchisees. For this purpose, assessee has obtained franchisee rights from KFC International Holdings Inc. and Pizza Hut 2 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 International LLC for which it pays royalty. Further, assessee has also entered into service agreement with KFC International Holdings and Pizza Hut International LLC. assessee is inter alia required to provide franchisee support service and liaisoning support in respect of franchisees located in India and Indian sub- continent. For this, assessee is remunerated at agreed upon rates as per service agreement. Further, assessee has also established wholly owned subsidiary under name of Yum Restaurants Marketing Private Limited which was incorporated with sole objective of undertaking advertising, media and promotional activities exclusively for assessee and its franchisees at national and international level. 2.1 For year under consideration, assessee filed its return of income declaring loss of Rs. 99,81,620/-. return was initially processed u/s 143(1) of Act at returned loss. Subsequently, for assessment year 2002-03, Special Audit was conducted under provisions of section 142(2A) of Income Tax Act, 1961 (hereinafter called Act ) wherein several additions 3 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 and disallowances were made. Based on special audit report, reassessment proceedings u/s 147 of Act were initiated by department and finally, vide order dated 29.12.2006, Assessing Officer passed order u/s 143(3)/147 of Act determining total income of assessee at Rs. 2,54,61,031/- which was then set off against brought forward losses resulting in nil taxable income. additions/disallowances/adjustments made by Assessing Officer were as under:- 1 Service income, treated as 'income from other sources 6,76,02,025 as against business income declared by assessee 2 Disallowance of royalty paid 1,74,92,008 3 Disallowance of lease rent paid for providing rent free 15,00,000 accommodation for managing director 4 Notional interest income on security deposits for 6,00,000 obtaining rent free accommodation for managing director 5 Disallowance of depreciation 1,54,49,696 6 Disallowance of prior period expenditure 90,812 7 Disallowance of personal expenditure 45,000 8 Disallowance of capital expenditure 30,880 9 Disallowance of excess provision of expenses 2,34,256 2.2 Aggrieved, assessee preferred appeal before learned First Appellate authority who partly upheld disallowance of lease rent paid on account of providing rent free accommodation to Managing 4 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 Director of company by upholding disallowance amounting to Rs. 1,26,00,000/-. Ld. Commissioner of Income Tax (A) also upheld disallowance of business expenditure of Rs. 45,000/- by holding same to be personal in nature. Ld. Commissioner of Income Tax (A) also upheld disallowance of business expenditure amounting to Rs. 30,880/- by holding same to be capital in nature. However, Ld. Commissioner of Income Tax(A) gave relief to assessee in respect of service income by directing Assessing Officer to assess income earned by assessee by providing services amounting to Rs. 6,76,02,025/- under head Income from business. Ld. Commissioner of Income Tax (A) also deleted addition of Rs. 1,74,92,008/- paid as royalty and treated as being capital in nature by Assessing Officer. Ld. Commissioner of Income Tax(A) also allowed assessee s ground of claim of depreciation amounting to Rs. 1,54,49,696/-. Ld. Commissioner of Income Tax (A) also allowed assessee s claim by deleting addition 5 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 amounting to Rs. 90,812/- on account of prior period expenses. 2.3 Now, both assessee and department are before ITAT and have challenged action of Ld. Commissioner of Income Tax(A) and respective grounds raised by both parties are as under:- 2.4 following grounds have been raised by assessee in ITA No. 964/D/2013:- 1. That on facts and circumstances of case and in law, Ld. Commissioner of Income Tax (Appeals) - XXI [ Ld. CIT(A) ] has erred in not adjudicating Ground No. 2 raised by appellant challenging validity of reassessment proceedings under Section 148 of Income Tax Act, 1961 [ Act ]. 2. That on facts and circumstances of case and in law, Ld. CIT (A) has erred in partly upholding disallowance of lease rent amounting to Rs. 12,60,000 out of total lease rent of Rs. 15,00,000 paid by appellant to M/s Mezbaan Hoteliers Pvt. Ltd. on account of rent free accommodation obtained for its Managing Director. In doing so, Ld. CIT (A) has erred in not considering valuation certificates submitted by appellant. 