Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (10) TMI 357 - DELHI HIGH COURT

2016 (10) TMI 357 - DELHI HIGH COURT - TMI - Payment towards trade mark and use of expertise in the field of commerce, finance etc - capital or revenue expenditure - Held that:- This court is of the opinion that the finding with respect to tangible or non-tangible asset vesting in the assesee and whether it had or not any lasting or enduring advantage to it is more in the nature of a finding of fact. The findings are also that to use the Nitrex brand, payments were made and it was essential for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essive commission - Held that:- This issue is consistently ruled against the assessee, for all the five years. However, in both the CIT (A) and the ITAT, the revenue’s contentions were not accepted. Here, the assessee’s argument was that the commission could not be characterised as excessive because they were more customary in nature having regard to the historic relationship with M/S Asha export, its export agent. This court is of the opinion that such decisions as to the nature and quantum of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of transfer of its business undertaking to fund the ESOP Trust, cannot be characterized as permissible expenditure but rather has to be added back for the purposes of income calculations - Held that:- As is evident, the expression “expenditure incurred wholly and exclusively in connection with such transfers” is in plain terms sufficient to encompass the kind of expenditure with which this Court has to deal with in respect of determining the issue in question. ESOP was an essential term of empl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee at the stage of transfer.Therefore, the court holds that there is no infirmity in the findings of the ITAT. - Disallowance under Section 14A - Held that:- We notice that the decision in the case of Maxopp Investment Ltd.Vs CIT, New Delhi (2011 (11) TMI 267 - Delhi High Court ) would apply in the circumstances. Equally for the last year i.e. year 2009-2010, the AO’s omission to record his satisfaction as to the permissibility of the deduction, which is the pre-condition for exercise .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cepted that the foreign exchange amounts amounted to income and proceeded to deal with it as such.This court is of the opinion that in view of the past revenue treatment, the revenue’s submissions by the appellant are unmerited. No question of law arises. - Revenue appeal dismissed. - ITA No. 247/2016, ITA 248/2016, ITA 249/2016, ITA 318/2016 & ITA 319/2016 - Dated:- 23-8-2016 - MR. S. RAVINDRA BHAT & MS. DEEPA SHARMA JJ. Appellant Through: Mr. Rahul Chaudhary, Advocate. Respondent Th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts trademark and for the purpose of obtaining expertise in commerce, finance, manufacturing etc. amounted to revenue expenditure instead of capital expenditure? 2. Whether the finding with respect to additions being disallowances of excessive commission on exports in the circumstances of the case is tenable? 3. Whether the computation of capital gains in respect of slump sale of trading businesses on account of purchase of shares by ESOP Trust, could be deducted from capital gain under Section 4 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d. The assessee in 2006-2007 had debited amounts under the head Techno Commercial Agreement and a further sum was paid towards Brand Licensing Agreement, executed on 14.03.2005. The Assessing Officer AO was of the opinion that these expenditures were of an enduring kind and held that they were capital in nature. The assessee, on the other hand, contended that these were revenue expenditure. The CIT (A) accepted the assessee s contention; the ITAT affirmed the order. 5. The revenue s counsel argu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

expenditure under the circumstances of the case could have led to creation of an asset of enduring nature or not would have assumed some importance if it had considerable impact. In the present case, there is no dispute that the undertaking itself was sold subsequently in 2005. So far as the use of the trade mark is concerned, the ITAT s reasoning is as follows:- After considering the submission of both the parties and perusing the material on record, it is noticed that the AO did not doubt the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d manufacturing etc. which were needed for smooth running of the business as the assessee was new in this business and the expenses were paid only for one year. Therefore, we are of the view that the ld. CIT (A) was fully justified in directing the AO to treat those expenses as revenue in nature, we do not see any infirmity in order of the ld. CIT(A) on this issue. 6. This court is of the opinion that the finding with respect to tangible or non-tangible asset vesting in the assesee and whether i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sion, was consistently ruled against the assessee, for all the five years. However, in both the CIT (A) and the ITAT, the revenue s contentions were not accepted. Here, the assessee s argument was that the commission could not be characterised as excessive because they were more customary in nature having regard to the historic relationship with M/S Asha export, its export agent. This court is of the opinion that such decisions as to the nature and quantum of commission may differ having regard .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pent by the assessee at the time of transfer of its business undertaking to fund the ESOP Trust, cannot be characterized as permissible expenditure but rather has to be added back for the purposes of income calculations. The assessee s contention, on the other hand, is that this expenditure was essential and integral part of the sale transaction itself. 9. The necessary facts for appreciation of the question are that the assessee sold a part of its unit as a going concern. In the process the tra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

connected with the transfer and therefore not adjustable from the capital loss as reported in that regard. The findings of the ITAT on this aspect are as follows:- 72. The Id. CIT(A) after considering the submissions of the assessee deleted the addition by observing as under: "1 have gone through the observations of the Assessing Officer as contained in the Assessment Order, submissions of the appellant filed during the course of appellate proceedings and various judicial pronouncements rel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

with M/s EAC Industrial Ingredients Pte. Ltd. on 14.10.2005 for a consideration of ₹ 22,15,00,0001- subject to the adjustment regarding net liquid assets and movable assets which are given in Schedule 'J' of BTA. On the same date, the appellant signed an ETA Agreement with M/s EAC also for employees transfer. As per clause 2 of this agreement, it was decided that- "2. Pre-completion matterITA Prior to completion, the employees shall be jointly approached by EAC and or Newco an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

employ the employees from the completion date on terms and conditions of service which are no less favorable than those which the employees enjoyed immediately prior to the completion date with Nitrex India without any interruption and break in service (but excluding employees stock share holding option). l. As per the terms and conditions listed above, it was the condition precedent to the completion transaction contemplated in the BTA that the management staff shall have confirmed to accept th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r share holding options. It is seen that the management employee of the Nitrex were having ESOP which was allowed to them by the appellant company in 2004 as per ESOP 2004 Scheme. As per this, 5.5% of the shares of the company were subscribed by the management team. The company has also entered into ESOP Scheme under which further shares to be allotted to the employees and an ESOP Trust was created on 20th June, 2005 as a custodian of the employees shares. As per the BTA and ETA, certain employe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

benefit of ESOP which would have effected them financially. However, as per the terms and conditions of BTA, the management team has to agree to join the new company which was a precondition for business transfer agreement. In such a situation, it became necessary for the appellant company to ensure that the management staff accepts to part with their employment with the appellant company and accept the employment of new company. Accordingly, management of team submitted acceptance letter on 09 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or EAC warranty claim. As a result of acceptance letter from the management team, the appellant company was able to transfer its trading business to M/s EAC without any hindrance. For buy backing, the management shares by the Trust, the appellant company provided the money to Trust. It is claimed by the appellant that said money is not recoverable from the Trust. However, the company has paid said money in pursuance to the BTA and ETA which was a contractual liability of the company. Without buy .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to the extent it is relevant reads as follows:- The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer (ii) the cost of acquisition of the asset and the cost of any improvement thereto: 11. As is evident, the expression expenditure inc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng of the ESOP became an integral part of the transfer itself. 12. In these circumstances, the court is of the opinion that the mode of computation of capital gains had to necessarily take into consideration the ESOP funding through the trust fund by the Assessee at the stage of transfer. 13. Therefore, the court holds that there is no infirmity in the findings of the ITAT. No question of law arises. 14. Re: Question of disallowance under Section 14A: On this aspect the revenue s grievance is co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version