TMI Blog2019 (8) TMI 841X X X X Extracts X X X X X X X X Extracts X X X X ..... has allowed the claim of deprecation in consonance with the order passed by the tribunal in assessment year 1996 97. That being the case, we do not find any infirmity in the decision of learned CIT(A) on the issue. Accordingly, ground raised is dismissed. Accrual of income - treating the amount received towards trademark, non compete fee, etc., as revenue receipts - HELD THAT:- The Hon'ble Jurisdictional High Court in Fernhill Laboratories and Industrial Establishment [ 2012 (7) TMI 463 - BOMBAY HIGH COURT] has held that sale of self-generated trademark is not chargeable to capital gain tax prior to 1st April 2002. It is further relevant to observe, while deciding identical issue in case of Parle Biscuits Pvt. Ltd. [ 2010 (8) TMI 881 - ITAT MUMBAI] for the very same assessment year, learned CIT(A), vide order dated 30th March 2015, has held that the amount received towards non compete fee and trade mark cannot be treated as income either u/s 28(va) or subjected to capital gain tax. Pertinently, the Revenue has accepted the aforesaid decision of learned CIT(A). Thus, on overall consideration of facts and material on record, we are of the view that the amount received by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .6 and 7 being general in nature, do not require adjudication. 3. In ground no.1, the Revenue has challenged the deletion of addition of ₹ 8,78,18,200, made by the Assessing Officer on account of suppression of production of biscuits in Mumbai Unit, resulting in suppression of sales. 4. Brief facts are, the assessee company is engaged in the business of manufacturing different varieties of biscuits and confectionaries. For the purpose of its manufacturing activities, it has set up a unit at Mumbai. That besides, the assessee also gets the products manufactured on contract basis through a number of Contract Manufacturing Units(CMUs) spread across the Country. For the assessment year under dispute, the assessee filed its return of income on 28th November 1997, declaring total income of ₹ 35,32,52,912. During the assessment proceedings, the Assessing Officer after calling for various information and materials from the assessee and verifying them, found that the normal yield of biscuits as per the standard formula is 92.59%. Further, assessee s CMUs have given average yield of 90.26%. Whereas, the assessee has shown the yie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considering the facts brought on record. As could be seen, the Assessing Officer inferred suppression of sales by the assessee primarily taking into account the percentage of yield of biscuits of the assessee compared to the percentage of yield of the contract manufacturing units. The allegation of the Assessing Officer is, as per the tax audit report the percentage of yield works out to 92.55%, whereas, as per the statement and revised statement showing consumption of different raw material and manufacture furnished by the assessee, the yield works out to 84%. He has also referred to the information obtained from contract manufacturing units to conclude that the average yield of contract manufacturing units work out to 91.55%. In this context, the Assessing Officer has also referred to the standard formula applicable and the physical enquiry conducted by him at the factory premises, wherein, it was found that the manufacturing of products at Mumbai unit is through sophisticated machinery. In the course of assessment proceedings, the assessee has explained comparative lesser yield qua contract manufacturing units due to the following reasons: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t report, the assessee has shown yield of 92.55% is factually incorrect. This is evident from Annexure 5 of the audit report copy of which is at Page 211 of the paper book. As far as the discrepancies pointed out in the original statement of consumption of raw materials and the revised statement furnished during the assessment proceedings, it is a fact that the quantity of coco vita oil has been shown at 1059 MTs instead of 1860 MTs shown in the audit report. However, in the revised statement, the quantity of coco vita oil has been shown at the correct figure of 1859 MTs. Therefore, the assessee s explanation that the figure of 1059 MTs shown in the original statement was due to a mistake is believable. As far as the allegation of the Assessing Officer that the raw material others were not shown in the audit report, we are of the view that non mentioning of the said item in the Annexure to the audit report may be for the reason that as per Form no.3CD, only primary raw materials are required to be shown. Therefore, non mentioning of raw material others in the Annexure to the audit report cannot be considered to be very serious lapse so as to infer suppression of sales and unrel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not found a single instance of sale made by the assessee outside the books. At least, no adverse material to indicate out of book sales has been brought on record by the Assessing Officer. In these circumstances, making addition on estimate basis by rejecting the books of account in the absence of any adverse material brought on record cannot stand legal scrutiny. It is also a fact on record that as per the information obtained from the contract manufacturing units, the yield varies between 87% to 100%. Therefore, average yield cannot be standardized to a particular percentage. Moreover, the yield of Mumbai unit for preceding assessment years has been shown by the assessee as under: A.Y. Percentage 1992 93 83.11% 1993 94 83.32% 1994 95 82.27% 1995 96 81.65% 54. Thus, compared to the yield of Mumbai unit in the preceding assessment years as no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue has been decided in favour of the assessee in assessment years 1996 97 and 1998 99. Thus, he submitted, there is no need to interfere with the decision of learned Commissioner (Appeals). 14. We have considered rival submissions and perused the material on record. Undisputedly, identical issue came up for consideration before the Tribunal in assessment year 1996 97 and while deciding the issue in the order cited supra, the Tribunal deleted the addition made by the Assessing Officer. Since, the relevant observations of the Tribunal has already been reproduced herein above, there is no need to reproduce them again. Pertinently, while deciding identical issue in the assessment year 1998 99 also, the Tribunal following its earlier decision deleted the addition. Facts being identical, respectfully following the decisions of the Tribunal, as referred to above, we uphold the order of learned Commissioner (Appeals) on the issue. Ground raised is dismissed. 