3. That on facts and circumstances of case and in law, Ld. CIT (A) has erred in upholding disallowance of business expenditure amounting to Rs. 45,000 by holding same to be personal in nature. 4. That on facts and circumstances of case and in law, Ld. CIT (A) has erred in upholding 6 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 disallowance of business expenditure amounting to Rs. 30,880 by holding same as being capital in nature. In doing so, Ld. CIT (A) has failed to correctly appreciate nature of expenses. 2.5 following grounds have been raised by department in ITA No. 953/D/2013:- (i) Ld. CIT(A) erred in law and on facts of case in directing AO to assessee income erred by assessee by providing services, under head income from Business. (ii) Ld CIT(A) erred in law and on facts of case in deleting addition of Rs. 1,74,92,008/- made by AO by treating royalty expenses as capital in nature. (iii) Ld. CIT(A) erred in law and on facts of case in allowing appeal of assessee against addition of Rs. 1,54,49,696/- on account of claim depreciation on transferred assets. (iv) Ld. CIT(A) erred in law and on facts of case in deleting addition of Rs. 90,812/- made by AO on accounts of prior period expenses as assessee maintains its accounts on mercantile basis. (iv) appellant craves, leave or reserving right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during hearing of this appeal. ITA 965/2013 and 954/2013 AY 2001-02 3. In this year, assessee had filed its return of income declaring total taxable income of Rs. 47,32,300/- under 7 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 head income from other sources . assessee had also computed profits under head profits and gains of business and profession amounting to Rs. 92,07,745/- which, after adjusting brought forward losses to extent of Rs. 92,07,745/-, were reduced to nil. assessment was completed u/s 143(3) of Act at Rs. 1,81,06,661/- as against returned income declared at Nil. This assessment was completed on 31.03.2004. Subsequently, due to special audit being ordered under provisions of section 142(2A) of Act for assessment year 2002-03, Assessing Officer initiated reassessment proceedings u/s 147 and concluded reassessment proceedings on 29.12.2006 by computing income at Rs. 8,64,96,240/- which was then set off against brought forward business losses and resulted in nil taxable income. In reassessment, Assessing Officer made following adjustments, additions and disallowances:- S.No. Particulars Amount (Rs.) *1 Service income, treated as income from other sources as against 9,04,27,842 business income 2 Disallowance of royalty paid to YRAPL 2,33,30,505 3 Disallowance of administrative expenses by hypothetical 3,30,68,187 apportionment to subsidiary company, i.e. YRMPL 4 Disallowance of lease rent paid for obtaining rent free 15,00,000 accommodation for managing director (Mr. Sandeep Kohli) 8 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 5 Addition made on account of notional interest income on security 6,00,000 deposits placed for obtaining rent free accommodation for managing director (Mr. Sandeep Kohli) 6 Disallowance on account of SCM Income 7,43,000 7 Disallowance on account of G & reimbursement 23,62,500 8 Disallowance of tax depreciation claimed under Section 32 of Act 1,01,98,827 9 Disallowance on account of alleged prior period expenditure 1,03,103 10 Disallowance on account of alleged personal expenditure 7,500 12 Disallowance on account of alleged capital expenditure 1,13,279 13 Disallowance on account of excess provision of expenses 4,38,298 3.1 Aggrieved, assessee carried matter before Ld. CIT (A) who partly sustained disallowance of lease rent in respect of MD s rent free accommodation to tune of Rs. 12,60,000/-. Ld. CIT (A) also upheld disallowance of Rs. 7,500/- on account of personal expenditure. Ld. CIT (A) also dismissed assessee s challenge to disallowance of business expenditure amounting to Rs. 1,13,279/- on account of expenditure being capital in nature. However, Ld. Commissioner of Income Tax (A) directed Assessing Officer to treat and tax service income of Rs. 9,04,727,842/- under head income from business . Ld. Commissioner of Income Tax (A) also deleted addition of Rs. 23,30,505/- in respect of royalty expenses. Ld. Commissioner of Income Tax (A) also deleted disallowance of 50% made under head general and administrative expenses . Ld. Commissioner of Income Tax 9 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 (A) also gave relief to assessee with respect to supply chain management fee amounting to Rs. 7,43,000/-. And also deleted addition of Rs. 23,62,500/- pertaining to reimbursement of expenses received from M/s Pizza Hut International LLC which were incurred by assessee in year under consideration but credited by assessee in its profit and loss account in subsequent year. Ld. CIT (A) also allowed assessee s claim of depreciation amounting to Rs. 1,01,98,827/-. and also directed deletion of addition of Rs. 1,03,103/- pertaining to prior period expenses. 