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TMI Blog2009 (11) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 9 Iakhs? 2. Whether in the facts and circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 2,95,390 made by the Assessing Officer on account of royalty payment for the use of trade mark? 3. Whether in the facts and circumstances of the case, the Tribunal, was justified in allowing deduction under sections 8OHH and 80-I of the Act?" 2. Mr. Lal fairly submitted that question No. 1 has not been correctly framed and it should be reframed. Mr. H. S. Shrivastava, learned senior counsel, being assisted by Mr. S. lain, also stated that there has been some error in framing of question. The question which is required to be framed would read as under : "Whether in the facts and circumstances of the case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 7. At the very outset, it is worthwhile to indicate that these three issues at different stages had travelled to this court in CIT v. Khemchand Motilal lain Co. [1997] 228 ITR 338, wherein it has been held as under (page 341): "On the basis of these admitted facts, the finding given by the Assessing Officer was found to be not sustainable. These admitted facts which emerge from the order of the appellate authority, make it clear that it was not a purchase of the wholesale firm but only purchase of certain things and started functioning as a new company because sales tax number, central excise number and labour licence under the Bidi and Cigar Act were taken anew. The movables like trade marks were not given to the company. All t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial involvement and they having given guarantee for the loans taken by the company. It was contended that there was no proximity between these two. The appellate authority held that this was not in lieu of salary paid to them for the full time services rendered by them. There fore, it was not considered to be salary. It was also found that it was not in excess warranting any part for disallowance under section 40(c). The appellate authority divided it in two parts, i.e., salary and commission, and treated this as commission only and not part of salary and not found to be excessive. Therefore, this disallowance was also negatived and this was affirmed by the Tribunal. We have considered the factual aspects and in view of the concurren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue approached this court under section 256(2) for calling statement of the case. 5. We have heard the learned counsel for the parties and perused the record. The above decision squarely covers the present case. It has been held by this court that under an agreement with another firm, the assessee was allowed to use the trade mark for 5 years on payment of compensation and the agreement amounted to licence to use the trade mark and the payment was in the nature of royalty The trademark used by the assessee was not the price paid for acquisition of capital asset or goodwill or trade mark and the amount paid for the exploitation of trade mark was an allowable revenue expenditure. This view has been further reaffirmed by another decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the allowance of the use of trade mark being an expenditure before this court which has been reported in CIT v. Khemchand Motilal Jain [1998] 96 Taxman 207 (MP) wherein this court following the earlier decision of this court in CIT v. M. B. Umbrella Industries [1984] 145 ITR 292 allowed the claim. The Revenue preferred a special leave petition before the apex court which eventually converted to Civil Appeal No. 4023 of 1998. During the course of hearing of the said appeal, the assessee had stated that he has no objection to the question being referred back to the High Court for decision because in another matter, identical question had already, been referred. The apex court passed the following order: "It shall, of course, be open to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing expenditure is so related to the carrying on or the conduct of the business that it may be regarded as an integral part of the profit-earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business the expenditure may be. regarded as revenue expenditure. See Bombay Steam Navigation Co. (1953) P. Ltd. v. CIT [1965] 56 ITR 52 (SC). The same test was formulated by Robert Addie and Sons' Collieries Ltd. v. IRC [1924] 8 TC 671, 676 (C Sess) in these words : 'Is it a part of the company's working expenses? - Is it expenditure laid out as part of the process of profit earning or, on the other hand, is it a capital outlay/ - is it expenditure nec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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