TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 742
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....the relevant material. The relevant portion of the order of the Tribunal is extracted as under: 3. During the course of hearing, it is submitted that assessee made a claim for deduction for advertisement expenditure of Rs.6,71,96,585/- which includes sum of Rs.5,02,00,000/- towards brands expenditure. It is stated before us that branding expenditure incurred by M/s. Univercell Telecommunications (P) Ltd are paid by assessee. Necessity of incurring brand expenditure as explained by the assessee is as under:- "As we operate in a very competitive dynamic market, these are new entrants in the market like other telecom specialized stores. Operators are entering the mobile retained space and manufacturers like Samsung have entered into these business. In addition, online space is growing day by day with big brands like Flipkart and Amazon dominating and customers get better deals online''. It is settled principle of law that the Assessing Officer is not expected to question the necessity of the expenditure. The brand expenditure is nothing but business promotion expenditure which is Revenue in nature and which is clearly allowed as deduction. Thus, grounds of appeal No.6 filed ....
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....ant. In response to notice u/s.148 of the Act, the appellant had filed reply vide letter dated 11.04.2013 stating that to treat the income originally filed as return in response to notice issued u/s.148 of the Act. Subsequently, assessee had sought reasons for reopening the assessment and the same was provided by l Assessing Officer through his letter dated 08.07.2013. Finally assessment was completed at a total loss of Rs. 57,83,182/- by disallowing the depreciation on intangible assets being trade mark acquired from ''M/s. Univercell Telecommunications India Pvt. Ltd'' at a cost of Rs. 3,48,00,000/-. While denying the claim for depreciation on intangible assets, ld. Assessing Officer had questioned the genuineness of agreement 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 mar....
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....ction of purchase of trademark from one Shri. D. Satish Babu for a consideration of Rs. 3,48,00,000/- is genuine. There is no dispute that Shri. D. Satish Babu is a owner of trademark ''Univercell'' as the trademark ''Univercell'' is registered under the name of Shri. D. Satish Babu by the Government of India and this trademark was purchased by the appellant for a consideration of Rs. 3,48,00,000/- , and the said consideration was paid on 15.02.2007. Ld. Assessing Officer had doubted the genuineness of the transaction primarily for following reasons namely:- (i) the agreement entered between the parties on 01.02.2007 was on stamp paper which is post dated. (ii) It is a device adopted by the parties to evade the taxes (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 assign....
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....ssee can incur. We may refer to a few of these authorities to elucidate the point. In Eastern Investments Ltd. v. CIT [1951] 20 ITR 1 (SC) it was held by the Supreme Court that (page 6) "There are usually many ways in which a given thing can be brought about in business circles but it is not for the court to decide which of them should have been employed when the court is deciding a question under section 12(2) of the Income-tax Act". It was further held in this case that "it is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned". In CIT v. Walchand and Co. P. Ltd. [1967] 65 ITR 381 (SC), it was held by the Supreme Court that in applying the test of commercial expediency for 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....
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....ncurred "wholly and exclusively" for the purpose of business and nothing more. It is this principle that, inter alia, finds expression in the OECD guidelines, in the paragraphs which we have quoted above''. Thus law is settled to the extent that it is outside the domain of the ld. Assessing Officer to question the necessity of incurring an expenditure. Thus the reasons assigned by the Assessing Officer that the transaction for purchase of trademark are not genuine cannot stand test of the law. Furthermore, it is an settled principle of law that intangible assets such as trademark, goodwill are also qualifies for depreciation at prescribed rates. Therefore we do not concur with the views of the lower authorities in disallowing the claim for depreciation on trademark. Accordingly, we set aside the orders of the lower authorities and allow the grounds of appeal filed by the assessee. Hence grounds of appeal 3 to 5 filed by the assessee are allowed. Since, the facts are same for this AY, following the above order in the assessee's own case, this issue is allowed in the assessee's favour. 8. The next issue is that the AO found that M/s.Rocky Marketing (Chennai) Pvt. Ltd., had writ....