2021 (9) TMI 1415

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... to Rs. 10,64,08,971/- made on account of disallowance on Trademark License Utilization fees. 3. The fact in brief is that return of income declaring loss of Rs. 7,19,71,472/- was filed on 17th October, 2016. The case was subject to scrutiny assessment and notice u/s. 143(2) of the act was issued on 10th August, 2018. During the course of assessment, the Assessing Officer noticed that the assessee incurred expenses of Rs. 14,18,78,627/- for trademark license utilization fees under the head selling and distribution expenses. The assessee has paid these fees to Mukesh Garg, M/s. Vishnu & Company Trademark Pvt. Ltd., New Delhi who was proprietor of trade mark "Vimal" and it has granted exclusive right to Shri Mukesh Garg to operate and carry ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... of the ITAT in the case of the assessee itself for assessment year 2010-11 and 2011-12 vide ITA No. 2046/Ahd/2013 and 1218/Ahd/2015 order dated 6th April, 2017. The relevant part of the decision of ld. CIT(A) is reproduced as under:- "5. I have carefully considered the facts of the case and submission made by the appellant as well as arguments taken by the AO. I find that it is a recurring issue in the case of appellant (earlier in the capacity of firm) and on the very same disallowance appeal has been allowed by my predecessors in A.Y.2010-11, 2011-12 & 2012-13. For A.Y. 2012-13 my predecessor allowed the appeal on this ground vide Appellate Order No.CIT(A)-3/ward3(2)(2)/01/15-1G dated 12.05.2016. Also departmental appeals on this issue....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... assistance of ld. representatives, we have gone through the decision of ITAT Ahmedabad vide ITA No. 1190 to 1192/Ahd/2018 in the case of the ACIT vs. M/s. Vishnu Pouch Packaging Pvt. Ltd. dated 18-12-2019. The relevant operative part of the decision of the ITAT is reproduced as under:- "9. We have carefully considered the rival submissions. The short controversy relates to the maintainability of expenditure incurred by way of license fees to the licensor of the trademark as revenue expenditure. Whereas, it is the case of the assessee that license fees paid as specified percentage of sales (6%) is revenue expenditure for use of trademark owned by the licensor, the Revenue, on the other hand, contends that license is being used by the asse....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... considered as a capital expenditure and accordingly disallowed the same and at the same time allowed depreciation @ 25%. 10. Aggrieved by this, the assessee carried the matter before the ld. CIT(A) and reiterated its claim. 11. After considering the facts and the submissions, the ld.CIT(A) found that the "Vimal" Trade Mark is owned by M/s. Vishnu & Company Trade Mark Pvt. Ltd. and the assessee has paid royalty @ 6% of its turnover as per the terms and conditions of license/registered user agreement dated 11.05.2007. The ld. CIT(A) further observed that the CBDT circular relied upon by the A.O. does not apply on the impugned payment since there is no acquisition of any technical knowhow; therefore, there is no reason to treat the impu....