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2023 (12) TMI 629 - ITAT MUMBAIDisallowance of Royalty paid u/s 37(1) - assessee is a franchisee bottler for the brand Aquafina owned by the franchisor PepsiCo India Holdings Pvt. Ltd. (erstwhile Pepsi Foods Private Ltd.) - non-compliance of notice issued under section 133(6) of the Act to Pepsi Foods Private Ltd and non-production of the party for verification by the assessee, for proving the genuineness of the transaction - HELD THAT:- It cannot be disputed that Pepsi Foods Private Ltd. now merged with PepsiCo India Holdings Pvt. Ltd. is well-known beverage and soft drink Company, having a presence across the globe. Therefore, mere non-compliance with the notice issued under section 133(6) and non-production of the said entity by the assessee before the AO cannot lead to the conclusion that the said entity is a non-existent entity and the transaction is not genuine. No material has been brought on record by the Revenue to show that the assessee did not manufacture and sell Aquafina bulk packaged drinking water in Mumbai as agreed under the aforesaid agreement dated 09/06/2003 during the year under consideration and the Royalty was paid to Pepsi Foods Private Ltd without usage of the trademark. It is also relevant to note that usage of the trademark without the consent of the owner is a violation of the provisions of the Trade Marks Act, 1999. Therefore accepting the submission of the Revenue that there was no agreement during the year under consideration will also lead to the conclusion that the assessee used the trademark of Pepsi Foods Private Ltd without any license, which is not the facts of the present case, as there is no material available on record to show that the assessee has infringed the trademark registered in the name of PepsiCo Inc. No basis in the submissions of the Revenue in denying the claim of deduction of Royalty paid by the assessee to Pepsi Foods Private Ltd during the year under consideration. Accordingly, AO is directed to allow the claim of Royalty paid by the assessee in the year under consideration. Decided in favour of assessee.
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