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TMI Blog2014 (11) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2005-06. Search and seizure action under Section 132 of the Income Tax Act, 1961 (Act, for short) was carried out on the Gopal Zarda group including M/s. Gopal Corporation Ltd. 3. The respondent-assessee was not subjected to search and seizure operations but subsequently on a satisfaction note recorded Assessing Officer of M/s. Gopal Corporation Ltd., proceedings under Section 153C of the Act were initiated. 4. Order under Section 153C of the Act, refers to agreements between respondent assessee and M/s S. Gopal & Co. and M/s Flakes N Flavourz and the factual position that the said companies had paid and the respondent assessee had received royalty of Rs. 54,63,751/-, Rs. 63,57,509 and Rs. 1,56,07,563/- for the assessment years 2003-04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent-assessee. 6. The Commissioner of Income Tax (Appeals) dealt with the issue in great depth and detail. Discussing the reasoning given by the Assessing Officer and the factual matrix, the Commissioner of Income Tax (Appeals) came to the following conclusion in ITA No.537/2014 for the assessment year 2003-04:- "However even on merits it is seen that the entire addition to income has been based on the premise that the expenditure claimed on account of advertisement expenses for Rs. 40,22,736/- (this is 1/5th of the total expense of Rs. 2,01,13,684/- spent on advertisement by the appellant of it's new product Joie Agarbatti and Incense stick in FY 2000-01) was not justified to be allowed as this expenditure should have been inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement for use of the trade mark and copyright license for Joie brand incense Sticks. In this connection the appellant has enclosed the copy of reply filed by him before the AO (in response to the questionnaire issued on 05.10.10 and 29.10.10) where the said fact was submitted before the AO also. The appellant has also enclosed copy of the Trade Mark & Copyright License Agreement dated 26.07.1999 which it had entered with M/s S Gopal & Co. as also the Trade mark and Copyright license agreement dated 19.01.04 which it had entered with M/s Flakes and Flavourz. It has been submitted that in both these agreements the "Trade Mark and copyright License" between the appellant and these parties is with regard to providing technical knowhow, experien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be substantiated. I also find substance in the contention of the appellant that the claim of the said expense of Rs. 2,01,13,684/- in equal portion in 5 assessment year beginning with AY 2000-01 is not prejudicial to the interest of revenue and am in agreement with the submission that the decision of Hon'ble ITAT Ahmadabad in case of M/s Aqua Mineral P. Ltd. Vs. Cit 96 ITD 417 are based on different set of facts and are not applicable to the facts of the instant case. In a result the disallowance made for Rs. 39,82,509/- in case of the appellant is directed to be deleted as no evidence has been brought on record by the AO that the said firms M/s S Gopal & Co and M/s Flakes and Flavourz were engaged in the manufacturing of joie brand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd whether the assessee was wise and prudent in incurring the expenditure, is not within the domain of examination by the assessing officer, unless permitted and allowed under the statute. Expenditure can be disallowed under section 37(1) of the Act, if it is held that it was not wholly and exclusively for business and not by adopting subjective standard of reasonableness. [See Commissioner of Income Tax vs.Walchand and Co. Private Ltd (1967) 65 ITR 381, J.K Woollen Manufacturers vs. Commissioner of Income Tax, (1969) 72 ITR 612]. Section 40A(2) of the Act has not been invoked and there is no provision which stipulates that advertisement and brand building expenses could be restricted or partly allowed. 10. In view of the aforesaid factual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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