2014 (10) TMI 111

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ellants. 2. The assessees are individuals. They were promoters and founder Directors / Shareholders of Kwality Biscuits Pvt. Ltd. (hereinafter referred to as the 'KBL', for short) which was engaged in the business of manufacturing, selling, marketing and distributing biscuits / bakery products. On 29.3.2001, the promoters / assessees and KBL entered into agreements with Britannia Industries Ltd. (hereinafter referred to as the 'BIL', for short). One agreement was regarding assignment and transfer of intellectual property assets, second agreement deals with sale of the entire share holdings of the promoters in KBL to BIL and the third agreement was regarding covenants by the promoters not to compete with BIL in the biscuit....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....39; obligations are discussed. Similarly, the BIL's obligations are also set out. The total consideration agreed to be paid for consultancy services to these promoters is Rs. 4 Crores. The mode of payment is also clearly set out. Clause 6.7 of the agreement reads as under:     "BIL shall pay and reimburse, and procure KBL to pay and reimburse, to the promoters all reasonable expenses incurred in connection with rendering the consultancy services and achievement of the performance paramaters." 5. The case of the assessees is that in order to render consultancy services and achieve performance parameters, all of them entered into an agreement with M/s. Akerrald Investments Ltd. who in turn submitted a report giving an....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ace, there was no obligation on the part of the assessees to have such a report from M/s. Akerrald Investments Ltd. Even if they have obtained such report, there is no nexus between the said report and a consultancy service they were expected to render under the agreement between them and BIL. Even otherwise, in terms of Clause 6.7 of the agreement between the assessees and BIL, the said expenditure has to be incurred by BIL and not by the promoters and therefore, held that the said amount, said to have been paid by the assessee to M/s. Akerrald Investments Ltd. is not eligible for deduction. Infact, the consultancy service was only for the period from 1.10.2000 to 30.9.2001. The report of M/s. Akerrald Investments Ltd. is dated 28.9.2001, ....