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Pr. Commissioner of Income Tax-2, Chandigarh Versus M/s Mobisoft Tele Solutions P. Ltd.

2015 (8) TMI 426 - PUNJAB AND HARYANA HIGH COURT

Royalty payment to a related person - whether would be allowable for business expenditure u/s 37(1) whereas the same has not been exclusively and wholly incurred for business purposes? - whether ITAT erred holding that royalty payment would be allowable business expenditure u/s 37(1) when the same has not been paid to the owner/holder of the patent, design, copyright and technical know how or to an inventor and where there is no transfer/acquisition of any assets? - Held that:- Tarun Mohan retai .....

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ame person cannot enter into an agreement with himself. This ignores the fundamental concept that the assessee being a company incorporated under the Companies Act, 1956 is a separate legal juristic entity.

The Tribunal, therefore, rightly disagreed with this finding. The Tribunal also rightly observed that Tarun Mohan had in any event paid the entire taxes in respect of the royalty received by him. That, however, would not make a difference for if the deduction sought by the assessee .....

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trade mark. This is not a ground for challenging his entitlement to the trade mark. The assesee was entitled, therefore, to use the trade mark as a licensee thereof. The payment of royalty for the same is nothing unusual or out of place.

In these circumstances, the deletion by the Tribunal of the addition of royalty by the Assessing Officer and confirmed by the CIT (Appeals) was rightly set aside by the Tribunal. - Decided against revenue. - ITAs-193-194-197-2015 (O&M) - Dated:- 7-8-2 .....

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of royalty for the use of the brand name phoneytunes.com. 3. According to the appellant, the following substantial questions of law arise in these cases:- (i) Whether on the facts and in the circumstances of the case and in law, the Hon ble ITAT is justified in holding that royalty payment to a related person would be allowable for business expenditure u/s 37(1) of the Act whereas the same has not been exclusively and wholly incurred for business purposes? (ii) Whether on the facts and in the ci .....

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penditure u/s 37(1) inspite of the fact that expenditure on royalty payment is capital in nature? (iv) Whether on facts and circumstances of the case and in law, the order of the Tribunal is not perverse in holding that the transaction was not a colourable device to reduce the tax liability of the company in which the Managing Director was none other than the beneficiary proprietor of royalty particularly when no evidence of any patented product in possession of the proprietor could be produced .....

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f providing value added telecom services to various mobile companies for ring tones, images, wall papers etc. He had entered into agreements with various music companies under which he acquired their rights as also the right to make ring tones on the basis thereof. In turn, he provided individual mobile users the tones through cellular operating companies. He paid royalty to the music companies in consideration of these agreements. He in turn was remunerated by collecting fees from the customers .....

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Articles 2 and 3 of the agreement read as under:- Article 2 - Transfer In consideration of the agreement and subject to the terms and conditions hereto, PT hereby agrees to sell, assign, transfer and convey the assets to ITIDA as provided herein and ITIDA would purchase and acquire the assets on and from the closing date subject to the terms and conditions of this agreement. The assets relating to the business which are to be sold, assigned, transferred and conveyed shall include without limita .....

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o ITIDA free and clear from any encumbrances, liens, charges, claims, restrictions of whatsoever nature. Article 3 - Consideration In consideration of PT agreeing to sell, assign, transfer and convey the assets to ITIDA on the terms and conditions stated in this agreement, ITIDA shall pay to Mr. Tarun Mohan, sole proprietor of PT a purchase price or consideration of a sum of ₹ 5,81,231/- and in consideration of all intellectual property rights (other than brand name) and for the use of bra .....

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