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TMI Blog2015 (9) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the assessee, wherein, the Tribunal has observed the payment made by the assessee in the shape of technical know-how fee by way of royalty @ 2% of the gross sales is Revenue expenditure - Decided in favour of assessee. - ITA No. 258/Mds/2015 - - - Dated:- 24-7-2015 - A. Mohan Alankamony, AM And V. Durga Rao, JM, JJ. For the Petitioner : Shri P B Sekaran, CIT For the Respondent : Shri Saroj Kumar Parida, Adv. ORDER Per V. Durga Rao, Judicial Member This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) III, Chennai dated 25.09.2014 relevant to the assessment year 2010-11. 2. The first ground of appeal of the Revenue is relating to the payment of logo charges. In the assessment order, the Assessing Officer has observed that the payment of logo charges is only a capital expenditure, which provides the assessee with enduring benefit and for which the Act provides for depreciation benefits also. The decision of the ITAT on this issue in the assessee's case for earlier assessment years had not become final. Accordingly, he disallowed the claim of the assessee. 3. On appeal, the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raceptives is desirous of promoting and strengthening its business base by establishing a proper identity in the minds of public at large which will create a strong marketing base for the products of the company and reflect an immediate identity in the minds of the public with reference to the products services and stature of the Licenses and for the purpose has approached TTK for license and permission to use the said monogram on or in relation to the goods manufactured and marketed by TTK - LIG and in relation to other business activities of TTK -LIG. WHEREAS TTK had acceded to the request of TTK -LIG to grant license and permission to TTK -LIG to use the said monogram, subject to certain terms and condition, which terms and conditions in writing by this Deed of Agreement. WHEREAS both the parties hereto consider it necessary and expedient to record such terms and conditions in writing by this Deed of Agreement. NOW THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL COVENANTS AND OBLIGATIONS HEREIN CONTAINED, THE PARTIES HERETO AGREE AS FOLLOWS: 1. TTK hereby confirms having licensed and permitted the use of the said monogram by TTK-LIG for a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Affairs, Chenai-6, do hereby approve under proviso to sub section (1) of section 297 of the Companies Act, for entering into contract with M/s. T.T. Krishnamachari Co. for licensing use of trade name and logo thereof in consideration of payment of 2% license fee calculated on the total sales of the company for a period of 3 years with effect from 1.4.2000. 2. The approval accorded in para 1 above is subject to the following conditions: (i) The contract shall be for a period of 3 years with effect from 1.4.2000 to 31.3.2003. (ii) The total value of services to be availed from the contractee party herein shall not exceed the limit mentioned in para 1 above during the contract period. (iii) The prices to be payable for the services to be obtained from the contractee party shall be reasonable and shall not be higher than the prevailing market rates. (iv) The company shall ensure that the contract with the contractee party is competitive and is not less advantageous to it as compared to similar contracts with other parties. 3. This approval has been accorded without prejudice to any action that may be required to be taken by the company under any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, expenses are to be treated as revenue expenditure and not capital expenditure. The assessee was required to pay royalty every year. But for payment of royalty, every year the assessee could not continue receiving the license to use the licenses marks on the products manufactured by it. Thus making payment every year it cannot be said that the assessee received advantage of enduring nature primarily to bring it as capital expenditure. Taking cue from the same, we hold that in the instant case also, title of the 'logo' in question has not passed over to the assessee. Further, there is no acquisition of assets or part of any capital asset. Usage of logo by the assessee is only for displaying it on the product manufactured i.e. rubber contraceptives. That too, for a limited period as provided in the agreement in lieu of payment @ 2% of the gross sales. When we apply the tenor of the case law above cited to the facts of the instant case, we hold the instant 'logo' charges are also revenue expenditure within the meaning of Sec.37 of the Act in the nature of wholly and exclusively for the purpose of assessee's business. Consequently, we see no reason to inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation which subsequent to disclosure becomes part of the public domain by publication or otherwise (other than through disclosures by TTK-LIG in breach of this Agreement. (c) Information which may be received by TTK-LIG from any third party having the right to disclose the same to TTK-LIG, provided that such information was not obtained by the said third party improperly. LRC includes any of its wholly-owned subsidiaries as defined by Section 736 of the U K Companies Act, 1985 UNDERTAKING BY TTK-LIG TTK-LIG hereby agrees - (a) to use the information solely for the purpose mentioned A above for which purpose it shall communicate the information solely to those of its employees who reasonably require the same for the purposes hereof and who are bound to TTK-LIG by like obligations as to confidentiality. (b) not otherwise to disclose the Information to any person firm or company without the prior written permission of LRC (c) upon conclusion of the purpose as aforesaid or sooner at LRC's request, to return all the Information to LRC together with all copies of written and graphic material and to retain no copies thereof and provide LRC with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e element of 'endurability' is also nowhere forthcoming and even duration of the agreement is not indefinite i.e. it is for a period of five years. In addition to this, there is no clause of 'exclusive usage' in favour of assessee for using the technical inputs. In these circumstances, in our opinion, the case law of M/s. Southern Switch Gear (supra) does not apply to the facts of the case as in the said case, the non-compete clause was there wherein the foreign company concerned had agreed not to manufacture similar products in India and not to give rights of manufacture to others. The instant case is rather covered by case law of M/s. IAEC Pumps Ltd., wherein the license to use the intellectual know-how was for ten years with clauses for rescinding the agreement before the expiry of said time period as well. Similarly in the case of M/s.G4S Securities System, there was no exclusive use of the technical know -how and royalty was payable on year to year basis and the Hon'ble Delhi High Court had held that the ownership rights of the trade mark and know-how throughout vested with the foreign company and on the expiration or termination of the agreement the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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