Yum! Restaurants (India) Pvt. Ltd., Gurgaon v. ITO, New Delhi

PER BENCH: These two sets of cross appeals pertain to assessment years 2001-02. ITA 964/Del/2013 is the ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 assessees appeal for assessment year 2000-01 against the order dated 30.11.2012 passed by the Ld. CIT (A)- XXI, New Delhi whereas ITA 953/2013 is the departments cross appeal. ITA 965/2013 is the assessees appeal for assessment years 2001-02 and is preferred against the order dated 30.11.2012 passed by the Ld. CIT(A)-XXI, New Delhi whereas ITA 955/Del/2013 is the departments cross appeal. All the four appeals were heard together and are being disposed of through this consolidated order for the sake of convenience. 1.1 We now take up the respective assessment years one by one. ITA 964/2013 and 953/2013 AY 2000-01

2. The brief facts for assessment year 2000-01 are that the assessee is a company incorporated under the provisions of Companies Act, 1956 and is engaged in the business of franchisee of Pizza Hut and KFC Restaurants for which it appointed various franchisees. For this purpose, the assessee has obtained franchisee rights from KFC International Holdings Inc. and Pizza Hut ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 International LLC for which it pays royalty. Further, the assessee has also entered into service agreement with KFC International Holdings and Pizza Hut International LLC. The 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, the assessee is remunerated at agreed upon rates as per the service agreement. Further, the assessee has also established a wholly owned subsidiary under the name of Yum Restaurants Marketing Private Limited which was incorporated with the sole objective of undertaking advertising, media and promotional activities exclusively for the assessee and its franchisees at the national and international level. 2.1 For the year under consideration, the assessee filed its return of income declaring a loss of Rs. 99,81,620/-. The return was initially processed u/s 143(1) of the Act at the returned loss. Subsequently, for assessment year 2002-03, Special Audit was conducted under the provisions of section 142(2A) of the Income Tax Act, 1961 (hereinafter called the Act) wherein several additions ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 and disallowances were made. Based on the special audit report, reassessment proceedings u/s 147 of the Act were initiated by the department and finally, vide order dated 29.12.2006, the Assessing Officer passed order u/s 143(3)/147 of the Act determining the total income of the assessee at Rs. 2,54,61,031/- which was then set off against the brought forward losses resulting in nil taxable income. The additions/disallowances/adjustments made by the Assessing Officer were as under:- 2.2 Aggrieved, the assessee preferred an appeal before the learned First Appellate authority who partly upheld the disallowance of lease rent paid on account of providing rent free accommodation to the Managing Service income, treated as 'income from other sources as against business income declared by the assessee 6,76,02,025

2 Disallowance of royalty paid 1,74,92,008

3 Disallowance of lease rent paid for providing rent free accommodation for managing director 15,00,000

4 Notional interest income on security deposits for obtaining rent free accommodation for managing director 6,00,000

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 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 Director of the company by upholding the disallowance amounting to Rs. 1,26,00,000/-. The Ld. Commissioner of Income Tax (A) also upheld the disallowance of business expenditure of Rs. 45,000/- by holding the same to be personal in nature. The Ld. Commissioner of Income Tax (A) also upheld the disallowance of business expenditure amounting to Rs. 30,880/- by holding the same to be capital in nature. However, the Ld. Commissioner of Income Tax(A) gave relief to the assessee in respect of service income by directing the Assessing Officer to assess income earned by the assessee by providing services amounting to Rs. 6,76,02,025/- under the head Income from business. The Ld. Commissioner of Income Tax (A) also deleted the addition of Rs. 1,74,92,008/- paid as royalty and treated as being capital in nature by the Assessing Officer. The Ld. Commissioner of Income Tax(A) also allowed the assessees ground of claim of depreciation amounting to Rs. 1,54,49,696/-. The Ld. Commissioner of Income Tax (A) also allowed the assessees claim by deleting addition 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 the assessee and the department are before the ITAT and have challenged the action of the Ld. Commissioner of Income Tax(A) and the respective grounds raised by both the parties are as under:- 2.4 The following grounds have been raised by the assessee in ITA No. 964/D/2013:-

1. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) - XXI [Ld. CIT(A)] has erred in not adjudicating the Ground No. 2 raised by the appellant challenging the validity of the reassessment proceedings under Section 148 of the Income Tax Act, 1961 [the Act].

