TMI Blog2021 (9) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... - As decided in own case [ 2020 (4) TMI 742 - ITAT CHENNAI] it is settled principle of law that the Assessing Officer is not expected to question the necessity of the expenditure. The brand expenditure is nothing but business promotion expenditure which is Revenue in nature and which is clearly allowed as deduction. - Decided in favour of assessee. - I.T.A. No. 915/Chny/2019 - - - Dated:- 16-9-2021 - Shri Duvvuru RL Reddy, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Shri B. Ramakrishnan, C.A. For the Respondent : Shri G. Johnson, Addl. CIT ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 13, Chennai, dated 22.11.2017 relevant to the assessment year 2011-12. The effective grounds raised in the appeal relate to confirmation of disallowance of depreciation on trademark and confirmation of disallowance of advertisement expenditure professional charges. 2. The above appeal is filed with a delay of 396 days, for which, the assessee has filed a petition in support of an affidavit for condonation of the delay. By r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts whereas there is no mention as to who is representing the company and the designation of the person representing. Whereas due authorisations have been given in favour of the person who signed the agreement. v) The Learned Assessing officer had stated that appellant company has not transferred the impugned Trade Marks and Copyright which has been in the individual name of Mr. D. Satish Babu, who is the Managing Director of the appellant company to its own name and hence the appellant company do not hold any Trade Mark or Copyright. Whereas the registration has been done by the legal counsel of the Company and the appellant company cannot be penalised for the above fault of the legal counsel. Moreover, the transfer had been done by way of transfer of requisite consideration to that effect and the parties have acted on the above agreement of transfer (assignment). The conduct of the parties goes to prove the authenticity of the transaction and does not invalidate the appellants ownership rights on the impugned Trade Mark Univercell . On appeal, after considering the submissions of the assessee, the ld. CIT(A) confirmed the disallowance. 4. On being aggrieved, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return in response to notice issued u/s.148 of the Act. Subsequently, assessee had sought reasons for reopening the assessment and the same was provided by l Assessing Officer through his letter dated 08.07.2013. Finally assessment was completed at a total loss of ₹ 57,83,182/- by disallowing the depreciation on intangible assets being trade mark acquired from M/s. Univercell Telecommunications India Pvt. Ltd at a cost of ₹ 3,48,00,000/-. While denying the claim for depreciation on intangible assets, ld. Assessing Officer had questioned the genuineness of agreement of assignment of trade mark right entered between the appellant and the M/s. Univercell Telecommunications India Pvt. Ltd dated 01.02.2007. The genuineness of the agreement is doubted on the ground that the agreement was on the post dated stamp paper which is dated 09.07.2007 and also the agreement is signed by one Shri. D. Satish Babu in all capacities i.e. assignor, assignee and confirming party and also questioned the necessity of procuring the trade mark and again giving back to the same party for a consideration of 0.01% of the turnover. Based on these facts, ld. Assessing Officer inferred that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Shri. D. Satish Babu is a owner of trademark Univercell as the trademark Univercell is registered under the name of Shri. D. Satish Babu by the Government of India and this trademark was purchased by the appellant for a consideration of ₹ 3,48,00,000/- , and the said consideration was paid on 15.02.2007. Ld. Assessing Officer had doubted the genuineness of the transaction primarily for following reasons namely:- (i) the agreement entered between the parties on 01.02.2007 was on stamp paper which is post dated. (ii) It is a device adopted by the parties to evade the taxes (iii) There is no necessity of buying the trade mark and again allowing M/s. Univercell Telecommunications India Private Limited to use this trademark for a consideration of 0.01% on the sales turnover. The Assessing Officer had not disputed, in principle, the eligibility of trademark for depreciation nor the cost of acquisition of trademark, but disallowed the claim doubting the genuineness of the transaction. Now we shall dwell upon each of the reasons assigned by the Assessing Officer. 11. There is no requirement under law that an agreement to purchase trademark should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [1951] 20 ITR 1 (SC) it was held by the Supreme Court that (page 6) There are usually many ways in which a given thing can be brought about in business circles but it is not for the court to decide which of them should have been employed when the court is deciding a question under section 12(2) of the Income-tax Act . It was further held in this case that it is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned . In CIT v. Walchand and Co. P. Ltd. [1967] 65 ITR 381 (SC), it was held by the Supreme Court that in applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively laid out for the purpose of business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. It was further observed that the rule that expenditure can only be justified if there is corresponding increase in the profits was erroneous. It has been classically observed by Lord Thankerton in Hughes (Inspector of Taxes) v. Bank of New Zealand [1938] 6 ITR 636 (HL) that expenditure in the course of the trade which is unremunerative is none the less a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that, inter alia, finds expression in the OECD guidelines, in the paragraphs which we have quoted above . Thus law is settled to the extent that it is outside the domain of the ld. Assessing Officer to question the necessity of incurring an expenditure. Thus the reasons assigned by the Assessing Officer that the transaction for purchase of trademark are not genuine cannot stand test of the law. Furthermore, it is an settled principle of law that intangible assets such as trademark, goodwill are also qualifies for depreciation at prescribed rates. Therefore we do not concur with the views of the lower authorities in disallowing the claim for depreciation on trademark. Accordingly, we set aside the orders of the lower authorities and allow the grounds of appeal filed by the assessee. Hence grounds of appeal 3 to 5 filed by the assessee are allowed. Since, the facts are same for this AY, following the above order in the assessee s own case, this issue is allowed in the assessee s favour. 5.1 The ld. DR could not controvert the above decision of the Tribunal by filing any higher court s decision having modified or reversed the order of the Tribunal. Respectfully follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers like Samsung have entered into these business. In addition, online space is growing day by day with big brands like Flipkart and Amazon dominating and customers get better deals online . It is settled principle of law that the Assessing Officer is not expected to question the necessity of the expenditure. The brand expenditure is nothing but business promotion expenditure which is Revenue in nature and which is clearly allowed as deduction. Thus, grounds of appeal No.6 filed by the assessee is allowed. Since the facts and circumstances have not changed, following the above order, this issue is decided in favour of the assessee. Therefore, corresponding grounds of appeal for the AYs 2007-08 2008-09 are allowed. 6.2 The ld. DR could not controvert the above findings of the Tribunal. Respectfully following the above decisions, we set aside the orders of authorities below and direct the Assessing Officer to allow the claim of deduction of advertisement expenditure and professional charges. Thus, the ground raised by the assessee is allowed. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced on the 16th September, 2021 in Chennai. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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