3.2 Now, both assessee and department are before ITAT and have challenged action of Ld. Commissioner of Income Tax(A) and respective grounds raised by both parties are as under:- 3.3 Following grounds have been raised by assessee in ITA No. 965/D/2013:- 1. That on facts and circumstances of case and in law, Ld. Commissioner of Income Tax (Appeals) - XXI [ Ld. CIT(A) ] has erred in not adjudicating Ground No. 2 raised by appellant challenging validity of reassessment proceedings under Section 148 of Income Tax Act, 1961 [ Act ]. 10 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 2. That on facts and circumstances of case and in law, Ld. CIT (A) has erred in partly upholding disallowance of lease rent amounting to Rs. 12,60,000 out of total lease rent of Rs. 15,00,000 paid by appellant to M/s Mezbaan Hoteliers Pvt. Ltd. on account of rent free accommodation obtained for its Managing Director. In doing so, Ld. CIT (A) has erred in not considering valuation certificates submitted by appellant. 3. That on facts and circumstances of case and in law, Ld. CIT(A) has erred in upholding disallowance of business expenditure amounting to Rs. 7,500 by holding same to be personal in nature. 4. That on facts and circumstances of case and in law, Ld. C1T(A) has erred in upholding disallowance of business expenditure amounting to Rs. 1,13,279 by holding same as being capital in nature. In doing so, Ld. CIT (A) has failed to correctly appreciate nature of expenses. 3.4 Following grounds have been raised by department in ITA No. 955/D/2013:- (i) Ld. CIT(A) erred in law and on facts of case in directing AO to assessee income erred by assessee by providing services, under head income from Business. (ii) Ld. CIT(A) erred in law and on facts of case in deleting addition of Rs.2,33,30,505/- made by AO by treating royalty expenses as capital in nature. (iii) Ld. CIT(A) erred in law and on facts of case in deleting addition made by AO on account of disallowance of 50% of administrative expenses. 11 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 (iv) Ld. CIT(A) erred in law and on facts of case in deleting addition of Rs. 7,43,000/- made by AO on accounts of Supply Chain Management Fee pertaining to this year and declared by assessee in subsequent year. (v) Ld. CIT(A) erred in law and on facts of case in deleting addition of Rs.23,62,500/- made by AO on account of reimbursement of expenses received from M/s Pizza Fast Food Restaurants (P) Ltd. which were incurred by assessee in this year but credited by assessee to its profit & loss account in subsequent year. (vi) Ld. CIT(A) erred in law and on facts of case in allowing appeal of assesses against addition of Rs. 1,01,98,827/- on account of claim of depreciation on transferred assets. (vii) Ld.CIT(A ) erred in law and on facts of case in deleting addition of Rs. 1,03,103/- made by AO on account of prior period expenses as assessee maintains its account on mercantile basis. 4. Ld. AR submitted that as far as ground no. 1 in assessee s appeals for assessment year 2000-01 and 2001-02, which challenge failure of Ld. Commissioner of Income Tax (A) in adjudicating assessee s challenge to validity of reassessment proceedings was concerned, ground was not being pressed for both years under consideration. 12 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 4.1 With respect to ground no.2 for both appeals of assessee, which challenge action of Ld. Commissioner of Income Tax(A) in partly upholding disallowance of lease rent amounting to Rs. 12,60,000/- out of total lease rent of Rs. 15 lakh and pertaining to rent free accommodation for Managing Director, it was submitted that ITAT Delhi Bench had partially allowed issue of lease rental in favour of assessee for assessment years 2002-03, 2003-04 and 2006-07 and annual rent of Rs. 2,40,000/- had been allowed as fair rent of property provided to Managing Director. Ld. AR submitted that this accommodation was provided in accordance with employment contract between assessee company and MD and tax was duly deducted at source on such payment along with taxing same as perquisite in hands of MD. It was also submitted that rent recovered from MD was duly accounted for as income by assessee in its books of accounts and same was evident from order of Ld. Commissioner of Income Tax (A) for assessment year 2002-03 and 2003-04. 