2. That on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in partly upholding the disallowance of lease rent amounting to Rs. 12,60,000 out of the total lease rent of Rs. 15,00,000 paid by the appellant to M/s Mezbaan Hoteliers Pvt. Ltd. on account of rent free accommodation obtained for its Managing Director. In doing so, the Ld. CIT (A) has erred in not considering the valuation certificates submitted by the appellant.

3. That on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in upholding the disallowance of business expenditure amounting to Rs. 45,000 by holding the same to be personal in nature.

4. That on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in upholding the ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 disallowance of business expenditure amounting to Rs. 30,880 by holding the same as being capital in nature. In doing so, the Ld. CIT (A) has failed to correctly appreciate the nature of expenses. 2.5 The following grounds have been raised by the department in ITA No. 953/D/2013:-

(i) The Ld. CIT(A) erred in law and on the facts of the case in directing the AO to assessee the income erred by the assessee by providing services, under the head income from Business.

(ii) The Ld CIT(A) erred in law and on the facts of the case in deleting the addition of Rs. 1,74,92,008/- made by the AO by treating the royalty expenses as capital in nature.

(iii) The Ld. CIT(A) erred in law and on the facts of the case in allowing the appeal of the assessee against the addition of Rs. 1,54,49,696/- on account of claim depreciation on the transferred assets.

(iv) The Ld. CIT(A) erred in law and on the facts of the case in deleting the addition of Rs. 90,812/- made by the AO on accounts of prior period expenses as the assessee maintains its accounts on mercantile basis.

(iv) The appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. ITA 965/2013 and 954/2013 AY 2001-02

3. In this year, the assessee had filed its return of income declaring a total taxable income of Rs. 47,32,300/- under the ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 head income from other sources. The assessee had also computed the profits under the head profits and gains of business and profession amounting to Rs. 92,07,745/- which, after adjusting the brought forward losses to the extent of Rs. 92,07,745/-, were reduced to nil. The assessment was completed u/s 143(3) of the Act at Rs. 1,81,06,661/- as against the returned income declared at Nil. This assessment was completed on 31.03.2004. Subsequently, due to special audit being ordered under the provisions of section 142(2A) of the Act for assessment year 2002-03, the Assessing Officer initiated reassessment proceedings u/s 147 and concluded the reassessment proceedings on 29.12.2006 by computing the income at Rs. 8,64,96,240/- which was then set off against the brought forward business losses and resulted in nil taxable income. In the reassessment, the Assessing Officer made the following adjustments, additions and disallowances:- S.No. Particulars Amount (Rs.) * 1 Service income, treated as income from other sources as against business income 9,04,27,842

2 Disallowance of royalty paid to YRAPL 2,33,30,505

3 Disallowance of administrative expenses by hypothetical apportionment to subsidiary company, i.e. YRMPL 3,30,68,187

4 Disallowance of lease rent paid for obtaining rent free accommodation for managing director (Mr. Sandeep Kohli) 15,00,000 ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013

5 Addition made on account of notional interest income on security deposits placed for obtaining rent free accommodation for managing director (Mr. Sandeep Kohli) 6,00,000

6 Disallowance on account of SCM Income 7,43,000

7 Disallowance on account of G & A reimbursement 23,62,500

8 Disallowance of tax depreciation claimed under Section 32 of the 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, the assessee carried the matter before the Ld. CIT (A) who partly sustained the disallowance of lease rent in respect of MDs rent free accommodation to the tune of Rs. 12,60,000/-. The Ld. CIT (A) also upheld the disallowance of Rs. 7,500/- on account of personal expenditure. The Ld. CIT (A) also dismissed the assessees challenge to disallowance of business expenditure amounting to Rs. 1,13,279/- on account of the expenditure being capital in nature. However, the Ld. Commissioner of Income Tax (A) directed the Assessing Officer to treat and tax the service income of Rs. 9,04,727,842/- under the head income from business. The Ld. Commissioner of Income Tax (A) also deleted the addition of Rs. 23,30,505/- in respect of royalty expenses. The Ld. Commissioner of Income Tax (A) also deleted the disallowance of 50% made under the head general and administrative expenses. The Ld. Commissioner of Income Tax ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 (A) also gave relief to the assessee with respect to supply chain management fee amounting to Rs. 7,43,000/-. And also deleted the addition of Rs. 23,62,500/- pertaining to reimbursement of expenses received from M/s Pizza Hut International LLC which were incurred by the assessee in the year under consideration but credited by the assessee in its profit and loss account in the subsequent year. The Ld. CIT (A) also allowed the assessees claim of depreciation amounting to Rs. 1,01,98,827/-. and also directed the deletion of addition of Rs. 1,03,103/- pertaining to prior period expenses. 3.2 Now, both the assessee and the department are before the ITAT and have challenged the action of the Ld. Commissioner of Income Tax(A) and the respective grounds raised by both the parties are as under:- 3.3 Following grounds have been raised by the assessee in ITA No. 965/D/2013:-

1. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) - XXI [Ld. CIT(A)] has erred in not adjudicating the Ground No. 2 raised by the appellant challenging the validity of the reassessment proceedings under Section

148 of the Income Tax Act, 1961 [the Act]. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013

2. That on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in partly upholding the disallowance of lease rent amounting to Rs. 12,60,000 out of the total lease rent of Rs. 15,00,000 paid by the appellant to M/s Mezbaan Hoteliers Pvt. Ltd. on account of rent free accommodation obtained for its Managing Director. In doing so, the Ld. CIT (A) has erred in not considering the valuation certificates submitted by the appellant.

3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the disallowance of business expenditure amounting to Rs. 7,500 by holding the same to be personal in nature.

4. That on the facts and circumstances of the case and in law, the Ld. C1T(A) has erred in upholding the disallowance of business expenditure amounting to Rs. 1,13,279 by holding the same as being capital in nature. In doing so, the Ld. CIT (A) has failed to correctly appreciate the nature of expenses. 3.4 Following grounds have been raised by the department in ITA No. 955/D/2013:-

(i) The Ld. CIT(A) erred in law and on the facts of the case in directing the AO to assessee the income erred by the assessee by providing services, under the head income from Business.

(ii) The Ld. CIT(A) erred in law and on the facts of the case in deleting the addition of Rs.2,33,30,505/- made by the AO by treating the royalty expenses as capital in nature.

(iii) The Ld. CIT(A) erred in law and on the facts of the case in deleting the addition made by the AO on account of disallowance of 50% of administrative expenses. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013

(iv) The Ld. CIT(A) erred in law and on the facts of the case in deleting the addition of Rs. 7,43,000/- made by the AO on accounts of Supply Chain Management Fee pertaining to this year and declared by the assessee in the subsequent year.

(v) The Ld. CIT(A) erred in law and on the facts of the case in deleting the addition of Rs.23,62,500/- made by the AO on account of reimbursement of expenses received from M/s Pizza Fast Food Restaurants (P) Ltd. which were incurred by the assessee in this year but credited by the assessee to its profit & loss account in the subsequent year.

(vi) The Ld. CIT(A) erred in law and on the facts of the case in allowing the appeal of the assesses against the addition of Rs. 1,01,98,827/- on account of claim of depreciation on the transferred assets.

(vii) The Ld.CIT(A ) erred in law and on the facts of the case in deleting the addition of Rs. 1,03,103/- made by the AO on account of prior period expenses as the assessee maintains its account on mercantile basis.

4. The Ld. AR submitted that as far as ground no. 1 in assessees appeals for assessment year 2000-01 and 2001-02, which challenge the failure of the Ld. Commissioner of Income Tax (A) in adjudicating the assessees challenge to the validity of reassessment proceedings was concerned, the ground was not being pressed for both the years under consideration. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 4.1 With respect to ground no.2 for both the appeals of the assessee, which challenge the action of the Ld. Commissioner of Income Tax(A) in partly upholding the 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 the Managing Director, it was submitted that ITAT Delhi Bench had partially allowed the issue of lease rental in favour of the assessee for assessment years 2002-03, 2003-04 and 2006-07 and the annual rent of Rs. 2,40,000/- had been allowed as fair rent of the property provided to the Managing Director. The Ld. AR submitted that this accommodation was provided in accordance with the employment contract between the assessee company and the MD and tax was duly deducted at source on such payment along with taxing the same as perquisite in the hands of the MD. It was also submitted that the rent recovered from the MD was duly accounted for as income by the assessee in its books of accounts and the same was evident from the order of the Ld. Commissioner of Income Tax (A) for assessment year 2002-03 and 2003-04. 4.2 With respect to ground no. 3 in assessees appeals for assessment year 2000-01 and 2001-02 pertaining to ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 disallowance of business expenditure by holding the same to be personal in nature, it was submitted that these expenses were incurred to procure car accessories for an employee and that the same were incurred as per companys policy and have been taxed in the hands of the employee as perquisite. It was submitted that these expenses were related to the business and were in the nature of perquisite to the employees and also taxed in the hands of the concerned employees but they were not disallowable in the hands of the assessee. It was submitted that a similar issue had arisen in assessment year 2003-04 and the Ld. Commissioner of Income Tax (A) had allowed the same as deductible expenses and these were further upheld by the ITAT. 4.3 With respect to ground no. 4 in assessees appeals for assessment year 2000-01, 2001-02, it was submitted that the ld. Commissioner of Income Tax (A) had erred in upholding the disallowance of business expenditure by holding the same as being capital in nature whereas these were in the nature of routine repairs and maintenance expenses like purchase of RAM and hard disk, etc. for the computers. It was submitted that these expenses were essentially revenue in nature as no new ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 asset had been created but were incurred for essentially maintaining the computers in running condition.

