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TMI Blog2009 (9) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed in detail the terms of Technical Assistant Agreement dated 14-2-1997, as per which the assessee was provided the technical know-how and was also allowed to use the brand name Adidas on the products manufactured by the assessee, which are to be sold in India, Nepal and Bhutan. Tribunal observed that merely because the assessee was paying royalty at the rate of 5 per cent to M/s. AIPL would not mean that the assessee could not incur the expenditure on advertisement to popularize the products dealt with by it in Indian market. No doubt, brand name of Adidas is already a well-known brand which belongs to the parent company of the assessee. However, to popularize the said product in India and to promote its sale in the Indian terri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by its 100 per cent subsidiary company M/s. AIPL. As per this agreement M/s. AIPL was to provide exclusive, non-transferable, non-assignable right to manufacture, distribute and sell the licensed products in India, Nepal and Bhutan on payment of royalty at the rate of 5 per cent of the sales effective of the licensed products in the aforesaid territories. 3. The Assessing Officer was of the opinion that the trademark Adidas belonged to the assessee s parent company and since the assessee was already paying royalty at the rate of 5 per cent of sales, the aforesaid expenditure on advertisements was not incurred by the assessee wholly and exclusively for the purpose of the business of the assessee inasmuch as it was to promote the brand nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on advertising to propagate the aforesaid brand name. The benefit thereof had to necessarily accrue to the assessee as well as the main purpose of the advertisement is to augment the sales. The contention of the assessee that it was a commercial practice and commercial expediency has rightly been accepted by the Tribunal. The relevant portion of the judgment of the Tribunal dealing with this aspect is reproduced below : 17. The assessee-company is itself engaged in the trading of various products under the brand name or logo ADIDAS . The expenditure on advertisements is only in respect of products, which are sold by the assessee-company, and payments for such expenditure have been made only to third parties, which are not in any way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of business , which is to be considered and looked into having regard to the realities of business from the point of view of a prudent businessman and not from the point of view of a tax collector. 20. In the light of the discussions made above and having found that since the assessee had incurred the advertisement and publicity expense with a view to promote its sale of products under the brand name Adidas which were sold by the assessee, the advertisement expenses incurred by the assessee are to be held as incurred to facilitate the assessee s business, and would thus be eligible for deduction while computing the assessee s profit from business. At this stage, it is also pertinent to note that the expression wholly and exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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