4.2 With respect to ground no. 3 in assessee s appeals for assessment year 2000-01 and 2001-02 pertaining to 13 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 disallowance of business expenditure by holding same to be personal in nature, it was submitted that these expenses were incurred to procure car accessories for employee and that same were incurred as per company s policy and have been taxed in hands of employee as perquisite. It was submitted that these expenses were related to business and were in nature of perquisite to employees and also taxed in hands of concerned employees but they were not disallowable in hands of assessee. It was submitted that similar issue had arisen in assessment year 2003-04 and Ld. Commissioner of Income Tax (A) had allowed same as deductible expenses and these were further upheld by ITAT. 4.3 With respect to ground no. 4 in assessee s appeals for assessment year 2000-01, 2001-02, it was submitted that ld. Commissioner of Income Tax (A) had erred in upholding disallowance of business expenditure by holding same as being capital in nature whereas these were in nature of routine repairs and maintenance expenses like purchase of RAM and hard disk, etc. for computers. It was submitted that these expenses were essentially revenue in nature as no new 14 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 asset had been created but were incurred for essentially maintaining computers in running condition. 5. Coming to department s appeal, Ld. AR submitted that here also, ground no. 1 were identical in both appeals and department was challenging action of Ld. Commissioner of Income Tax(A) in directing Assessing Officer to assess service income under head income from business . It was submitted that this issue was covered in favour of assessee by order of ITAT in assessee s case for assessment years 2002-03, 2003-04 and 2006-07. It was also submitted that ITAT had also decided this issue in favour of assessee for assessment years 2004-05, 2005-06and 2008-09 by relying upon its earlier orders. It was also submitted that Hon'ble Delhi High Court has also upheld issue in favour of assessee in assessment years 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. 5.1 Similarly, in respect of department s ground no. 2 for both years under appeal challenging action of Ld. Commissioner of Income Tax (A) in deleting additions pertaining to royalty expenses, Ld. AR submitted that this issue was also covered in favour of assessee by order of 15 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 ITAT for assessment years 2002-03, 2003-04 and 2006-07. It was further submitted that ITAT followed its earlier orders in assessment years 2004-05, 2005-06, 2007-08 and 2008-09. It was also submitted that Hon'ble Delhi High Court had also upheld orders of ITAT for these assessment years. 5.2 With respect to ground no. 3 of department s appeal for assessment year 2000-01 and ground no. 6 for assessment year 2001-02 pertaining to depreciation, Ld. AR submitted that this issue was also covered in favour of assessee by order of ITAT in assessee s own case for assessment years 2002-03, 2003-04 and 2006-07. It was also submitted that ITAT followed its earlier orders in assessment years 2004-05, 2005-06, 1999-2000. 5.3 With respect to ground no. 4 in department s appeal for assessment year 2000-01 and ground no. 7 in appeal for assessment year 2001-02 pertaining to prior period expenses, it was submitted that these expenses were disallowed because as per Assessing Officer, they did not pertain to assessment years under consideration. Ld. AR submitted that invoices pertaining to these expenses were received by assessee in years under consideration and, therefore, 16 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 liability to pay crystallized only when these invoices were received by assessee. Ld. AR placed reliance on judgment of Hon'ble Apex Court in case of Nonsuch Tea Estate Limited vs. CIT reported in 98 ITR 189(SC) for proposition that liability to pay crystallises only when invoices are received by assessee. It was also submitted that for allowable expenditure year of allowance is not relevant when tax rates are constant, as in case of corporate assessee. For this purpose, reliance was placed on judgment of Hon'ble Delhi High Court in case of CIT vs Vishnu Industrial Gases in ITA No.229/1988. 