5. Coming to the departments appeal, the Ld. AR submitted that here also, ground no. 1 were identical in both the appeals and the department was challenging the action of the Ld. Commissioner of Income Tax(A) in directing the Assessing Officer to assess the service income under the head income from business. It was submitted that this issue was covered in favour of the assessee by the order of ITAT in assessees 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 the assessee for assessment years 2004-05, 2005-06and 2008-09 by relying upon its earlier orders. It was also submitted that the Hon'ble Delhi High Court has also upheld the issue in favour of the 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 departments ground no. 2 for both the years under appeal challenging the action of the Ld. Commissioner of Income Tax (A) in deleting the additions pertaining to royalty expenses, the Ld. AR submitted that this issue was also covered in favour of the assessee by the order of ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 the ITAT for assessment years 2002-03, 2003-04 and 2006-07. It was further submitted that the ITAT followed its earlier orders in assessment years 2004-05, 2005-06, 2007-08 and 2008-09. It was also submitted that the Hon'ble Delhi High Court had also upheld the orders of the ITAT for these assessment years. 5.2 With respect to ground no. 3 of the departments appeal for assessment year 2000-01 and ground no. 6 for assessment year 2001-02 pertaining to depreciation, the Ld. AR submitted that this issue was also covered in favour of the assessee by the order of the ITAT in assessees own case for assessment years 2002-03, 2003-04 and 2006-07. It was also submitted that the ITAT followed its earlier orders in assessment years 2004-05, 2005-06, 1999-2000. 5.3 With respect to ground no. 4 in departments 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 the Assessing Officer, they did not pertain to the assessment years under consideration. The Ld. AR submitted that the invoices pertaining to these expenses were received by the assessee in the years under consideration and, therefore, the ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 liability to pay crystallized only when these invoices were received by the assessee. The Ld. AR placed reliance on the judgment of the Hon'ble Apex Court in the case of Nonsuch Tea Estate Limited vs. CIT reported in 98 ITR 189(SC) for the proposition that the liability to pay crystallises only when the invoices are received by the assessee. It was also submitted that for an allowable expenditure the year of allowance is not relevant when the tax rates are constant, as in the case of a corporate assessee. For this purpose, reliance was placed on the judgment of Hon'ble Delhi High Court in the case of CIT vs Vishnu Industrial Gases in ITA No.229/1988. 5.4 With respect to ground no. 3 of the departments appeal for assessment year 2001-02 pertaining to the departments challenge to the action of the Ld. Commissioner of Income Tax (A) in deleting the addition made by the Assessing Officer on account of disallowance of 50% of administrative expenses, the Ld. AR submitted that this issue also stood covered in favour of the assessee by the order of the ITAT for assessment years 2002-03, 2003-04 and 2006-07, 2007-08. It was also submitted that the Hon'ble Delhi High Court had also upheld the issue in favour of the assessee. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 5.5 With respect to ground nos. 4 and 5 of the departments 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 the assessee by the order of the ITAT for assessment year 2002-03 wherein the ITAT had upheld the order of the Ld. CIT (A).

6. In response, the Ld. Sr. DR read out extensively from the assessment orders and placed reliance on the findings of the Assessing Officer. On the grounds taken by the assessee in its appeals, he also placed reliance on the observations of the Ld. CIT (A).

