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2009 (9) TMI 918 - HC - Income TaxExpenditure incurred on advertisement and publicity - Business Expenditure or not ? - as per AO trademark Adidas belonged to the assessee’s parent company and since the assessee was already paying royalty at the rate of 5 per cent of sales, it was to promote the brand name of the licensor company and on this ground held that it was not allowable u/s 37(1) - Tribunal has reversed the decision of the CIT(A) as confirming the addition - HELD THAT:- We find from the order of the ITAT that it has discussed in detail the terms of Technical Assistant Agreement dated 14-2-1997, as per which the assessee was provided the technical know-how and was also allowed to use the brand name ‘Adidas’ on the products manufactured by the assessee, which are to be sold in India, Nepal and Bhutan. Tribunal observed that merely because the assessee was paying royalty at the rate of 5 per cent to M/s. AIPL would not mean that the assessee could not incur the expenditure on advertisement to popularize the products dealt with by it in Indian market. No doubt, brand name of ‘Adidas’ is already a well-known brand which belongs to the parent company of the assessee. However, to popularize the said product in India and to promote its sale in the Indian territories, it became essential for the assessee to incur expenditure on advertising to propagate the aforesaid brand name. The benefit thereof had to necessarily accrue to the assessee as well as the main purpose of the advertisement is to augment the sales. The contention of the assessee that it was a commercial practice and commercial expediency has rightly been accepted by the Tribunal. We, therefore, do not find any substantial question of law that arises for our consideration. This appeal is accordingly dismissed.
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