Indus Mobile Distribtion Pvt. Ltd., CHENNAI V. ACIT Central Circle 1(1), CHENNAI

ITA 915/CHNY/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5752 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 03-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G JOHNSON
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Depreciation; Transfer pricing; Cost of acquisition; Difference of opinion; Commercial expediency; Change of opinion; Reassessment proceedings; Set aside
• Section: 37(1)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A. NO. 915/CHNY/2019 / ASSESSMENT YEAR: 2011-12 M/S. INDUS MOBILE DISTRIBUTION PVT. LTD., NO. 281, TTK ROAD, ALWARPET, CHENNAI 600 018. [PAN:AABCI6304D] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI B. RAMAKRISHNAN, C.A. / RESPONDENT BY : SHRI G. JOHNSON, ADDL. CIT / DATE OF HEARING : 01.09.2021 /DATE OF PRONOUNCEMENT : 16.09.2021 / O R D E R 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 REFERRING TO THE AFFIDAVIT THE LD. COUNSEL FOR THE ASSESSEE HAS I.T.A. NO. 915/CHNY/19 2 SUBMITTED THAT THE ASSESSEE COMPANY WAS UNDERGOING CORPORATE INSOLVENCY RESOLUTION PROCESS UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016 (IBC) VIDE ORDER OF NCLT, CHENNAI BENCH IN CP NO. 763/IB 2018 DATED 28.09.2019 HAD ADMITTED THE APPLICATION. IT WAS FURTHER SUBMISSION THAT AT THE TIME OF RECEIPT OF THE APPELLATE ORDER AND TILL THE DATE OF FILING THE SUBJECT APPEAL, THE ASSESSEE WAS UNDERGOING THE PROCEEDINGS UNDER IBC, 2016 AND THERE WERE SHORTAGE OF SUFFICIENT PERSONNEL IN ASSESSEES COMPANY AND THUS, THE LD. COUNSEL PRAYED THAT THE DELAY MAY BE CONDONED AND ADMIT THE APPEAL FOR ADJUDICATION, TO WHICH; THE LD. DR HAS NOT RAISED ANY SERIOUS OBJECTION. CONSEQUENTLY, SINCE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE, THE DELAY OF 396 DAYS IN FILING OF THE APPEAL STANDS CONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 3. BRIEF FACTS LEADING TO THE DISALLOWANCE OF DEPRECIATION ON TRADEMARK ARE THAT THE ASSESSING OFFICER DISALLOWED A SUM OF .32,11,523/- CLAIMED TOWARDS DEPRECIATION ON THE TRADEMARK OWNED BY THE ASSESSEE FOR THE REASON THAT THE DEED OF ASSIGNMENT OF TRADEMARK AND COPYRIGHT ENTERED INTO BY THE ASSESSEE WITH M/S. UNIVERCELL TELECOMMUNICATIONS INDIA PRIVATE LIMITED IS AN INVALID AGREEMENT FOR THE FOLLOWING REASONS:- I. MR. D. SATISH BABU, HAS SIGNED ON BEHALF OF M/S. UNIVERCELL INDIA PRIVATE LIMITED AS ASSIGNOR AND ON BEHALF OF THE APPELLANT COMPANY AS ASSIGNEE AND IN HIS PERSONAL CAPACITY AS THE CONFIRMING PARTY AND HENCE THE AGREEMENT IS AN INVALID AGREEMENT. I.T.A. NO. 915/CHNY/19 3 II. THE SAID AGREEMENT, WHICH IS EXECUTED ON 01/02/2007, IS SIGNED ON A POST-DATED STAMP PAPER DATED 09/07/2007, WHICH MAKES THE ENTIRE AGREEMENT INVALID. (III) THE LEARNED ASSESSING OFFICER HAS HELD THE AGREEMENT VOID MERELY BECAUSE 'MR. SATISH BABU HAS SIGNED THE LAST PAGE OF THE AGREEMENT TWICE, BOTH AT THE TOP AS WELL AS AT THE BOTTOM OF THE LAST PAGE. THERE WAS NO REASON TO AGAIN SIGN AT THE BOTTOM OF THE LAST PAGE AS THE SIGNATURE FIELDS HAVE ALREADY BEEN FULLY COMPLETED AT THE TOP OF THE LAST PAGE' .. IV). THE