7. We have heard the rival submissions and perused the material available on record. Ground no. 1 in assessees appeal for both the years challenging the validity of reassessment proceedings is dismissed as not being pressed by the assessee. 7.1 Ground no. 2 in the appeals of the assessee for both the years challenge partial upholding of disallowance of lease rent amounting to Rs. 12.60 lakh out of the total ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 lease rent of Rs. 15 lakh paid by the assessee on account of rent free accommodation for its Managing Director. It is seen that this issue has been partially allowed by the 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 the ITAT has held in Para 46 that there was no dispute that the payments in this regard had been made to persons who were covered under the provisions of section 40A(2)(b) of the Act. The ITAT in the said order has noted that the assessee has extended extra pecuniary benefit to its MD and, therefore, taking into consideration the overall evidence on record, the Assessing Officer was directed to allow payment of rent to the extent of Rs. 20,000/- per month and the balance had to be disallowed. Thus, the ITAT has ruled that only a rent of Rs. 2,40,000/- per annum was allowable as a deduction in the facts and circumstances of the case. We find that the Ld. CIT has allowed the assessee a deduction of Rs. 2,40,000/- per annum for both the ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 0 years under consideration and has disallowed the remaining amount i.e. Rs. 12.60 lakh. During the course of proceedings before us, the Ld. AR has only relied on the findings of the ITAT in assessees 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 an amount exceeding Rs. 2,40,000/- per annum. Accordingly, we hold that as the Ld. CIT (A) has already allowed a deduction of Rs. 2,40,000/- per annum to the assessee for both the years under consideration, no further relief needs to be extended to the assessee in this regard. Accordingly, we dismiss ground no. 2 of the assessees appeals for both the years. 7.2 Ground no. 3 in assessees appeal for assessment year 2000-01 challenges the action of the Ld. CIT (A) in upholding the disallowance of business expenditure amounting to Rs. 45,000/- on the ground that the same was personal in nature whereas ground no. 3 in assessees appeal for assessment year 2001-02 challenges the upholding of disallowance of Rs. 7,500/- on the same ground. It has been submitted by the Ld. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 1 AR that these expenses were incurred for buying car accessories for an employee and they were incurred as per the companys policy. It was submitted that these expenses were related to the business and were in the nature of perquisite to the employees and taxed in the hands of the concerned employee and, therefore, the disallowance could not be made in the hands of the company. It has also been submitted that the ITAT in assessees own case for 2003-04 had held that medical expenses of the Director and expenses incurred on the uniform of a driver of the Director were expenses relating to day to day business of the assessee and on similar ground, these expenses, being challenged in the two years under appeal, also should be allowed. Ld. AR has also relied on the judgment of Honble Gujarat High Court in the case of Sayaji Iron & Engineering Co. vs. CIT reported in 253 ITR 749 (Guj) for the proposition that the expenditure in maintenance of vehicles could not be disallowed. However, after perusing the material on record, we are of the considered opinion that the assessee has not brought on record any policy decision of ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 2 the management wherein it was obligatory on the part of the assessee company to meet the expenses on purchase of car accessories for an employee. Reliance placed by the Ld. AR on the judgment of the Honble Gujarat High Court in the case of Sayaji Iron & Engineering Co. vs. CIT (supra) also does not help the case of the assessee as in this case, the issue was partial disallowance of expenditure incurred on the maintenance of vehicles used by the director of the company and the Honble Gujarat High Court had held that partial disallowance was not sustainable even if there was any personal use of the vehicles by the director. However, in the case before us, the impugned expenditure has been incurred on buying car accessories for a vehicle which is not owned by the assessee company but by the employee of the company. Accordingly, we uphold the sustenance of disallowance by the Ld. CIT (A) in both the years under consideration and dismiss ground no. 3 of the assessees appeals for both the years. 7.3 Ground no. 4 in assessees appeal for assessment year 2000-01 challenges the upholding of disallowance of ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 3 Rs. 30,880/- incurred on repair and maintenance of computers whereas in assessment year 2001-02 the amount in dispute is Rs.1,13,279/-. It has been submitted that no new asset has been created in this regard and the expenditure included amount spent on purchase of RAM, hard disk, laptop battery etc. It is seen that these expenditure/s have been disallowed on the ground that they were capital in nature. However, looking into the facts of the case, we agree with the averments of the Ld. AR that these expenses were incurred to keep the assets of the assessee-company in a running condition and they were essentially in the nature of routine repair and maintenance expenditure. The department has also not brought on record any finding of fact that a new asset had been created by spending these amounts. Therefore, we allow ground no.

