TMI Blog2019 (7) TMI 1738X X X X Extracts X X X X X X X X Extracts X X X X ..... and if the TDS deducted has been deposited within due date prescribed under the rules then credit of the same has to be allowed. Thus, this issue is decided in favour of the assessee. - I.T.A. No.2979/DEL/2016, I.T.A. No.5440/DEL/2016 - - - Dated:- 26-7-2019 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For the Appellant : Shri KVS Krishna, CA For the Respondent : Smt. Sulekha Verma, CIT-DR ORDER PER AMIT SHUKLA, JM: The aforesaid cross appeals have been filed by the Revenue as well as by the Assessee against impugned order dated 30.03.2016, passed by ld. CIT(A)-XX, New Delhi for the quantum of assessment passed u/s.143(3) for the assessment year 2011-12. The Revenue in its grounds of appeal has raised the following grounds: 1. The Ld. CIT(A) has erred in remaining silent on the disallowance of revenue expense amounting to ₹ 23,51,55,896/-. 2. The Ld. CIT(A) has erred in concluding on the mistaken premise that he acquisition of right to use Remfry Sagar brand by the appellant is in the nature of capital transaction and thereby directing the assessing officer to allow depreciation at the applicable ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to allow depreciation at the applicable rates. 6. We find that this issue is permeating from the earlier years and the Tribunal after noting the entire facts and rival contentions made by the parties as well as relevant provision of law has held that the license fee paid to M/s. RSCPL is allowable as Revenue expenditure. The relevant observation and the finding of the Tribunal read as under: 8. We have heard both the parties at length. We have considered the written submission, the papers on record as well as the case laws cited by both parties. On a careful consideration of the same we hold as follows: 8.1. Before we adjudicate the issue as to whether the disallowance of license fee paid by the assessee to RSCPL for license to practice as Remfry Sagar and for use of the said name, trade mark and goodwill by the A.O is to be upheld or not, for the purpose of the ready reference we recapitulate the facts of the case as below: Facts Year 1827: A sole proprietorship firm was established as Grant and Remfry , by a British immigrant, Mr. Henry Oliver Remfry, which was subsequently converted into partnership firm and operated by five generations of Remfry fami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which continues till date, even -after the demise of Dr. V. Sagar. 8.2. M/s Remfry Sons , was carrying on a business of patent agents. Vide terms of the deed of partnership dated 6th April 1970, 50% of the goodwill of the business belonged to the partner Mrs. Holloway and other 50% to Mrs. Silver Stone. Both of them held 50% of all the other capital assets and properties of the firm. Though Mrs. Remfry was having a share in the net profits of the partnership, she had no ownership rights in the goodwill of this firm. This demonstrates that the name and goodwill of the business Remfry Sons is distinct and seperate from the other assets of the partnership firm and that it vested only in two partners of the firm and not the firm. This is clear from reading of Clause 2 3 of the said partnership deed. 8.3. On the fourth day of April 1973, Mr. Vidya Sagar purchased by way of sale, from Mr. Holloway and Mrs. Silver Stone, the business carried on under the name and style of Remfry Sons along with all its assets including capital asset as on 31st March 1973 and the name and goodwill thereof which was referred to as the said business in that agreement for a total cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tise in this field of the profession. We notice that the partnership deed dated 5th June 2001 is under the name and style of Remfry Sagar and this partnership deed has come into force on 1st June 2001. Thus what is licensed by RSCPL to the assesse firm is Goodwill and its associated rights to practice as Attorneys-at-law and not to do business of trademark and Patent Agents. 8.8. Vide agreement dated 5th June 2001, RSCPL permitted to use of goodwill to the partnership and permitted them to use the name of Remfry Sagar with retrospective effect i.e. 1st June 2001. While Clause No. 16.1 of this agreement, the license fee in question is to be paid in pursuance to this agreement. 8.9. It is clear that Dr. V. Sagar has arranged his affairs in such a way that the goodwill earned by him over the years is enjoyed by his children who are his legal heirs. All the documentation shows that this is a very well thought out strategy by Dr.V.Sagar to retain his hard earned as well as purchased goodwill and to use it for his future generations, irrespective of the fact whether they were in the practice of law. Such well considered and thought out arrangements cannot be said to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted to do so by the owner of the goodwill. 8.13. The submission of the Ld. Special counsel for the revenue that goodwill of a profession cannot be segregated from the persona of the person is against the propositions of law laid down by the Hon'ble Supreme Court in the case of Devi Das Mittal Daas Vithaldas Co. VS. CIT Bombay City (supra). The constitutional bench of the Hon'ble Supreme Court consisting of four findings was considering a case of chartered accountant who was carrying on his profession in the name of Devi Dass Co. Vide partnership dated 31 January 1948, wherein he retained/reserved the right of goodwill of the profession carried on by him earlier in sole proprietorship. On 2nd June 1951, he retired from the said partnership. The goodwill in the partnership was sold to the other partner and the consideration was to be paid to the Chartered Accountant at the certain rate and after his death to his wife and thereafter his son were to paid annual consideration. The question before the Hon ble Court was whether such the amounts paid to the wife and thereof to the son is allowable deduction or not under the Income tax Act. 8.14. The Larger Bench co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue has accepted that both the entities i.e. the assessee as well as RSCPL, pay taxes, at the maximum rate and that there is no loss of Revenue on account of this arrangement. The taxes due to the Government have not been avoided or evaded by this arrangement. Thus the disallowance made on the ground of diversion of profits is devoid of merit. 8.17. Though the Ld. Special Counsel for the Revenue argued that good will of a profession cannot be sold to a company which does not have a right to carry on practice, no specific law or section was brought to the notice of the Bench in support of the argument. Only several submissions have been made. Certain judgements of Foreign Courts were cited, which were based on ethical considerations and not legal prohibition. In any event, the ITAT has no power or authority to adjudicate the issue as to whether, the gift of goodwill by Dr.V.Sagar of his profession of law, to a company is violating the Advocates Act, 1961 or the Bar Council Rules. No authority has held that this arrangement violates any Act or law of the land, though the assessee firm has been carrying on its profession of Attorneys at law under this arrangement for the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer was that this was a part of expenditure and has been claimed as expenditure in P L account and since assessee is following cash system of accounting, therefore, same cannot be allowed as it remain payable on 31st March, 2011. The case of the assesse before the authorities below was that the said amount of TDS is not an expense debited in the P L account and the same was deposited to the Government account within the due date prescribed under the Rule, i.e., on 7th April, 2011. The date of deposit of TDS is governed by the Income Tax provision and not by the accounting policy. Moreover, amount of TDS of ₹ 18,72,782/- is on account of license fee which has already been disallowed by the AO, and therefore, there would be double disallowance. 9. Ld. CIT (A) directed the AO to give credit to TDS as per Rule 37BA r.w.s. 199. 10. Before us, learned counsel has submitted the details of challan of TDS deposited on 24.07.2011 and if the TDS deducted has been deposited within due date prescribed under the rules then credit of the same has to be allowed. Thus, this issue is decided in favour of the assesse. 11. In the result, the appeal of the assesse is allowed and ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
