TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 828
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....an circumstances of the case. Re-opening of assessment:- 2. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the validity f the reassessment proceedings u/s 147 despite the assessment originally completed u/s 143(3) of the Act. 3. Disallowance of depreciation on trademark 4. For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of depreciation on trade mark amounting to _76,12,500/- 5. For that the Learned Commissioner of Income Tax (Appeals) erred in holding that the agreement entered between the appellant and M/s. Univercell Telecommunications India (P) Ltd. is not a valid agreement as the same was entered into on a post dated stamp paper, and the all parties to the agreement was a single person without considering the substance over form i.e., the consideration being paid and recorded in the books of M/s.Univercell Telecommunications India Private Limited and the same being offered to tax which was duly reflected in the return of income of respective parties. 5. For that the Learned Commissioner of Income Tax (Appeals) having accepted franchisee f e of 0.01 % of net sales amounting to Rs. 3,1....
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....ent of assignment of trade mark right entered between the appellant and the M/s. Univercell Telecommunications India Pvt. Ltd dated 01.02.2007. The genuineness of the agreement is doubted on the ground that the agreement was on the post dated stamp paper which is dated 09.07.2007 and also the agreement is signed by one Shri. D. Satish Babu in all capacities i.e. assignor, assignee and confirming party and also questioned the necessity of procuring the trade mark and again giving back to the same party for a consideration of 0.01% of the turnover. Based on these facts, ld. Assessing Officer inferred that the transaction were malafide and disallowed the claim for depreciation. 7. Being aggrieved by the ld. Assessing Officer order, assessee filed an appeal before ld. Commissioner of Income Tax (Appeals) contending that the very reopening the assessment is not valid in law, in as much as, reopening is based on change of opinion on the same set of facts which are in existence and also contending that Assessing Officer had no power to question the necessity to enter into transaction and also finding fault with the conclusion reached by the Assessing Officer that the transaction is mala....
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....iii) There is no necessity of buying the trade mark and again allowing M/s. Univercell Telecommunications India Private Limited to use this trademark for a consideration of 0.01% on the sales turnover. The Assessing Officer had not disputed, in principle, the eligibility of trademark for depreciation nor the cost of acquisition of trademark, but disallowed the claim doubting the genuineness of the transaction. Now we shall dwell upon each of the reasons assigned by the Assessing Officer. 11. There is no requirement under law that an agreement to purchase trademark should be in writing on a stamp paper. An agreement in writing is entered in order to reduce the agreed terms and conditions in writing so as to avoid any misunderstanding in future. Therefore, the fact that the agreement is entered on post dated stamp paper is immaterial and not germane to decide whether or not transaction is genuine. It is not the case of the Assessing Officer that substance of the transaction is something else. Therefore the reasoning of the Assessing Officer, as well as ld. Commissioner of Income Tax (Appeals) that the agreement is entered on post dated stamp paper, transaction is not genuine cann....
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.... determining whether the expenditure was wholly and exclusively laid out for the purpose of business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. It was further observed that the rule that expenditure can only be justified if there is corresponding increase in the profits was erroneous. It has been classically observed by Lord Thankerton in Hughes (Inspector of Taxes) v. Bank of New Zealand [1938] 6 ITR 636 (HL) that "expenditure in the course of the trade which is unremunerative is none the less a proper deduction, if wholly and exclusively made for the purposes of trade. It does not require the presence of a receipt on the credit side to justify the deduction of an expense". The question whether an expenditure can be allowed as a deduction only if it has resulted in any income or profits came to be considered by the Supreme Court again in CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC), and it was observed as under (page 523) : "We fail to appreciate how expenditure which is otherwise a proper expenditure can cease to be such merely because there is no receipt of income. Whatever is a proper outgoing....