Tribunal: Trademark License Fees Deductible as Revenue Expenditure

The Tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee regarding the deduction of trademark license fees as revenue expenditure. The ongoing use of the trademark did not result in the acquisition of a capital asset, and the licensee did not gain any valuable rights beyond the temporary use of the trademark. The Tribunal emphasized that the licensor retained control over the trademark, making the expense deductible as revenue expenditure. Consequently, the Revenue's appeal for AY 2012-13 and other related appeals for subsequent years were dismissed based on the identical issue involved.

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Issues:
Appeal by Revenue against CIT(A) orders for AYs 2012-2013 to 2014-15 regarding disallowance of trademark license utilization fees.

Detailed Analysis:

Issue 1: Disallowance of Trademark License Utilization Fees
The Revenue challenged the CIT(A)'s decision to delete the addition of Rs.2,44,82,272 made on account of disallowance of trademark license utilization fees. The AO observed the licensee obtained a trademark license for an unlimited period and concluded the expenditure was capital in nature, disallowing it. The CIT(A) allowed the appeal based on past decisions and deleted the disallowance, citing the licensee's ongoing use of the trademark. The Revenue contended the expenditure provided an enduring advantage and should be treated as capital, urging to reverse the CIT(A)'s decision.

Issue 2: Judicial Precedent
The assessee argued that the issue had been previously examined by a co-ordinate bench regarding the trademark license agreement in the hands of the erstwhile partnership firm. The Tribunal's past order highlighted the allowance of similar payments as revenue expenditure, emphasizing the ongoing nature of the advantage derived from the trademark use. The Tribunal found no reason to interfere with the CIT(A)'s decision, dismissing the Revenue's appeal.

Conclusion
The Tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee regarding the deduction of trademark license fees as revenue expenditure. The ongoing use of the trademark did not result in the acquisition of a capital asset, and the licensee did not gain any valuable rights beyond the temporary use of the trademark. The Tribunal emphasized that the licensor retained control over the trademark, making the expense deductible as revenue expenditure. Consequently, the Revenue's appeal for AY 2012-13 and other related appeals for subsequent years were dismissed based on the identical issue involved.

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