9911796707
TMI Blog2019 (12) TMI 1613X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AYs 2012-2013 to 2014-15. 2. As claimed on behalf of the Revenue, the facts are similar and common issues are involved in all assessment years and therefore all three appeals were heard together and disposed of by common order. 3. We shall take note of facts and issue involved in ITA No. 1190/Ahd/2018 concerning AY 2012-13 for adjudication purposes for the sake of convenience. ITA No. 1190/Ahd/2018 - AY 2012-13 4. The grounds of appeal raised by the Revenue read as under: "that the ld. CIT(Appeals) has erred in law and on facts in deleting the addition amounting to Rs.2,44,82,272/- made on account of disallowance of Trademark License Utilization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any other items of like nature. It was further observed that the licensee (assessee) has equal right to terminate the user agreement in terms of the agreement. The AO took a view that the assessee has obtained secret formula for manufacturing tobacco products as well as acquired trademark from the so-called licensor. The licensor has no name of its own in the market and it is the assessee which has earned the name and brand value of 'Vimal' in the market. On these brand parameters, it was concluded by the AO that expenditure incurred by the assessee towards license utilization fee is incurred in the capital field and is not revenue in character. The AO accordingly disallowed the claim of the assessee towards license fees in Revenue accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the aforesaid action, the Revenue preferred appeal before the Tribunal. 8.1 The learned DR for the Revenue reiterated various observations made by the AO and relied upon the conclusion drawn by the AO. It was thus submitted that the CIT(A) has wrongly admitted the claim of the assessee as revenue expenditure which in reality has been incurred in the capital field and the assessee is deriving benefit of enduring nature. The learned DR accordingly urged that the action of the CIT(A) be reversed and the action of the AO be restored. 8.2 The learned AR for the assessee, on the other hand, submitted that the issue is no longer res integra and the license agreement was under judicial scrutiny of the co-ordinate bench in the hands of the er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement with M/s. Vishnu & Company Trade Mark Pvt. Ltd. that ("Vimal" Brand Pan Gutakha and Pan Masala) are license on Trade Mark of M/s. Vishnu & Company Trade Mark Pvt. Ltd and since the assessee has used the license Trade Mark of Vishnu & Company Trade Mark Pvt. Ltd. The license fee paid by the assessee is an allowable expenditure u/s. 37 of the Act. This submission of the assessee did not find any favour with the A.O. who was of the opinion that the Trade Mark license utilization fees treated to M/s. Vishnu & Company Trade Mark Pvt. Ltd. have to be considered as a capital expenditure and accordingly disallowed the same and at the same time allowed depreciation @ 25%. 10. Aggrieved by this, the assessee carried the matter before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 is accordingly dismissed." 10. In the light of the decision of the co-ordinate bench, the claim of the assessee for payment of user license fees based on turnover is deductible as revenue expenditure. In our view, where the licensor continues to be owner of the capital asset i.e. trademark 'Vimal', the assessee cannot be said to have acquired any capital asset by making payment of user license fee. The interpretation of certain restrictive covenants by the AO is totally misplaced. The contractual obligations are ordinary in commercial parlance and does not grant any valuable right to the licensee. The advantage earned by the assessee by use of the license is neither permanent nor ephemeral but is linked to the use of the trademark owned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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