2026 (8) TMI 1641

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....ounds of appeal: 1) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT A erred in deleting the addition of INR 2,44,83,000 failing to appreciate that the trademark fee results in an enduring benefit and facilitates long term brand building, thereby possessing the character of capital expenditure under Section 37 1 of the Act. 2) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT A failed to appreciate that despite legal ownership resting with the parent company, the payment of a substantial trademark fee grants the assessee an effective right of usage and commercial exploitation akin to co-ownership, leading to the creation of an intangible asset of a capital nature. ....

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.....2. 5. After hearing the learned counsels for both the parties and perusing the decisions relied upon by the parties and the orders passed by the Revenue Authorities, we find that the AO had disallowed trademark fees of Rs. 2,44,83,000 paid by the assessee to Dehoco License AG for the usage of the trademark "Deugro", on the conclusion that the payment relates to enduring benefits and thus constitutes capital expenditure and cannot be claimed as business expenditure in the statement of profit and loss for the year under consideration. 6. Whereas, on the contrary, in this regard, the assessee submitted that it had entered into an agreement with Dehoco License AG, which is effective from 1st July 2015, for the usage of the trademark "Deu....

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....arent retained all proprietary rights, and the Indian company only received a limited right to use, no capital asset was acquired. 10. Moreover, the general principle that we can derive from the judicial decisions and the facts of the present case is as to whether, under the terms of the agreement, the assessee acquires a benefit of an enduring nature, which will constitute acquisition of an asset, and, therefore, the amount paid for the same is a capital expenditure. 11. After having regard to the clauses of the agreement, we find that the assessee has only been allowed to use the trademark for the period authorised by Dehoco License AG and, on termination of the agreement, the assessee is bound to immediately abstain from any furthe....