4 of the assessees appeals for both the years under consideration and direct the Assessing Officer to allow deduction of these expenses.

8. Thus, the assessees appeals for both the years stand allowed partially. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 4

9. Coming to the departments ground no. 1 in both the years which challenge the direction by the Ld. CIT (A) to the Assessing Officer to assess the income earned by the assessee by providing services under the head income from business, it is seen that this issue is covered in favour of the assessee by the order of the ITAT in assessees own case for assessment years 2002-03, 2003-

04 and 2006-07 (supra). The issue has been discussed by the Coordinate Bench of the ITAT in Para 8 of the said order and appears in pages 9 to 12. The ITAT has held that the Assessing Officer had miserably failed to appreciate the facts and circumstances. The ITAT has noted that the assessee had been offering income from consultancy etc. as a business income and the same had been duly accepted by the department since 1988-89. The ITAT has further noted that the Assessing Officer, without assigning any valid reason, concluded that it was income from other sources. The ITAT has also noted that the assessee, right from assessment year 1988-89 had been providing various types of services to its franchisees in India and also to its Associated ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 5 Enterprises. Thereafter, the ITAT upheld the adjudication of the Ld. CIT (A) in holding that the services income received was chargeable as business income. This order of the ITAT was also followed by the ITAT in assessment years 2004-05, 2005-06, 2007-08 and 2000-10 and was also upheld by the Honble High Court of Delhi. On identical facts and respectfully following the ratio as laid down by the Coordinate Bench of the ITAT and as upheld by the Honble Delhi High Court in assessees own case, we find no reason to interfere with the adjudication of the Ld. CIT (A) on this issue and we dismiss ground no. 1 raised by the department in both the years under consideration. 9.1 Ground no. 2 in both the departments appeals are also identical and challenge the action of the Ld. CIT (A) in deleting the addition on account of royalty expenses. We find that this issue is also covered in favour of the assessee by the order of the ITAT in assessees own case for earlier assessment years viz. 2002-03, 2003-04 and 2006-07 (supra). The Coordinate Bench of ITAT has discussed the issue in Para 20 of the said order wherein ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 6 it is noted that the Assessing Officer has misread the approvals granted by the Govt. of India while arriving at the conclusion that the assessee has not been remitting the payment as per the approvals. The ITAT has noted that in the approval, Secretariat of Industrial Assistance (SIA), Govt. of India has used the expression royalty as well as Fee for technical services loosely and interchangeably. It was also noted by the ITAT that these payments were directly related to the business and were incurred wholly and exclusively for running the franchisees within India. This adjudication by the ITAT in assessees own case also for assessment years 2004-05, 2005-06, 2007-08 and was also upheld by the Honble Delhi High Court. During the course of proceedings before us, department could not point out any legal or factual error in the adjudication so reached by the Ld. CIT (A). Therefore, respectfully applying the ratio of the Coordinate Bench, which was later upheld by the Honble Delhi High Court, in assessees own case, we find no reason to interfere with the finding of the Ld. CIT (A) on this issue also. Accordingly, we dismiss ground no. 2 of the departments appeals for both the years. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 7 9.2 Ground no. 3 in departments appeal for assessment year 2000-01 and ground no. 6 in departments appeal for 2001-02 are identical and challenge the action of the Ld. CIT (A) in allowing the claim of depreciation on transferred assets. The facts surrounding this issue are that during the previous year 1988-89 relevant to assessment year 1989-90, some restaurants in Delhi were sold by the assessee on an itemized sale basis wherein all the fixed assets pertaining to these outlets stood transferred to the buyer. The consideration received was appropriated against the security deposit and advance rentals of the 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 the same in the block assets and the 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 the assessee by the order of the ITAT for assessment years 2002-03, 2003-04 and 2006-07 (supra) in assessees own case. The Coordinate Bench of the ITAT has discussed this issue in Para 25 of the said order and has also followed this order in assessment years 2004-05 and 2005-06 also. Therefore, respectfully following the ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 8 adjudication made by the Coordinate Bench of the ITAT in assessees own case (supra) we dismiss ground no. 3 of the departments appeal for assessment year 2000-01 and ground no. 6 in departments appeal for assessment year 2001-02. 9.3 Ground no. 4 in departments appeal for 2000-01 and ground no. 7 in the appeal for 2001-02 are again identical and they challenge the action of the Ld. CIT (A) in deleting the addition on account of prior period expenses. It is the assessees contention that these expenses were claimed during the year under consideration because the invoices relating to these expenses were received by the assessee during the year under consideration and, therefore, the liability to pay the amounts crystallized only when the invoices were received. We find that the Ld. CIT (A), while allowing the claim of the assessee in both the years, has followed his orders for earlier assessment years wherein in similar circumstances, he had allowed identical expenses of earlier years. The department could not bring on record any evidence to distinguish the facts in these two years from the facts in earlier years. Therefore, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 9 Accordingly, we dismiss ground no. 4 for assessment year 2000-