LEARNED ASSESSING OFFICER HAD STATED THAT ANY PRIVATE LIMITED COMPANY THAT ENTERS INTO AN AGREEMENT NEED TO MENTION THE DESIGNATION OF THE PERSON WHO IS GOING TO REPRESENT THEM ON THEIR BEHALF AND HAS TO BE AUTHORISED BY THE BOARD BY A RESOLUTION AS PER THE COMPANY LAW AND LAW OF CONTRACTS 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 IS IN APPEAL BEFORE THE TRIBUNAL. BY FILING COPIES OF THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER I.T.A. NO. 915/CHNY/19 4 ASSESSMENT YEARS, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND PRAYED FOR FOLLOWING THE SAME. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE GONE THROUGH THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2015-16 IN I.T.A. NOS. 967, 968 & 969/CHNY/2019 DATED 18.02.2020, WHEREIN, ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A. NOS. 673-675/CHNY/2018 WAS FOLLOWED AND RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 6. THE LD.AR SUBMITTED THAT THE AO MADE DISALLOWANCE OF DEPRECIATION ON TRADE MARK. ON APPEAL, THE LD.CIT(A) CONFIRMED THE DISALLOWANCE. IN THIS REGARD, THE LD.AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE FOR THE AYS 2007-08 TO 2009-10 IN ITA NOS.673-675/CHNY/2018 DATED 16.05.2019. 7. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. THE RELEVANT PORTION OF THE ORDER RELIED ON BY THE ASSESSEE IS EXTRACTED AS UNDER: 6. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. INDUS MOBILE DISTRIBUTION PVT. LTD IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF WHOLESALE TRADING AND DISTRIBUTION OF MOBILE PHONES AND ACCESSORIES. THE RETURN OF INCOME FOR THE AY 2007-08 WAS FILED ON 26.10.2007 DISCLOSING TOTAL INCOME OF RS. 17,58,080/-, AND THE SAME WAS REVISED ON 29.10.2013 AT A LOSS OF RS.1,01,33,182/-. AGAINST THE SAID RETURN OF INCOME, THERE WAS NO SCRUTINY ASSESSMENT PROCEEDINGS. SUBSEQUENTLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2010-2011, LD. ASSESSING OFFICER FOUND THAT THE CLAIM OF DEPRECIATION ON INTANGIBLE ASSET WAS NOT CORRECT AND THEREFORE INITIATED THE REASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S.148 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 13.03.2013 TO THE APPELLANT. IN RESPONSE TO NOTICE U/S.148 OF THE ACT, THE APPELLANT HAD FILED REPLY VIDE LETTER DATED 11.04.2013 STATING THAT TO TREAT THE INCOME ORIGINALLY FILED AS RETURN IN RESPONSE TO NOTICE ISSUED U/S.148 OF THE I.T.A. NO. 915/CHNY/19 5 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 RS.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 RS. 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 TRANSACTION WERE MALAFIDE AND DISALLOWED THE CLAIM FOR DEPRECIATION. 7. BEING AGGRIEVED BY THE LD. ASSESSING OFFICER ORDER, ASSESSEE FILED AN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONTENDING THAT THE VERY REOPENING THE ASSESSMENT IS NOT VALID IN LAW, IN AS MUCH AS, REOPENING IS BASED ON CHANGE OF OPINION ON THE SAME SET OF FACTS WHICH ARE IN EXISTENCE AND ALSO CONTENDING THAT ASSESSING OFFICER HAD NO POWER TO QUESTION THE NECESSITY TO ENTER INTO TRANSACTION AND ALSO FINDING FAULT WITH THE CONCLUSION REACHED BY THE ASSESSING OFFICER THAT THE TRANSACTION IS MALAFIDE AND TRANSACTION BETWEEN ASSESSEE AND M/S. UNIVERCELL TELECOMMUNICATIONS INDIA PVT. LTD IS BASED ON IRRELEVANT MATERIAL. HOWEVER, LD. COMMISSIONER OF INCOME TAX (APPEALS) DISMISSED THE APPEAL BOTH ON THE REOPENING AND MERITS OF THE ISSUE. 8. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. LD. AUTHORISED REPRESENTATIVE MR. B. RAMAKRISHNAN, SUBMITTED THAT THE CONCLUSION REACHED BY THE ASSESSING OFFICER THAT IT IS AN ATTEMPT BY THE PARTIES TO CLAIM HIGHER DEPRECIATION IN ORDER TO EVADE TAXES, IT IS BASED ON THE IRRELEVANT MATERIAL AS MUCH AS APPELLANT COMPANY HAD BEEN INCURRING LOSSES AND M/S. UNIVERCELL TELECOMMUNICATIONS INDIA PVT. LTD IS MAKING PROFITS. FURTHER LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT ASSESSING OFFICER AS WELL AS LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD FAILED TO CONSIDER THE FACTS THAT THE AGREEMENT TO PURCHASE M/S. UNIVERCELL TELECOMMUNICATIONS INDIA PVT. LTD IS REACHED ON 01.02.2007 WHICH IS EVIDENCED BY PASSING OF THE CONSIDERATION STATEMENT IN AGREEMENT DATED 01.02.2007 AND THE ADDENDUM DATED 02.02.2007 WAS ENTERED IN ORDER TO REDUCE THE TERMS AND CONDITIONS INTO WRITING AND TO ENSURE THE CLARITY OF THE AGREEMENT. THEREFORE, THE DATE OF THE STAMP PAPER HAS NO RELEVANCE, IN AS MUCH AS, THE SUBSTANCE OF THE TRANSACTION REMAINING THE SAME, THEREFORE HE SUBMITTED THAT THE ORDERS OF THE LOWER AUTHORITIES CANNOT BE SUSTAINED. 9. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 10. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SHORT ISSUE INVOLVED IN THIS APPEAL IS WHETHER OR NOT THE TRANSACTION OF PURCHASE OF TRADEMARK FROM ONE SHRI. D. SATISH BABU FOR A CONSIDERATION OF RS.3,48,00,000/- IS I.T.A. NO. 915/CHNY/19 6 GENUINE. THERE IS NO DISPUTE THAT 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 RS. 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 BE IN WRITING ON A STAMP PAPER. AN AGREEMENT IN WRITING IS ENTERED IN ORDER TO REDUCE THE AGREED TERMS AND CONDITIONS IN WRITING SO AS TO AVOID ANY MISUNDERSTANDING IN FUTURE. THEREFORE, THE FACT THAT THE AGREEMENT IS ENTERED ON POST DATED STAMP PAPER IS IMMATERIAL AND NOT GERMANE TO DECIDE WHETHER OR NOT TRANSACTION IS GENUINE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT SUBSTANCE OF THE TRANSACTION IS SOMETHING ELSE. THEREFORE THE REASONING OF THE ASSESSING OFFICER, AS WELL AS LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE AGREEMENT IS ENTERED ON POST DATED STAMP PAPER, TRANSACTION IS NOT GENUINE CANNOT BE SUSTAINED. 12. AS REGARDS TO THE ALLEGATION THAT IT IS ADOPTED TO AVOID EVADING THE TAXES, FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEAR THAT EVEN AFTER DISALLOWANCE OF CLAIM FOR DEPRECIATION ON THE TRADEMARK STILL THE ASSESSMENT RESULTED IN LOSSES. IT IS AN ADMITTED FACT THAT PAYEE HAD DISCLOSED THIS INCOME IN HIS HANDS AND THEREFORE THERE IS NO MOTIVE OF EVASION OF TAXES, THAT CAN BE ATTRIBUTE TO THIS TRANSACTIONS. FINALLY NECESSITY OF ENTERING INTO AGREEMENT, IT IS A SETTLED PROPOSITION OF LAW THAT IT IS NOT OPEN TO THE ASSESSING OFFICER TO QUESTION THE NECESSITY OF