2002 (7) TMI 73 - HC - Income Tax

Business Expenditure, Company, Disallowance Of Expenditure - Whether, on the facts and in the circumstances of the case, the royalty paid to the director as a proprietor of the trade mark could be treated as a benefit derived by a director within the meaning of section 40(c) of the Income-tax Act, 1961? - the question of law is answered against the Revenue and in favour of the assessee.

Summary

The High Court of Madras ruled that royalty paid to directors as proprietors of a trademark cannot be treated as remuneration under section 40(c) of the Income-tax Act, 1961. The court cited a similar view by the Supreme Court in Bharat Beedi Works (P.) Ltd. v. CIT [1993] 201 ITR 1063. The Tribunal was correct in holding that the royalty payment is not subject to section 40(c). The question of law was answered in favor of the assessee, with no costs ordered.