Appeal details
Counselvise Citation
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-11-2024
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
26-11-2024
Assessment Year
2015-2016
Appeal Filed On
26-08-2024
Judgement Text
"आयकर अपीलीय अिधकरण, ’ए’ Ɋायपीठ, चेɄई \nIN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI \nŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी जगदीश, लेखा सद˟ क\nे समƗ । \nBefore Shri S.S. Viswanethra Ravi, Judicial Member & \nShri Jagadish, Accountant Member \n \nआयकर अपील सं./I.T.A. No.2254/Chny/2024 \nिनधाŊरण वषŊ/Assessment Year: 2015-16 \n \nThe Income Tax Officer, \nCorporate Ward 3(1), \nChennai. \nVs. TTK Healthcare Limited, \nNo. 6, Cathedral Road, \nGopalapuram, Chennai 600 086. \n \n[PAN:AABCT3312J] \n \n(अपीलाथŎ/Appellant) \n \n(ŮȑथŎ/Respondent) \n \nअपीलाथŎ की ओर से / Appellant by : \nShri C. Murugesan, Addl. CIT \nŮȑथŎ की ओर से/Respondent by : \nShri Vikram Vijayaraghavan, Advocate \n(virtual) \nसुनवाई की तारीख/ Date of hearing \n: \n26.11.2024 \nघोषणा की तारीख /Date of Pronouncement : \n27.11.2024 \n \nआदेश /O R D E R \n \nPER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: \n \n \nThis appeal filed by the Revenue is directed against the order dated \n27.06.2024 passed by the ld. Commissioner of Income Tax (Appeals), \nNational Faceless Appeal Centre (NFAC), Delhi for the assessment year \n2015-16. \n \n2. \nWe note that the return of income filed by the assessee was \nselected for scrutiny and assessment order was passed assessing \nincome of ₹.35,75,45,407/-. The Assessing Officer reopened the \n\nI.T.A. No.2254/Chny/24 \n2\nassessment by issuing notices. After considering the submissions of the \nassessee against the show-cause notice, the Assessing Officer \ncompleted the assessment under section 147 of the Income Tax Act, \n1961 [“Act” in short], inter alia making additions towards disallowance \nunder section 14A of the Act, disallowance of logo charges and \ndisallowance of depot service charges. On appeal against the \ndisallowance of log charges, the ld. CIT(A), by following the decision of \nthe Coordinate Bench of the ITAT in assessee’s own case for earlier \nassessment years, deleted the addition made by the Assessing Officer on \naccount of logo charges. \n \n3. \nAt the outset, the ld. AR Shri Vikram Vijayaraghavan, Advocate \nsubmits that the issue is squarely covered in favour of the assessee by \nthe order of the Tribunal, wherein, the logo charges was treated as \nrevenue expenditure. He brought on record the decision of the Tribunal \nvide order dated 08.08.2024 for the assessment years 2013-14, 2014-15 \n& 2016-17 as well as latest decision in ITA No. 1772/Chny/2024 for AY \n2020-21 dated 25.10.2024 and prayed to follow the same. \n \n4. \nThe ld. DR Shri C. Murugesan, Addl. CIT submits that the \nDepartment has not accepted the decision of the Tribunal and preferred \n\nI.T.A. No.2254/Chny/24 \n3\nfurther appeal before the Hon’ble High Court of Madras and thus prayed \nto set aside the order of the ld. CIT(A). \n \n5. \nHaving heard both the parties, we find that the Coordinate Bench of \nthe Tribunal in assessee’s own case for earlier assessment years held \nthat the logo charges are revenue in nature and by following the order of \nthe Tribunal in ITA Nos. 1826 to 1830 & 2011/Mds/2011 dated \n31.10.2012 and in ITA Nos. 1587 to 1589/Mds/2015 dated 13.11.2015, \nthe ld. CIT(A) deleted the addition made by the Assessing Officer. We \nfind that in a latest decision of the Tribunal dated 25.10.2024 in ITA No. \n1772/Chny/2024 in the case of ITO v. TSL Techno Services Limited [TTK \nHealthcare Private Ltd.) for AY 2020-21 also the Tribunal held that the \nlogo charges incurred by the assessee is revenue expenditure by \nfollowing the order of the Tribunal vide order dated 08.08.2024 in ITA \nNos. 1459 to 1461/Chny/2024, wherein, the Tribunal held as under: \n7. \nWe have heard the rival submissions and gone through the material \navailable on record and the orders of the authorities below. We note that these \nissues are covered by the Tribunal’s decision in assessee’s own case in ITA \nNo.1459, 1460 & 1461/Chny/2024 for the assessment years 2013-14, 2014-15 & \n2016-17, vide order dated 08.08.2024, wherein the tribunal held as under: \n \n“4.At the outset, the ld. counsel for the assessee stated that this issue is fully \ncovered by the Tribunal’s decision in assessee’s own case in ITA \nNo.2030/Mds/2011 for the assessment year 2008-09, vide order dated \n02.07.2013, wherein exactly on identical facts, the Tribunal by following its \nearlier decision in assessee’s own case in ITA Nos.1791 to 1796/Mds/2011 \n& 1826 to 1830/Mds/2011 held that the logo charges incurred by the \nassessee is revenue expenditure by observing as under:- \n \n\nI.T.A. No.2254/Chny/24 \n4\n33. The last issue in the grounds of appeal of the Revenue is that the \nCommissioner of Income Tax (Appeals) erred in holding that the \nexpenditure incurred towards payment of logo charges is revenue in nature. \nAt the time of hearing, the counsel for the assessee submits that this issue \nhas been decided in favour of the assessee by the co-ordinate Bench of this \nTribunal in ITA Nos. 1791 to 1796/Mds/2011 and 1826 to 1830/Mds/2011 \ndated 31.10.2012 in the case of TTK LIG Ltd., a group concern of the \nassessee on identical facts and circumstances. Copy of the said order is \nplaced on record. \n \n34. The Departmental Representative supports the order of the Assessing \nOfficer. \n \n35. We have gone through the order of the co-ordinate Bench of this \nTribunal in ITA Nos. 1791 to 1796/Mds/2011 and 1826 to 1830/Mds/2011 \ndated \n31.10.2012 \nand \nfind \nthat \nITA Nos.1897, \n1898, \n2029 \n& \n2030/Mds/2011, 1783/Mds/2012 this Tribunal has decided this issue in \nfavour of the assessee holding that logo charges paid by the assessee are \nrevenue expenditure within the meaning of section 37 of the Act. While \nholding so, the Tribunal observed as under:- \n \n20. We have given our thoughtful consideration to the issue and also \nperused the relevant findings, contents of paper book referred and case law \ncited. Undisputed facts are that vide agreement in question, the assessee had \nagreed to pay another entity vide agreement dated 31.3.00/6.5.00 for using \nthe monogram, namely “ttk”. The relevant extract of the said agreement as \navailable in the paper book reads as under:- \n \nWHEREAS TTK has been in the business of various consumer and \npharmaceuticals products and has been marketing and distributing the \nconsumer and pharmaceuticals products for over five decades and has \nearned a wide reputation and has created a strong image and awareness on \nthe minds of public and has also evolved an original artistic work in the \nform of a monogram entitled ‘ttk’ (hereinafter referred to as the said \nmonogram) which has established an identity of its own in the public minds \nrelating to the quality of the products and other services, as well as the \nstature of the organization. \n \nWHEREAS TTK is the owner of the copyright of the said monogram having \nsecured a registration of the said copyright under No.A- 39006/83 under the \nCopyright Act, 1957. \n \nWHEREAS TTK LIG, a company already in the business of Manufacture of \nRubber Contraceptives is desirous of promoting and strengthening its \nbusiness base by establishing a proper identity in the minds of public at \nlarge which will create a strong marketing base for the products of the \ncompany and reflect an immediate identity in the minds of the public with \nreference to the products services and stature of the Licenses and for the \npurpose has approached TTK for license and permission to use the said \nmonogram on or in relation to the goods manufactured and marketed by \nTTK LIG and in relation to other business activities of TTK LIG. \n\nI.T.A. No.2254/Chny/24 \n5\nWHEREAS TTK had acceded to the request of TTK LIG to grant license and \npermission to TTK LIG to use the said monogram, subject to certain terms \nand condition, which terms and conditions in writing by this Deed of \nAgreement. \n \nWHEREAS both the parties hereto consider it necessary and expedient to \nrecord such terms and conditions in writing by this Deed of Agreement. \nNOW THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF \nTHE MUTUAL COVENANTS AND OBLIGATIONS HEREIN CONTAINED, \nTHE PARTIES HERETO AGREE AS FOLLOWS: \n \n1. TTK hereby confirms having licensed and permitted the use of the said \nmonogram by TTK-LIG for a period of three years with effect from 1st April \n2000, as per approval accorded by the Government of India vide letter \nNo.2/M-7964 dated 3rd May, 2000. Copy of Government approval is \nannexed to this Agreement. \n \n2. The License and permission granted by TTK in favour of TTK-LIG as \naforesaid, shall entitle TTK-LIG, so long as this agreement in force, to use \nthe said monogram on or in relation to the goods of TTK-LIG and in \nrelation to the business activities of TTK-LIG, including the use of the said \nmonogram on stationery, trade literature, packing of goods, labels, \nwrappers and advertisements of TTL-LIG. TTK-LIG shall not under any \ncircumstances transfer or assign any of their rights under this agreement. \n \n3. TTK-LIG accepts that the said monogram shall be used by TTKLIG under \nthis agreement in a manner indicative of the fact that the copyright in the \nsaid monogram is owned by TTK. Illustrative of the words to appear in close \nproximity to the said monogram, for the purpose of carrying out the \nrequirements of this clause are: \n \n1981 T.T.Krishnamachari & Co \n1. When the said monogram is used on or \nin relation to the goods of TTK-LIG \nA Unit 1981 T.T.Krishnamachari & Co \nWhen the said monogram is used otherwise \nin relation to the name of TTK-LIG \n \n4. The agreement shall be in force for a period of three years effective from \n1st April, 2000 and may be renewed thereafter by the consent of both the \nparties, subject to Government approval. \n \n5. The renewal of this agreement may be effected by both the parties hereto \nby exchange of letters signed by persons duly authorized in this behalf. \n \n6. In consideration of the said License and permission granted by TTK., \nTTK-LIG shall pay to TTK as non-refundable license fee, a sum equivalent \nto two percent of the total sales of the company on quarterly rest. \n \nThe above said agreement for using the monogram in question, was also \napproved by Department of Company Affairs, Ministry of Law, Justice and \nCompany Affairs, Government of India vide letter dated 03.05.00, which is \nreproduced hereunder below:- \n\nI.T.A. No.2254/Chny/24 \n6\n1. In exercise of the powers delegated to the undersigned by the Government \nof India under section 637 of the Companies Act, 1956 in Notification \nNo.GSR 563 E dated 19.08.93,I, the Regional Director, Department of \nCompany Affairs, Chenai-6, do hereby approve under proviso to sub section \n(1) of section 297 of the Companies Act, for entering into contract with \nM/s.T.T. Krishnamachari & Co. for licensing use of trade name and logo \nthereof in consideration of payment of 2%license fee calculated on the total \nsales of the company for a period of 3 years with effect from 1.4.2000. \n \n2. The approval accorded in para 1 above is subject to the following \nconditions: \n \n(i) The contract shall be for a period of 3 years with effect from 1.4.2000 \nto 31.3.2003. \n \n(ii) The total value of services to be availed from the contractee party herein \nshall not exceed the limit mentioned in para 1 above during the contract \nperiod. \n \n(iii) The prices to be payable for the services to be obtained from the \ncontractee party shall be reasonable and shall not be higher than the \nprevailing market rates. \n \n(iv) The company shall ensure that the contract with the contractee party is \ncompetitive and is not less advantageous to it as compared to similar \ncontracts with other parties. \n \n3. This approval has been accorded without prejudice to any action that may \nbe required to be taken by the company under any other provisions of the \nCompanies Act, 1956 or any other law in force. Dated at Chennai the 27th \nday of April 2000. There is hardly any dispute between the parties about the \nfactum of payment made by assessee of logo charges @ 2% of the gross \nsales. The only strife is that per revenue, it is capital expenditure whereas \nthe assessees plea of treating it as a revenue expenditure stands accepted by \nCIT(A). We find that in exactly the similar circumstances, the Hon’ble Delhi \nHigh Court in the case of G4S Securities System had held as under:- \n \n“ the ownership rights of the trade mark and know-how throughout vested \nwith the foreign company and on the expiration or termination of the \nagreement the assessee was to return all the know-how obtained by it under \nthe agreement. The payment of royalty was also to be on year to year basis \non the net sales of the assessee and at no point of time was the assessee \nentitled to become