INCURRING AN EXPENDITURE AND HE CANNOT STEP INTO THE SHOES OF THE ASSESSEE AS HOW TO CONDUCT THE BUSINESS OF THE ASSESSEE. IN THIS CONNECTION, RELIANCE CAN BE PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF EASTERN INVESTMENTS LTD. VS. CIT, 20 ITR 1. RECENTLY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EKL APPLIANCES LTD, 345 ITR 241 AFTER REFERRING THE ABOVE SAID JUDGMENT OF SUPREME COURT, WHEREIN IT WAS HELD AS FOLLOWS: 19. THERE IS NO REASON WHY THE OECD GUIDELINES SHOULD NOT BE TAKEN AS A VALID INPUT IN THE PRESENT CASE IN JUDGING THE ACTION OF THE TRANSFER PRICING OFFICER. IN FACT, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS REFERRED TO AND APPLIED THEM AND HIS DECISION HAS BEEN AFFIRMED BY THE TRIBUNAL. THESE GUIDELINES, IN A DIFFERENT FORM, HAVE BEEN RECOGNIZED IN THE TAX JURISPRUDENCE OF OUR COUNTRY EARLIER. IT HAS BEEN HELD BY OUR COURTS THAT IT IS NOT FOR THE REVENUE AUTHORITIES TO DICTATE TO THE I.T.A. NO. 915/CHNY/19 7 ASSESSEE AS TO HOW HE SHOULD CONDUCT HIS BUSINESS AND IT IS NOT FOR THEM TO TELL THE ASSESSEE AS TO WHAT EXPENDITURE THE ASSESSEE CAN INCUR. WE MAY REFER TO A FEW OF THESE AUTHORITIES TO ELUCIDATE THE POINT. IN EASTERN INVESTMENTS LTD. V. 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 PROPER DEDUCTION, IF WHOLLY AND EXCLUSIVELY MADE FOR THE PURPOSES OF TRADE. IT DOES NOT REQUIRE THE PRESENCE OF A RECEIPT ON THE CREDIT SIDE TO JUSTIFY THE DEDUCTION OF AN EXPENSE'. THE QUESTION WHETHER AN EXPENDITURE CAN BE ALLOWED AS A DEDUCTION ONLY IF IT HAS RESULTED IN ANY INCOME OR PROFITS CAME TO BE CONSIDERED BY THE SUPREME COURT AGAIN IN CIT V. RAJENDRA PRASAD MOODY [1978] 115 ITR 519 (SC), AND IT WAS OBSERVED AS UNDER (PAGE 523): 'WE FAIL TO APPRECIATE HOW EXPENDITURE WHICH IS OTHERWISE A PROPER EXPENDITURE CAN CEASE TO BE SUCH MERELY BECAUSE THERE IS NO RECEIPT OF INCOME. WHATEVER IS A PROPER OUTGOING BY WAY OF EXPENDI TURE MUST BE DEBITED IRRESPECTIVE OF WHETHER THERE IS RECEIPT OF INCOME OR NOT. THAT IS THE PLAIN REQUIREMENT OF PROPER ACCOUNTING AND THE INTERPRETATION OF SECTION 57(III) CANNOT BE DIFFERENT. THE DEDUCTION OF THE EXPENDITURE CANNOT, IN THE CIRCUMSTANCES, BE HELD TO BE CONDITIONAL UPON THE MAKING OR EARNING OF THE INCOME.' IT IS NOTEWORTHY THAT THE ABOVE OBSERVATIONS WERE MADE IN THE CONTEXT OF SECTION 57(III) OF THE ACT WHERE THE LANGUAGE IS SOMEWHAT NARROWER THAN THE LANGUAGE EMPLOYED IN SECTION 37(1) OF THE ACT. THIS FACT IS RECOGNISED IN THE JUDGMENT ITSELF. THE FACT THAT THE LANGUAGE EMPLOYED IN SECTION 37(1) OF THE ACT IS BROADER THAN SECTION 57(III) OF THE ACT MAKES THE POSITION STRONGER. 20. IN THE CASE OF SASSOON J. DAVID AND CO. PVT. LTD. V. CIT [1979] 118 ITR 261 (SC), THE SUPREME COURT REFERRED TO THE LEGISLATIVE HISTORY AND NOTED THAT WHEN THE INCOME-TAX BILL OF 1961 WAS INTRODUCED, SECTION 37(1) REQUIRED THAT THE EXPENDITURE SHOULD HAVE BEEN INCURRED 'WHOLLY, NECESSARILY AND EXCLUSIVELY' FOR THE PURPOSES OF BUSINESS IN ORDER TO MERIT DEDUCTION. PURSUANT TO PUBLIC PROTEST, THE WORD 'NECESSARILY' WAS OMITTED FROM THE SECTION. 