5.4 With respect to ground no. 3 of department s appeal for assessment year 2001-02 pertaining to department s challenge to action of Ld. Commissioner of Income Tax (A) in deleting addition made by Assessing Officer on account of disallowance of 50% of administrative expenses, Ld. AR submitted that this issue also stood covered in favour of assessee by order of ITAT for assessment years 2002-03, 2003-04 and 2006-07, 2007-08. It was also submitted that Hon'ble Delhi High Court had also upheld issue in favour of assessee. 17 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 5.5 With respect to ground nos. 4 and 5 of department s appeal for assessment year 2001-02 which pertained to supply chain management fee and reimbursement of expense received from M/s Pizza Hut International LLC, it was submitted that both these issues were also covered in favour of assessee by order of ITAT for assessment year 2002-03 wherein ITAT had upheld order of Ld. CIT (A). 6. In response, Ld. Sr. DR read out extensively from assessment orders and placed reliance on findings of Assessing Officer. On grounds taken by assessee in its appeals, he also placed reliance on observations of Ld. CIT (A). 7. We have heard rival submissions and perused material available on record. Ground no. 1 in assessee s appeal for both years challenging validity of reassessment proceedings is dismissed as not being pressed by assessee. 7.1 Ground no. 2 in appeals of assessee for both years challenge partial upholding of disallowance of lease rent amounting to Rs. 12.60 lakh out of total 18 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 lease rent of Rs. 15 lakh paid by assessee on account of rent free accommodation for its Managing Director. It is seen that this issue has been partially allowed by ITAT in its order for assessment years 2002-03, 2003-04 and 2006-07 in ITA No. 3796/Del/2006, 4154/Del/2006, 142/Del/2007, 482/Del/2007 and ITA 5122/Del/2010 wherein, vide order dated 31.05.2011, Coordinate Bench of ITAT has held in Para 46 that there was no dispute that payments in this regard had been made to persons who were covered under provisions of section 40A(2)(b) of Act. ITAT in said order has noted that assessee has extended extra pecuniary benefit to its MD and, therefore, taking into consideration overall evidence on record, Assessing Officer was directed to allow payment of rent to extent of Rs. 20,000/- per month and balance had to be disallowed. Thus, ITAT has ruled that only rent of Rs. 2,40,000/- per annum was allowable as deduction in facts and circumstances of case. We find that Ld. CIT has allowed assessee deduction of Rs. 2,40,000/- per annum for both 19 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 years under consideration and has disallowed remaining amount i.e. Rs. 12.60 lakh. During course of proceedings before us, Ld. AR has only relied on findings of ITAT in assessee s own case for earlier years as aforementioned and he has not brought out any new fact or evidence in support of his contention for allowance of amount exceeding Rs. 2,40,000/- per annum. Accordingly, we hold that as Ld. CIT (A) has already allowed deduction of Rs. 2,40,000/- per annum to assessee for both years under consideration, no further relief needs to be extended to assessee in this regard. Accordingly, we dismiss ground no. 2 of assessee s appeals for both years. 7.2 Ground no. 3 in assessee s appeal for assessment year 2000-01 challenges action of Ld. CIT (A) in upholding disallowance of business expenditure amounting to Rs. 45,000/- on ground that same was personal in nature whereas ground no. 3 in assessee s appeal for assessment year 2001-02 challenges upholding of disallowance of Rs. 7,500/- on same ground. It has been submitted by Ld. 20 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 AR that these expenses were incurred for buying car accessories for employee and they were incurred as per company s policy. It was submitted that these expenses were related to business and were in nature of perquisite to employees and taxed in hands of concerned employee and, therefore, disallowance could not be made in hands of company. It has also been submitted that ITAT in assessee s own case for 2003-04 had held that medical expenses of Director and expenses incurred on uniform of driver of Director were expenses