the exclusive owner of the know- how and trade mark. \nHence, the expenditure incurred by the assessee as royalty was revenue \nexpenditure and was deductible under section 37(1) of the Income-tax Act, \n1961.” \n \n 20.1. Similarly, the Co-ordinate Bench of Delhi ITAT in the case of DCM \nBenetton(supra) has also held usage of such brand name etc. to be revenue \nexpenditure by observing as follows:- \n \n\nI.T.A. No.2254/Chny/24 \n7\n“From the agreement it is clear that the assessee was only granted non-\nassignable licence, right and privilege with reference to the licensed marks \nto manufacture on the mark and distribute the licensed product in India and \nto use the expression Benetton. The assessee did not become the owner of \nthe licensed marks or the holder of the trade-marks. Such license marks at \nall times remain the property of the licensor. The license was initially \ngranted for a period from October, 1992 till fall/winter season of 1999-\n2000. However, to continue to use the license mark for manufacturing of the \nlicensed products, the assessee was to pay royalty @ % % of the amount of \nnet sales. By paying the royalty the assessee did not acquire any right in the \nlicenses trade-marks. Only the products manufactured by the assessee i.e. \ngarments will bear the licensed marks for which the license has been \ngranted. Accordingly, it can be said that the assessee has not acquired any \ncapital asset but has merely paid to the licensor for use of such trade-marks. \nTherefore, expenses are to be treated as revenue expenditure and not capital \nexpenditure. The assessee was required to pay royalty every year. But for \npayment of royalty, every year the assessee could not continue receiving the \nlicense to use the licenses marks on the products manufactured by it. Thus \nmaking payment every year it cannot be said that the assessee received \nadvantage of enduring nature primarily to bring it as capital expenditure”. \n \nTaking cue from the same, we hold that in the instant case also, title of the \nlogo in question has not passed over to the assessee. Further, there is no \nacquisition of assets or part of any capital asset. Usage of logo by the \nassessee is only for displaying it on the product manufactured i.e. rubber \ncontraceptives. That too, for a limited period as provided in the agreement \nin lieu of payment @ 2% of the gross sales. When we apply the tenor of the \ncase law above cited to the facts of the instant case, we hold the instant logo \ncharges are also revenue expenditure within the meaning of Sec.37 of the \nAct in the nature of wholly and exclusively for the purpose of assessees \nbusiness. Consequently, we see no reason to interfere in the findings of the \nCIT(A). Therefore, the same are hereby upheld.” \n \n36. Since the facts and circumstances being similar, respectfully following \nthe above said order of the co- ordinate Bench of this Tribunal, we hold that \nthe logo charges incurred by the assessee are revenue expenditure.” \n \n4.1 \nSince the Co-ordinate Bench of this Tribunal has allowed this issue in \nfavour of assessee in earlier years on similar facts and circumstances and the \nCIT(A) has also deleted the addition made by the AO towards logo charges by \nfollowing the Tribunal’s order in assessee’s own case for earlier assessment years, \nwe find no reason to interfere with the order of the CIT(A). Therefore, we confirm \nthe order of CIT(A) and dismiss this ground raised by the Revenue. \n \n6. \nWe note that the ld. CIT(A), by following earlier decisions of the \nTribunal in assessee’s own case held that the expenditure incurred \ntowards logo charges is allowable as revenue expenditure. Under the \n\nI.T.A. No.2254/Chny/24 \n8\nabove facts and circumstances, we find no infirmity in the order passed \nby the ld. CIT(A) and thus, the grounds raised by the Revenue are \ndismissed. \n \n7. \nIn the result, the appeal filed by the Revenue is dismissed. \n \nOrder pronounced on 27th November, 2024 at Chennai. \n \n \n \nSd/- \nSd/- \n(JAGADISH) \nACCOUNTANT MEMBER \n(S.S. VISWANETHRA RAVI) \nJUDICIAL MEMBER \n \nChennai, Dated, 27.11.2024 \n \nVm/- \n \nआदेश की Ůितिलिप अŤेिषत/Copy to: \n1. अपीलाथŎ/Appellant, \n2.ŮȑथŎ/ Respondent, \n3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem \n4. िवभागीय Ůितिनिध/DR & \n5. गाडŊ फाईल/GF. \n"
Mehul