9911796707
TMI Blog1998 (8) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... m Jalwa starring Naseeruddin Shah, Archana Puransingh, Saeed Jaffrey and others with lyrics by Pandit Narendra Sharma, Sameer, Gulshan Bawra and Remo Fernandes and music by Anand-Milind and Remo Fernandes, produced by us, for exploitation throughout the world. This outright sale is for a consideration of ₹ 1,50,000 (Rupees One Lakh Fifty Thousand Only) for a period of 5 (five) years. At the end of which time, the ownership of this product would revert to us. It is, however, agreed that you would have the sole right to commercially exploit the sound track of the film after the 5 years on a royalty basis. The royalty so payable for production and sale after 5 years would be worked out at 13.5% of the net domestic price of the Record/Cassette (less of sales tax duties and CBS s standard packaging deduction of 10%). We confirm that the sound track is free from all claims of copyright and we are the owners of the sound track in its entirety. All persons/parties connected with its production have been adequately compensated by us and we indemnify you against any claims from such third parties. We, being the rightful owners of the sound track, are entitled to make this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed the word sold figuring in the first line of the letter addressed by M/s. PLA Productions and contended that the assessee had bought the rights in question absolutely and so, the expenditure should be regarded as on capital account. 7. We agree with the above contention of the learned counsel for the assessee that the expenditure of ₹ 1,50,000 in question is of the nature of revenue expenditure and is deductible under section 37. We have to hold the same in respect of the entire amount of ₹ 2,75,400, as it is not the case of either side before us that the balance of ₹ 1,24,000 should be given a separate treatment from ₹ 1,50,000. However, on reading the letter dated 18-6-1986 addressed by M/s. PLA Productions to the assessee, as a whole, it is evident that the use of the word sold in the first line of the letter is not technically correct as what the assessee has acquired is only a right or licence to exploit the sound track of the film Jalwa initially over a period of 5 years. So, we hold that the expenditure of ₹ 2,75,400 is allowable as revenue expenditure over 5 years. No evidence has been produced before us that the assessee has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts assets and liabilities, trade name, goodwill etc. And whereas the parties hereto are desirous of reducing to writing the terms and conditions mutually agreed upon between the parties hereto. Now this deed witnesseth and it is hereby agreed and declared by and between the parties hereto as follows : 1. The partnership subsisting between the parties hereto in the firm name and style of Messrs The Perennial Press has been completely dissolved as on 31st day of December, 1985 and the Retiring Partners have retired from the said partnership as on the 31st day of December, 1985. 2. The said business of Messrs The Perennial Press has been taken over as a running business with all its assets, liabilities, trade name, goodwill etc. by the Continuing Party hereto, except for the house in Bangalore which shall be taken away by the Retiring Partner Mrs. Virginia R. Pandit at book value. 3. On dissolution of the firm the Retiring Partners shall be entitled to goodwill of ₹ 5,00,000 (Rupees Five lakhs only) which shall be allocated to them on the basis of their profits sharing ratio which is mentioned in the Deed of Partnership dated 1st day of January, 1980. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition of the goodwill of a business is, without doubt, acquisition of a capital assets, and therefore, its purchase price would be capital expenditure. It would not make any difference whether it is paid in a lump sum at one time or in instalments distributed over a definite period. Where, however, the transaction is not one for acquisition of the goodwill, but for the right to use it, the expenditure would be revenue expenditure. 14. We are of the view that this case actually supports the case of the department and not of the assessee. In this case, there was no lump sum payment for the goodwill but there were annual payments for an indefinite period reckoned with reference to the profits of the business and as such, they were held to be of the nature of payments royalties. The facts in the present case are totally different inasmuch as, the goodwill of the firm has been determined at ₹ 5 lakhs and the share of the retiring partners at ₹ 3,75,000 in proportion to their shares. 15. The decision of the Tribunal in the case of Raj Kishan Co. (supra), is also distinguishable because in that case there was a finding that the firm in question was started only an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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