relating to day to day business of assessee and on similar ground, these expenses, being challenged in two years under appeal, also should be allowed. Ld. AR has also relied on judgment of Hon ble Gujarat High Court in case of Sayaji Iron & Engineering Co. vs. CIT reported in 253 ITR 749 (Guj) for proposition that expenditure in maintenance of vehicles could not be disallowed. However, after perusing material on record, we are of considered opinion that assessee has not brought on record any policy decision of 21 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 management wherein it was obligatory on part of assessee company to meet expenses on purchase of car accessories for employee. Reliance placed by Ld. AR on judgment of Hon ble Gujarat High Court in case of Sayaji Iron & Engineering Co. vs. CIT (supra) also does not help case of assessee as in this case, issue was partial disallowance of expenditure incurred on maintenance of vehicles used by director of company and Hon ble Gujarat High Court had held that partial disallowance was not sustainable even if there was any personal use of vehicles by director. However, in case before us, impugned expenditure has been incurred on buying car accessories for vehicle which is not owned by assessee company but by employee of company. Accordingly, we uphold sustenance of disallowance by Ld. CIT (A) in both years under consideration and dismiss ground no. 3 of assessee s appeals for both years. 7.3 Ground no. 4 in assessee s appeal for assessment year 2000-01 challenges upholding of disallowance of 22 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 Rs. 30,880/- incurred on repair and maintenance of computers whereas in assessment year 2001-02 amount in dispute is Rs.1,13,279/-. It has been submitted that no new asset has been created in this regard and expenditure included amount spent on purchase of RAM, hard disk, laptop battery etc. It is seen that these expenditure/s have been disallowed on ground that they were capital in nature. However, looking into facts of case, we agree with averments of Ld. AR that these expenses were incurred to keep assets of assessee-company in running condition and they were essentially in nature of routine repair and maintenance expenditure. department has also not brought on record any finding of fact that new asset had been created by spending these amounts. Therefore, we allow ground no. 4 of assessee s appeals for both years under consideration and direct Assessing Officer to allow deduction of these expenses. 8. Thus, assessee s appeals for both years stand allowed partially. 23 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 9. Coming to department s ground no. 1 in both years which challenge direction by Ld. CIT (A) to Assessing Officer to assess income earned by assessee by providing services under head income from business, it is seen that this issue is covered in favour of assessee by order of ITAT in assessee s own case for assessment years 2002-03, 2003- 04 and 2006-07 (supra). issue has been discussed by Coordinate Bench of ITAT in Para 8 of said order and appears in pages 9 to 12. ITAT has held that Assessing Officer had miserably failed to appreciate facts and circumstances. ITAT has noted that assessee had been offering income from consultancy etc. as business income and same had been duly accepted by department since 1988-89. ITAT has further noted that Assessing Officer, without assigning any valid reason, concluded that it was income from other sources. ITAT has also noted that assessee, right from assessment year 1988-89 had been providing various types of services to its franchisees in India and also to its Associated 24 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 Enterprises. Thereafter, ITAT upheld adjudication of Ld. CIT (A) in holding that services income received was chargeable as business income. This order of ITAT was also followed by ITAT in assessment years 2004-05, 2005-06, 2007-08 and 2000-10 and was also upheld by Hon ble High Court of Delhi. On identical facts and respectfully following ratio as laid down by Coordinate Bench of ITAT and as upheld by Hon ble Delhi High Court in assessee s own case, we find no reason to interfere with adjudication of Ld. CIT (A) on this issue and we dismiss ground no. 1 raised by department in both years under consideration. 