Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (3) TMI 526 - AT - Income TaxAddition u/s 37(1) - processing fees paid to bank in relation to acquiring brand name - Held that:- In the instant case, the payment has not been made for acquiring a brand name, but for facilitating for acquisition of the brand name, which in turn made substantial improvement in earning capacity of the appellant’s business. The payment is in the form of a brokerage or commission or service charges. (not-withstanding its liability for TDS). Therefore on the facts and in the circumstances of the case in my view the expenditure incurred by the appellant company for the payment made to M/s. Shalini Properties & Developers Pvt. Ltd is a revenue expenditure. One of the positive tests must be attracted and none of the negative tests should be satisfied in order to claim deduction under section 37(1) of the Act. In this case, ,the expenditure has been incurred with a view to bring profits or monetary advantage either today or tomorrow; the expenditure incurred is such as a wise, prudent, pragmatic and ethical man of the world of business would conscientiously incur with an eye on promoting his business prospects, subject to the expenditure being genuine and within reasonable limits. Therefore, more than one of the positive tests have been proved. Therefore, more than one of the positive tests have been proved. Coming to the negative tests, it may be mentioned again that the Assessing Officer has not brought any material evidence on record that it is a bogus fictitious or sham transaction; it is unreasonable and out of proportion; and that it is an expenditure merely with a view to avoid tax liability without any genuine purpose or reason in good faith. Therefore, none of the conditions of the negative tests has been satisfied in this case. In Sasson J.David & Co.(P)Ltd. Vs. CIT [1979 (5) TMI 3 - SUPREME Court] has been held that the assessee can claim deduction under section 37(1) even though there is no compelling necessity to incur such expenditure. In Goodyear India ltd. Vs. ITO[2000] 73 ITD 189/68TTJ(Delhi)TM 330, it has been held that expenditure incurred to get right to use licence for limited period (where the assessee company, manufacturing tyres, entered into an agreement with a foreign company for technical know-how for manufacture of radial tyres and the assessee got the right to use the licence for a fixed period of 8 years) is deductible. Thus expenditure incurred by the appellant company in making payment under the head SBLC charges to Shalini Properties and Developers Pvt. Ltd. Is consideration of commercial expediency of the business of the appellant company and is allowable as deduction under section 37(1) - Decided in favour of assessee
|