15. In ground no.3, the Revenue has challenged the deletion of addition made on account of suppression of production resulting in suppression of sales of biscuits and confectionery manufactured in CMU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee had received more than ₹ 10 crore for selling certain brands such as Prudent Tooth Brush, Flash, Prudent, Forward Angle, etc., and also some assets like land, building, plant and machinery to Gillette Diversified Operations Pvt. Ltd. (GDOPL). Whereas, the assessee has not offered the amount received as income. On being called upon by the Assessing Officer to explain the reason for not doing so, it was submitted that the amount received is towards trademark and non competence fee, hence, in the nature of capital receipt, therefore, no taxable. The Assessing Officer, after considering the submissions of the assessee in the context of facts and material on record including the trademark users agreement, concluded that the amount received towards sale of trademark and non compete fee is nothing but towards goodwill of the business. In this context, he relied upon certain judicial precedents. Thus, ultimately, he concluded that in the garb of trademark, non compete fee, etc., the assessee has actually transferred the goodwill of the business. Thus, referring to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. The learned Authorised Representative strongly relying upon the observations of learned Commissioner (Appeals) submitted, under identical agreements the assessee company along with its subsidiary Parle Biscuits Pvt. Ltd., transferred certain trademark used by them in respect of Oral Care and Oral Hygiene Products Business. In this regard, the assessee also received certain consideration towards non compete fee. He submitted, in the assessment completed for the very same assessment year in case of Parle Biscuits Pvt. Ltd., the Assessing Officer treated the amount received towards trademark and non compete fee as revenue receipt. However, learned Commissioner (Appeals) deleted the addition by accepting assessee s claim that the amount received is capital in nature. He submitted, the aforesaid decision of the first appellate authority was accepted by the Department as they did not raise the issue in appeal filed before the Tribunal. Thus, he submitted, the Department cannot take a different view in case of the present assessee. Without prejudice, the learned Authorised Representative taking us through the agreement submitted, the terms of the agreement would make it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had entered into an asset purchase agreement with Oral B Laboratories India Pvt. Ltd., an affiliate of GDOPL, under which certain assets and machinery capital of producing Tooth Paste, Gels, Tooth Brushes and Mouth Rinses were purchased from the assessee. Similarly, the assessee entered into an agreement with Gillette Co., Boston, for use of certain trademarks relating to Oral Care and Oral Hygiene products. Under the aforesaid agreement, the assessee had also agreed to not compete with either GDOPL or any of its affiliate in respect of oral care and oral hygiene products. For transfer of trademark, the assessee received certain consideration. Similarly, the assessee also received consideration towards non compete fee. Similar agreements were also entered into by another affiliate of the assessee viz. Parle Biscuits Pvt. Ltd. with GDOPL on 26th March 1997. Though, the assessee had claimed the amount received for trademark and towards non compete fee as capital receipt not chargeable to tax,in view of the fact that the cost of acquisition of such assetsare unascertainable.however, the Assessing Officer by treating the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Authorised Representative it has been held that the amendment brought to section 55(2)(a) of the Act by including the term trademark , brand name , right to carry on business , etc., would apply prospectively from the assessment year 2002 03. This view has been expressed by the Tribunal in case of Quality Biscuits Ltd. (supra). The Hon'ble Jurisdictional High Court in Fernhill Laboratories and Industrial Establishment (supra), has held that sale of self-generated trademark is not chargeable to capital gain tax prior to 1st April 2002. It is further relevant to observe, while deciding identical issue in case of Parle Biscuits Pvt. Ltd. for the very same assessment year, learned Commissioner (Appeals), vide order dated 30th March 2015, has held that the amount received towards non compete fee and trade mark cannot be treated as income either under section 28(va) of the Act or subjected to capital gain tax. Pertinently, the Revenue has accepted the aforesaid decision of learned Commissioner (Appeals). Thus, on overall consideration of facts and material on record, we are of the view that the amount received by the assessee towards trademark and non compete fee bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, the decision of learned Commissioner (Appeals) in sustaining the addition to the extent of 0.05% of the total turnover is reasonable, hence, it does not require interference from this forum. This ground is dismissed. 35. In ground no.2, the assessee has challenged the disallowance of ₹ 7,62,798, on account of foreign travel expenses. 36. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed expenditure on account of foreign travel of directors / executives called upon the assessee to furnish necessary details. Alleging that no supporting evidence was filed by the assessee to demonstrate that such foreign travels were for the purpose of business, the Assessing Officer disallowed 25% out of the total expenditure claimed. Learned Commissioner (Appeals) also relying upon the decision of the Tribunal in assessment year 2006 07 upheld the disallowance made by the Assessing Officer. 37. The learned Authorised Representative submitted, though, disallowance of foreign travel expense was upheld by the Tribunal in the assessment year 2006 07, however, in assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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