9.1 Ground no. 2 in both department s appeals are also identical and challenge action of Ld. CIT (A) in deleting addition on account of royalty expenses. We find that this issue is also covered in favour of assessee by order of ITAT in assessee s own case for earlier assessment years viz. 2002-03, 2003-04 and 2006-07 (supra). Coordinate Bench of ITAT has discussed issue in Para 20 of said order wherein 25 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 it is noted that Assessing Officer has misread approvals granted by Govt. of India while arriving at conclusion that assessee has not been remitting payment as per approvals. ITAT has noted that in approval, Secretariat of Industrial Assistance (SIA), Govt. of India has used expression royalty as well as Fee for technical services loosely and interchangeably. It was also noted by ITAT that these payments were directly related to business and were incurred wholly and exclusively for running franchisees within India. This adjudication by ITAT in assessee s own case also for assessment years 2004-05, 2005-06, 2007-08 and was also upheld by Hon ble Delhi High Court. During course of proceedings before us, department could not point out any legal or factual error in adjudication so reached by Ld. CIT (A). Therefore, respectfully applying ratio of Coordinate Bench, which was later upheld by Hon ble Delhi High Court, in assessee s own case, we find no reason to interfere with finding of Ld. CIT (A) on this issue also. Accordingly, we dismiss ground no. 2 of department s appeals for both years. 26 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 9.2 Ground no. 3 in department s appeal for assessment year 2000-01 and ground no. 6 in department s appeal for 2001-02 are identical and challenge action of Ld. CIT (A) in allowing claim of depreciation on transferred assets. facts surrounding this issue are that during previous year 1988-89 relevant to assessment year 1989-90, some restaurants in Delhi were sold by assessee on itemized sale basis wherein all fixed assets pertaining to these outlets stood transferred to buyer. consideration received was appropriated against security deposit and advance rentals of restaurants and all fixed assets were transferred at nil consideration. Since no separate sale consideration was received in respect of fixed assets, no reduction was made on account of same in block assets and block of assets continued to exist and, therefore, depreciation was claimed in respect of block of assets. This issue is also covered in favour of assessee by order of ITAT for assessment years 2002-03, 2003-04 and 2006-07 (supra) in assessee s own case. Coordinate Bench of ITAT has discussed this issue in Para 25 of said order and has also followed this order in assessment years 2004-05 and 2005-06 also. Therefore, respectfully following 27 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 adjudication made by Coordinate Bench of ITAT in assessee s own case (supra) we dismiss ground no. 3 of department s appeal for assessment year 2000-01 and ground no. 6 in department s appeal for assessment year 2001-02. 9.3 Ground no. 4 in department s appeal for 2000-01 and ground no. 7 in appeal for 2001-02 are again identical and they challenge action of Ld. CIT (A) in deleting addition on account of prior period expenses. It is assessee s contention that these expenses were claimed during year under consideration because invoices relating to these expenses were received by assessee during year under consideration and, therefore, liability to pay amounts crystallized only when invoices were received. We find that Ld. CIT (A), while allowing claim of assessee in both years, has followed his orders for earlier assessment years wherein in similar circumstances, he had allowed identical expenses of earlier years. department could not bring on record any evidence to distinguish facts in these two years from facts in earlier years. Therefore, we find no reason to interfere with findings of Ld. CIT (A) on this issue. 28 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 Accordingly, we dismiss ground no. 4 for assessment year 2000- 01 and ground no. 7 for 2001-02. 