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2011 (8) TMI 485 - DELHI HIGH COURTRoyalty payment - Capital expenditure or not - Expenditure incurred by the assessee was neither for acquisition of any patents or copyrights - This is not even the case of the revenue - The revenue has latched on to royalty paid for use of trademarks and brands of SWCL - It was argued by revenue that the expenses incurred for use of trademark ought to be treated as capital expenditure - A perusal of the provisions of the agreement would show all that the assessee acquired was the use of the brand names and the trade marks of SWCL, which find a mention in Appendix-C annexed to the said agreement - The assessee acquired no right to any secret process or formulae or even any right title and interest in the trade marks and brands under which the IMFL products were sold. As a matter of fact assessee's rights were co-terminus with the subsistence of the said agreement. Therefore, we have no hesitation in rejecting the contention of the revenue in this regard. Applicability of provisions of section 40A(2) - Assessing Officer in the assessment year 1997-98 after recording that the shares of the assessee were held by six (6) entities goes on to observe that the assessee "became a subsidiary of Shaw Wallace Group of Companies" - There is no finding recorded by the Assessing Officer that SWCL had acquired substantial interest i.e., 20 per cent or more of the share capital with attending voting rights, whether directly or beneficially - If that is so, then the provisions of section 40A(2)(a) could not have got triggered - Further, CIT(A) records that six (6) individuals held ten (10) shares each in the assessee while, one gentleman by the name of Mr. Suraj P. Gupta held 8,61,610 shares who was neither an employee of the assessee and nor was any payment made to Mr. Suraj P. Gupta or his relative or to a company of which he was a Director - Held that:-payments had not been made to persons specified under section 40A(2)(b) and therefore, the provisions of section 40A(2) were not applicable.
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