TaxTMI 
TaxTMI 
2001 (8) TMI 307
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....cquired the trade mark "Tauras" for the bidis a few years before the assessment year under appeal. This brand was new in the market. In the beginning, the assessee manufactured the bidis of this brand and sold them itself in the market. But because the brand was not popular and was not well-known, it incurred losses. Therefore, the assessee decided to give this brand on user basis to its group concerns and charged the royalty therefor. Accordingly, the assessee-firm entered into an oral agreement with M/s S.R. Thakur & Co., M/s Thakur Shankarrao & Co. and M/s P.P. Tobacco Co. allowing them the user of the brand, so that they could sell the bidis with this brand in the market and also in return, the assessee charged the royalty from them. 3....
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.... interest. 5. On appeal, the learned CIT(A) deleted the addition observing as under: "I have considered the facts in the case and the rival submissions. In the first place the fact that the appellant actually incurred these expenses for advertisement by way of sales promotion scheme is NOT disputed by the AO. It is clearly seen that the expenditure is for the purpose of development of market for Tauras brand of bidis. Since the appellant owns the trade mark/label of tauras brand of bidis it clear that the primary burden of defraying the expenses is that of the appellant. The disputes raised by the AO have been properly answered in the representation made during the appellate proceedings. These facts were also made known to the AO during t....
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.... not having enough infrastructure to market this brand of bidis itself and, therefore, it thought of giving this brand on user basis for a year only to the group concerns which had a bigger marketing network and hence, giving an asset on user basis for a short period as a stopgap arrangement to recoup the losses constitutes a business activity as held in the following cases: (1) CIT vs. New India Industries Ltd. (1992) 106 CTR (Guj) 374 : (1993) 201 ITR 208 (Guj) (2) Everest Hotel vs. CIT (1978) 114 ITR 779 (Cal), (3) CIT vs. Laxmi Rice Mills (1987) 59 CTR (MP) 135 : (1987) 164 ITR 571 (MP), (4) CIT vs. Vikram Cotton Mills (1988) 67 CTR (SC) 169 : (1988) 169 ITR 597 (SC), (5) Universal Plast Ltd. vs. CIT (1999) 153 CTR (SC) 95 : (1999)....
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....ten agreement, it is to be noted that for allowability of an expenditure under s. 37(1), written agreement is not essential. It is nowhere mentioned in the Act that the expenditure will be allowable under s. 37 only if it is supported by a written agreement. In this connection, reliance is placed on p. 2134 of the Commentary of learned Authors Chaturvedi & Pithisaria, 5th Edn. and the decision of the Patna High Court in the case of Jamshedpur Motor Accessories Stores vs. CIT (1974) 95 ITR 664 (Pat). Accordingly, I reject the arguments of the AO and the learned Departmental Representative that since there was no written agreement, advertisement expenditure is not allowable under s. 37. 9. In the light of above discussion, I concur with the ....