9.4 Ground no.3 in department s appeal for 2001-02 challenges deletion of addition by Ld. CIT (A) on account of disallowance of 50% of administrative expenses. controversy arose because assessee has wholly owned subsidiary named Yum Restaurant India Pvt. Ltd. whose main job was to carry out marketing, advertising, media and promotional activities. Assessing Officer observed that subsidiary company had been operating from premises of assessee only and, therefore, all administrative expenses in connection with advertising, promotional activities, marketing etc. should be allocated to company and assessee should not bear overhead expenses at head office. Assessing Officer proceeded to disallow 50% of administrative expenses. However, this issue has also been decided in favour of assessee by order of ITAT in assessee s own case for assessment years 2002-03, 2003-04 and 2006-07 (supra) and also followed by ITAT in assessment years 2004-05, 2005-06 and 2007-08. orders of ITAT for these years were also upheld by Hon ble Delhi High Court. issue has been discussed 29 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 in Para 21 and 22 of ITAT order for assessment years 2002- 03, 2003-04 and 2006-07 (supra) wherein ITAT has noted that subsidiary of assessee company was incorporated to carry out advertising, marketing and promotional activities of assessee as well as various franchisees. It has been further noted that assessee had entered into tripartite agreement with its franchisee and subsidiary company wherein it was provided in tripartite agreement that franchisee was to pay advertisement and promotional contribution and assessee company may not pay separate contribution. coordinate bench of ITAT went on to note that subsidiary was to carry out on no-profit/no-loss basis. Coordinate Bench of ITAT held that Assessing Officer had disallowed expenses attributable to subsidiary but disallowance was not correct as ultimately it was assessee who had to contribute all sums as assessee can either bear cost of expenses incurred by subsidiary or separately remit amount to subsidiary and, thus, it was assessee who had to essentially contribute amounts. On identical facts and respectfully following ratio of order of coordinate Bench of ITAT in assessee s own case in earlier assessment 30 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 years and as upheld by Hon ble Delhi High Court, we dismiss ground no. 3 of department s appeal for assessment year 2001- 02. 9.5 Ground nos. 4 and 5 in department s appeal for assessment year 2001-02 are related grounds and challenge deletion of addition made on account of Supply Chain Management and reimbursement of expenses received from M/s Pizza Fast Food Pvt. Ltd. This issue has been discussed in ITAT s order for assessment year 2002-03 wherein, in Para 26, 27 and 28, findings of ITAT have been recorded. In assessment year 2002-03, department had contested action of Ld. CIT (A) in including income of Rs. 3,01,500/- as taxable in assessment year 2002-03 whereas as per department, it pertained to assessment year 2001-02. These receipts pertained to Supply Chain Management local fees, Supply Chain Management international fees and reimbursement of general and administrative expenses. issue arose because in special audit report, auditor had pointed out that three receipts accounted by assessee pertain to earlier assessment years. However, Ld. CIT (A) was of view that since tax rate in both assessment years was same, it did not make 31 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 much difference if these receipts were included in assessment year 2002-03 and he directed Assessing Officer to tax this income in 2002-03 itself. On appeal, Coordinate Bench of ITAT held that major item appeared to be taxable in assessment year 2002-03 and further, Ld. CIT (A) had held them to be taxable in assessment year 2002-03 on ground of tax rate being similar. ITAT Coordinate Bench went on to hold that it would create unnecessary complications by excluding these receipts from assessment year 2002-03 and include them in assessment year 2001-02. Thus, it is evident that ITAT has held that impugned receipts on account of Supply Chain Management as well as reimbursement of general and administrative expenses were to be taxed in assessment year 2002-03. Once these have been taxed in assessment year 2002- 03, there is no question of bringing them to tax in assessment year 2001-02. Accordingly, ground nos. 4 and 5 of department s appeal for assessment year 2001-02 also stand dismissed. 10. In result, both department s appeal for both years stand dismissed. 32 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 11. In final result, assessee s appeals for both assessment years are partly allowed and department s appeals for both assessment years are dismissed. order is pronounced in open court on 20.02.2018. Sd/- Sd/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER Dated: 20th FEBRUARY, 2018 GS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY By Order ASSISTANT REGISTRAR 33 Yum Restaurants (India) Pvt. Ltd. v. ITO, Ward 18(4), New Delhi