21. THE POSITION EMERGING FROM THE ABOVE DECISIONS IS THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO SHOW THAT ANY LEGITIMATE EXPENDITURE INCURRED BY HIM WAS ALSO INCURRED OUT OF NECESSITY. IT IS ALSO NOT NECESSARY FOR THE ASSESSEE TO SHOW THAT ANY I.T.A. NO. 915/CHNY/19 8 EXPENDITURE INCURRED BY HIM FOR THE PURPOSE OF BUSINESS CARRIED ON BY HIM HAS ACTUALLY RESULTED IN PROFIT OR INCOME EITHER IN THE SAME YEAR OR IN ANY OF THE SUBSEQUENT YEARS. THE ONLY CONDITION IS THAT THE EXPENDITURE SHOULD HAVE BEEN INCURRED 'WHOLLY AND EXCLUSIVELY' FOR THE PURPOSE OF BUSINESS AND NOTHING MORE. IT IS THIS PRINCIPLE 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 ASSESSEES OWN CASE, THIS ISSUE IS ALLOWED IN THE ASSESSEES FAVOUR. 5.1 THE LD. DR COULD NOT CONTROVERT THE ABOVE DECISION OF THE TRIBUNAL BY FILING ANY HIGHER COURTS DECISION HAVING MODIFIED OR REVERSED THE ORDER OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, THE GROUND RAISED BY THE ASSESSEE IS LIABLE TO BE ALLOWED AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 6. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSEE RELATES TO CONFIRMATION OF DISALLOWANCE OF ADVERTISEMENT EXPENDITURE AND PROFESSIONAL CHARGES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY IN ITS PROFIT AND LOSS ACCOUNT HAS CLAIMED .2,64,81,387/- TOWARDS ADVERTISEMENT EXPENDITURE AND PROFESSIONAL CHARGES AMOUNTING TO .2,04,05,500/- VIZ., PAYMENT MADE TOWARDS BRAND I.T.A. NO. 915/CHNY/19 9 AMBASSADORS FOR PROMOTION OF THE BRAND 'UNIVERCELL'. AFTER CONSIDERING THE DETAILED EXPLANATIONS OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF .2,64,81,387/- ADVERTISEMENT EXPENDITURE AND PROFESSIONAL CHARGES AMOUNTING TO .2,04,05,500/- AND BROUGHT TO TAX. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 6.1 WE HAVE HEARD THE RIVAL CONTENTIONS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS AND PRAYED FOR FOLLOWING THE SAME. WE HAVE GONE THROUGH THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2015-16 IN I.T.A. NOS. 967, 968 & 969/CHNY/2019 DATED 18.02.2020, WHEREIN, ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A. NO. 675/CHNY/2018 WAS FOLLOWED AND RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 3. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS EXTRACTED AS UNDER: 3. DURING THE COURSE OF HEARING, IT IS SUBMITTED THAT ASSESSEE MADE A CLAIM FOR DEDUCTION FOR ADVERTISEMENT EXPENDITURE OF 6,71,96,585/- WHICH INCLUDES SUM OF 5,02,00,000/- TOWARDS BRANDS EXPENDITURE. IT IS STATED BEFORE US THAT BRANDING EXPENDITURE INCURRED BY M/S. UNIVERCELL TELECOMMUNICATIONS (P) LTD ARE PAID BY ASSESSEE. NECESSITY OF INCURRING BRAND EXPENDITURE AS EXPLAINED BY THE ASSESSEE IS AS UNDER:- AS WE OPERATE IN A VERY COMPETITIVE DYNAMIC MARKET, THESE ARE NEW ENTRANTS IN THE MARKET LIKE OTHER TELECOM SPECIALIZED STORES. OPERATORS ARE ENTERING THE MOBILE RETAINED SPACE AND I.T.A. NO. 915/CHNY/19 10 MANUFACTURERS 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 16 TH SEPTEMBER, 2021 IN CHENNAI. SD/- SD/- (G. MANJUNATHA) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 16.09.2021 VM/- /COPY TO: 1. /APPELLANT, 2. / RESPONDENT, 3. ( )/CIT(A), 4. /CIT, 5. /DR & 6. /GF.