01 and ground no. 7 for 2001-02. 9.4 Ground no.3 in departments appeal for 2001-02 challenges the deletion of addition by the Ld. CIT (A) on account of disallowance of 50% of administrative expenses. The controversy arose because the assessee has a wholly owned subsidiary named Yum Restaurant India Pvt. Ltd. whose main job was to carry out marketing, advertising, media and promotional activities. The Assessing Officer observed that the subsidiary company had been operating from the premises of the assessee only and, therefore, all the administrative expenses in connection with advertising, promotional activities, marketing etc. should be allocated to the company and the assessee should not bear overhead expenses at the head office. The Assessing Officer proceeded to disallow 50% of the administrative expenses. However, this issue has also been decided in favour of the assessee by the order of the ITAT in assessees 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. The orders of the ITAT for these years were also upheld by the Honble Delhi High Court. The issue has been discussed ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 in Para 21 and 22 of the ITAT order for assessment years 2002- 03, 2003-04 and 2006-07 (supra) wherein the ITAT has noted that the subsidiary of the assessee company was incorporated to carry out advertising, marketing and promotional activities of the assessee as well as the various franchisees. It has been further noted that the assessee had entered into a tripartite agreement with its franchisee and the subsidiary company wherein it was provided in the tripartite agreement that the franchisee was to pay advertisement and promotional contribution and the assessee company may not pay a separate contribution. The coordinate bench of the ITAT went on to note that the subsidiary was to carry out on no-profit/no-loss basis. The Coordinate Bench of the ITAT held that the Assessing Officer had disallowed the expenses attributable to the subsidiary but the disallowance was not correct as ultimately it was the assessee who had to contribute all the sums as the assessee can either bear the cost of expenses incurred by the subsidiary or separately remit the amount to the subsidiary and, thus, it was the assessee who had to essentially contribute the amounts. On identical facts and respectfully following the ratio of the order of the coordinate Bench of the ITAT in assessees own case in earlier assessment ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013 years and as upheld by the Honble Delhi High Court, we dismiss ground no. 3 of departments appeal for assessment year 2001- 9.5 Ground nos. 4 and 5 in the departments appeal for assessment year 2001-02 are related grounds and challenge the 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 ITATs order for assessment year 2002-03 wherein, in Para 26, 27 and 28, the findings of the ITAT have been recorded. In assessment year 2002-03, the department had contested action of the Ld. CIT (A) in including an income of Rs. 3,01,500/- as taxable in assessment year 2002-03 whereas as per the 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. The issue arose because in the special audit report, the auditor had pointed out that three receipts accounted by the assessee pertain to earlier assessment years. However, the Ld. CIT (A) was of the view that since the tax rate in both the assessment years was the same, it did not make 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 the Assessing Officer to tax this income in 2002-03 itself. On appeal, the Coordinate Bench of the ITAT held that the major item appeared to be taxable in assessment year 2002-03 and further, the Ld. CIT (A) had held them to be taxable in assessment year 2002-03 on the ground of the tax rate being similar. The 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 the ITAT has held that the 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 the departments appeal for assessment year 2001-02 also stand dismissed.

10. In the result, both the departments appeal for both the years stand dismissed. ITA No. 964, 965/D/2013 ITA 953 & 955/D/2013

11. In the final result, the assessees appeals for both the assessment years are partly allowed and departments appeals for both the assessment years are dismissed. The order is pronounced in the open court on 20.02.2018. Sd/- Sd/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER Dated: 20th FEBRUARY, 2018 Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR, ITAT TRUE COPY By Order ASSISTANT REGISTRAR