TMI Blog2021 (9) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... returned by the ld. CIT (A), hence ground determined against the Revenue. - ITA No.4955/Del./2018 - - - Dated:- 22-9-2021 - Shri Kuldip Singh, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri KVSR Krishna, Advocate For the Revenue : Shri Dilip Kothari, CIT DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : Appellant, ACIT, Circle 61 (1), New Delhi (hereinafter referred to as the Revenue ) by filing the present appeal sought to set aside the impugned order dated 01.02.2018 passed by the Commissioner of Income - tax (Appeals)-38, New Delhi qua the assessment year 2013-14 on the grounds inter alia that:- 1. On the fact and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on account of disallowance of license fee of ₹ 30,49,29,397/- paid to Remfry Sagar Consultants Pvt. Ltd. (RSCPL) by ignoring the fact that the assessee being law firm was using goodwill of RSCPL being a company prohibited from practicing law in India as per Advocates Act, 1961 and Bar Council Rule. 2. On the fact and in the circumstances of the case and in law, the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S NO.1 2 6. By relying upon paras 3.21 to 3.24 of the assessment order, ld. DR for the Revenue while challenging the impugned order contented that AO has factually determined that expenses paid by the assessee to RSCPL under the garb of licence fee are not in the nature of licence fee. 7. However, ld. AR for the assessee to repel the arguments addressed by the ld. DR for the Revenue contented that this issue has already been decided by the Tribunal in favour of the assessee in its own case in ITA Nos.3667, 3666, 3668, 3669/Del/2013, 367/Del/2012 4680/Del/2012, ITA No.6669/Del/2017 ITA No.2979/Del/2016 for AYs 2003-04 to 2009-10, 2013-14 2015- 16 vide orders dated 06.09.2016, 22.01.2021 26.07.2019 respectively. 8. Bare perusal of the impugned order passed by the ld. CIT(A) goes to prove that the same has been passed by following earlier years order passed by the Tribunal deleting the identical addition by thrashing complete facts in detail in the light of the agreement dated June 5, 2001 vide which RSCPL has granted the licence for the use of goodwill to the assessee on payment of licence fee @25% of the amount of bills raised. When the agreement is still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Remfry Son', and changed the name of the proprietorship to 'Remfry Sagar'. Year 2001: (i) By a Deed of Gift executed on June 1, 2001, Dr. V. Sagar gifted the good will vesting in 'Remfry Sagar' to a private limited company, viz., Remfry Sagar Consultants Private Limited ('RSCPL'), wherein substantial shareholding was held by Dr. Sagar's children, viz., Ms. Rosemary Sagar and Mr. Hemant Sagar, who were not lawyers. At the time of the said transfer, goodwill was valued at ₹ 45 crores on which stamp duty of ₹ 90 lakhs was paid by Dr. V. Sagar. (ii) On June 5, 2001, Dr. V. Sagar entered into partnership with Mr. R. Sampath, Mrs. Ashwin Julka, Mr. Ramit Nagpal and Mr. Prem Sewak to continue the said practice of law. (iii) By an agreement dated June 5, 2001 RSCPL granted a License for the use of Goodwill in 'Remfry Sagar' to the appellant firm for a period of 5 years subject to payment of license fees @ 25% of the amount of bills raised. Latter this was raised to 28% of the bills raised on renewal of agreement after 5 years. (iv) In addition to the above, RSCPL and the appellant firm entered into an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he name and style of 'Remfry Sagar', in New Delhi and Mumbai. The goodwill in the name of 'Remfry Sagar' and all the rights associated thereof (including intellectual property rights) belong exclusively to Dr. V. Sagar. Dr. V. Sagar by way of a gift deed executed on the day of 1st June 2001, granted conveyed and transferred by way of gift to RSCPL the said goodwill in the name of 'Remfry Sagar' and all the rights associated therewith(hereinafter referred collectively referred to as goodwill ). Dr. V. Sagar also sold and transferred to RSCPL, the infrastructure associated with his practice. 8.6. From the above, it is clear that from 1st June 1990 to 31st May 2001, Dr. V. Sagar was only carrying on the practice and profession of Attorney-At-law, which included the business of Remfry and Sons acquired by him. In other words, prior to 1st June, 1990, the Goodwill of Remfry and Sons was goodwill of business and not of advocacy profession, but thereafter there is a merger of the profession of law and the business of trade mark and patent. Agents and this was carried on as a profession of law. 8.7. Vide Partnership dated 5th June 2001 between Dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eirs may be entitled to consideration for the goodwill on behalf of the deceased father but they cannot be regarded as the lawful owners of the goodwill or having the rights of owning the goodwill or to license the same. In our view, we find a contradiction in these submissions. When it contended that the legal heirs of a practitioner are entitled to receive consideration for goodwill on behalf of the deceased parent, it would be difficult to hold that, the goodwill cannot be separated from the legal practice and the fruits of such goodwill cannot be enjoyed by the legal heirs of the legal practitioner or that it can be enjoyed by the legal heirs only in a particular manner. 8.12. Be it as it may, the submission of the assessee that goodwill is a separate intangible asset which can be alienated and that which cannot be attached to a firm and that it can be vested in one or more partner of the firm, in exclusion of others, is well settled. The assessee partnership firm formed for carrying a profession and practice of Dr. V. Sagar under the name and style of 'Remfry Sagar' could not have carried out the profession as it is doing run by using the goodwill and name o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) neither clause 2 nor any other provision in the deed fixed any lump sum as price in respect of which annual payments were provided; (iii) the duration of payment was indefinite and the amount was indefinite and depended upon the rise and fall in the profits of the business, (iv) clause 6 indicated that the payments were to be made so long as the business was carried on in the name of D.V. Co. And not otherwise; and (v) the document was silent as to what was to happen to the goodwill if A or his partners were to cease to carry on business in that name or at all. Justice S.M. Sikri C.J, has written a dissenting judgment, the pith and substance of which is that the entire arrangement was made for evasion of taxes. He held as follows: In my view, it is a very ingenious attempt to avoid payment of tax by making it appear somehow that the payment of purchase money may be treated as payment of a royalty. In the view I take of the deed, it is not necessary to discuss the numerous cases referred to by Shlat J. In my opinion, the High Court came to the correct conclusion and the appeals should be dismissed with costs. 8.15. In the case of hand, this is exactly the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ables the assessee firm to carry on its profusions, in the manner in which it is now doing, is definitely an expenditure laid down wholly and exclusively for the purpose of business or profession. The argument of the Ld. Special Council that the purpose test contemplated u/s 37 of the Act is not satisfied is devoid of merit. Irrespective of whether the gift of Dr. V. Sagar to RSCPL being ethical or not and irrespective of the fact whether the gift is legally valid or not, from the view point of the assessee firm, as it could not have continued and carried on the profession of Attorneys-at- Law in the name of Remfry Sagar and use its goodwill and all its associated rights without the impugned agreement with RSCPL. Hence the payment has to be held as that which is incurred wholly and exclusively for the purpose of business or profession. 8.19. The contention of the Special Council for the Revenue that the arrangement is just a revenue shown arrangement is just an inference and is not supported by any material. Thus the argument of violation of Bar Council Rules is devoid of merit. 8.20. For all these reasons we are of the considered opinion that the deduction claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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