TaxTMI 
TaxTMI 
2012 (9) TMI 91
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....39.39 crores on account of reimbursement of advertisement expenses as not assessable under Chapter XIV B of the Income Tax Act, 1961 ? (b) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in holding that the provisions of Chapter XIV B cannot be invoked in respect of additions made on account of royalty and of advertisement expenses inspite of the fact that seized documents recovered during search clearly establish consideration of such income under Chapter XIV B of Income Tax Act, 1961 ? (c) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in holding that royalty income and income on account of advertisement expenses does not fall within the definition of "undisclosed income" u/s. 158(b) by relying upon the decisions quoted in 64 ITD 396 (ITAT, Pune), 194 ITR 32 (Delhi) and 83 ITD 111 (ITAT, Kolkata) [TM] inspite of the fact that the ratio given in the Tribunal decisions are no longer applicable on account of the amendment made to the definition of "undisclosed income" retrospectively w.e.f. 01.07.95 by the Finance Act, 02 and that the Delhi High Court decision was delivered with referenc....
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....r of M/s. Jyothy Laboratories of manufacturing and selling fabric liquid whitener under the mark "UJALA". (B) In the year 1992, Jyothy Laboratories Limited was incorporated. The company carried on the same business. The respondent was the promoter, Managing Director and, alongwith the members of his family, the majority share-holder of this company. (C) The respondent entered into an agreement dated 23rd December, 1994, with Jyothy Laboratories Limited under which the respondent permitted the company to use the said mark. The agreement was to remain in force for ten years. Clause 16 thereof reads as under : "Clause 16(i) "The users shall pay to the proprietor in respect of this Agreement, Technical-know-how / Royalty of 25 paise per bottle of UJALA 75 ml. And proportionally higher or lower sum for various volumes of the product sold during each financial year commencing from the date of this Agreement." Clause 16(ii) "The users shall pay to the proprietor such advance as and when demanded by the latter which, in any case, shall not exceed 3 times of the technical-knowhow / royalty fee paid during the previous financial year in which the demand for advance has been....
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....ystems and training programs to be initiated in the company." 9. The respondent agreed that by virtue of this clause, the mark stood assigned to Jyothy Laboratories Limited. Accordingly, with effect from 17th November, 1999, the company Jyothy Laboratories Limited stopped paying the respondent royalty. 10. The Tribunal has considered and analyzed the documents on record as well as the respondent's responses to the authorities during the course of search in considerable detail. The same indicates that the respondent had, in fact, not received any royalty with effect from October, 1999. Indeed, the appellant has not been able to indicate any evidence to the contrary. There is, however, nothing to indicate that the share-holder's agreement dated 17th November, 1999, between the respondent and BIIL was sham and bogus. Nor is there anything to indicate that the agreement was not implemented. As the trademark stood transferred to Jyothy Laboratories Limited, there would be no question of it continuing to pay royalty to the respondent. He contended even in his response to the authorities that he wanted to raise funds for the company and was of the view that by increasing the volume ....
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....lar assessment and the block assessment under Chapter XIV-B of the IT Act." 13. Mr. Dastur's submission that the present exercise by the Assessing Officer is not in conformity with the provisions of Section 132 and 158B, is not without force. We are, however, of the view that in the facts and circumstances of the present case, it is not even necessary for the respondent to go that far. Even if it was an assessment under section 143, it would make no difference. The above facts indicate that there was no undisclosed income. The respondent was entitled to enter into the arrangements with the company i.e. Jyothy Laboratories Limited as also with BILL. At the cost of repetition, it is not even contended that these agreements were sham or bogus. Nor is it suggested that they were a device to launder money through BILL. Most important is the fact that the Assessing Officer, during the regular assessment, was aware of the fact that income by way of royalty was not paid with effect from September/October, 1999. The first issue, therefore, does not raise a substantial question of law. 14. The next question is whether as contended by the respondent, the Tribunal erred in deletin....
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....Income Tax (Appeals) deleting the addition of Rs.39.39 crores on account of reimbursement of advertisement expenses on the ground that the same were not assessable under Chapter XIV-B of the Act. The Tribunal observed that the Assessing Officer had worked out the apportionment of the advertisement expenses debited in the books of accounts of the company on the basis of the sales and the right of the respondent to be reimbursed the advertisement expenses. As observed by the Tribunal, the advertisement expenses were disclosed in the return of income. The agreement dated 23rd December, 1994, for payment of royalty, which included clause 16, was also with the Department during the regular assessments. It was not contended before the Appellate Authority or before us that the advertisement expenses were false. The Tribunal, therefore, rightly held that the primary facts were also disclosed in the books of accounts of the respondent as well as the company and that the Assessing Officer was, therefore, not justified in making an addition in the block assessment. It is useful to refer to the following concluding observations of the Tribunal. "To sum up the factual and legal background, a....