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TMI Blog2013 (7) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... companies namely TTK Biomed Ltd. and TTK Medical Devices Ltd. in the hands of the appellant. At the time of hearing, the counsel for the assessee fairly conceded that this issue has been decided against the assessee by the co-ordinate Bench of this Tribunal in ITA No.369/Mds/2009 dated 16.07.2010 for the assessment year 2000-01 and ITA No.794/Mds/2010 dated 13.10.2011 for the assessment year 2005-06. Copy of the order is placed on record. 3. We have gone through the order of the co-ordinate Bench of this Tribunal dated 13.10.2011 in ITA No.794/Mds/2010, wherein the Tribunal held as under:- "2.3 The second ground raised by the assessee is that the Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of carry forward of loss. This issue was also considered by the B-Bench of this Tribunal in assessee's own case in the appeal field by the Revenue for the assessment year 2000-01 in ITA No.369/Mds/2009 disposed of on 16.07.2010. The Tribunal held against the assessee. Accordingly, this issue is also decided against the assessee." 4. Following the order of the co-ordinate Bench of this Tribunal in assessee's own case for the assessment year 2005-06, this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections available in Chapter IV i.e computation of business income. Except these remarks, the Assessing Officer has not mentioned anything about the nature of expenditure and why it should not be allowed as deduction in computing business income. The assessee has made elaborate submissions before the Commissioner of Income Tax (Appeals) as to why the work-in-progress should be allowed as deduction in computing the business income as under:- "In the current assessment year, we have claimed Rs. 130.45 Lakhs being the expenses incurred on development of Maps under manual process. These expenses were included under material consumption as detailed below:- 2003-04 2002-03 Opening Stock (i) Raw / Packing Materials 1481806 1664304 a) Carto (Map Development Charges 13045133 1195066 b) Others Total 25129081 1983768 Less: Work-in-Progress (Map Develooment Charaes - Carto) 13045133 12083948 1983768 (iii) Finished Goods 7457110 1103356 To tal-A 21022864 3253555 Purchases Raw / Packing Materials 39539539 3474822 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onnection with the business, we have rightly claimed the development charges of `130.45 Lakhs as Business Expenditure (details enclosed)." 10. The Commissioner of Income Tax (Appeals) after considering the elaborate submissions of the assessee deleted the disallowance made by the Assessing Officer holding as under:- "5.2 I have carefully considered the facts of the case and the submissions made by the Id. AR. From the submissions I find that the appellant has incurred some expenditure while developing the maps under manual process and has been charging of the same as revenue expenditure under material consumption based on the number of copies sold every year. In the year under review, the appellant has switched over from manual map making process to digital map making process and the balance amount relating to manual map making process lying under workin- progress was written off against opening reserves(in line with AS 26 issued by ICAI). The Id. AR further submitted that it was a classification under work-in- progress and the amount recovered every year was adjusted against material consumption and in the current year due to shifting of manual to digital process, the entire am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance to the extent of ` 33,61,792/-. 13. The counsel for the assessee submits that the above debt represents bad debts written off in respect of non-recoverable advances/dues from Government institutions and hospitals including amounts written off as non-recoverable advances towards earnest money deposits given to Government institutions/hospitals in connection with various tenders. The counsel submits that in view of the decision of the Hon'ble Supreme Court in the case of TRF Ltd. Vs. CIT, (323 ITR 397) these deposits have to be allowed as deduction as they were written off in the books of accounts. 14. The Departmental Representative relied on the orders of the lower authorities. 15. In respect of disallowance of non-recoverable deposits written off to the extent of ` 18,97,494/- paid as earnest money deposit to various institutions mainly Government bodies. The issue has been considered by this Tribunal in assessee's own case in ITA No.795/Mds/2010 dated 13.10.2011 for the assessment year 2006-07 and the co-ordinate Bench confirmed the disallowance holding as under:- 4.1. The first ground raised by the assessee is that the Commissioner of Income-tax(Appeals) has err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This ground of appeal of the assessee is partly allowed. 19. The next issue in the grounds of appeal of the assessee is that the Commissioner of Income Tax (Appeals) erred in confirming the disallowance of expenses amounting to `24,29,355/- relating to medical devices division at Waluj, Aurangabad under section 37 of the Act. While completing the assessment, the Assessing Officer disallowed expenditure of ` 24,29,355/- debited by the assessee in its books in respect of medical devices division at Aurangabad stating that the assessee has sold this division and has not made any turnover and therefore the same is disallowed as there is discontinuance of business. The Commissioner of Income Tax (Appeals) sustained the disallowance holding that the medical division was sold off and had not been temporarily shut down and therefore, this expenditure cannot be allowed against income of the other divisions of the assessee. 20. The counsel for the assessee submits that the assessee has incurred these expenses of ` 24,29,355/- in the medical devices division of the assessee. The assessee sold the factory including land and building, plant and machinery to Atra Pharmaceuticals Pvt. Ltd. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is allowed. 23. The last issue in the appeal of the assessee is that the Commissioner of Income Tax (Appeals) erred in not allowing the carry forward loss/depreciation relating to amalgamating company namely TTK Medical Devices Ltd. in the hands of the assessee. This issue has already been decided against the assessee by the co-ordinate Bench of this Tribunal in ITA No.794/Mds/2010 dated 13.10.2011 in assessee's own case for the earlier assessment year 2005- 06. Respectfully following the order of the co-ordinate Bench of this Tribunal, we decide this issue against the assessee. This ground of appeal of the assessee is rejected. ITA No. 2030/Mds/2011 (A.Y. 2008-09):- 24. The first issue in the appeal of the Revenue is that the Commissioner of Income Tax (Appeals) erred in deleting the additions on account of bad debts written off to the extent of ` 3,98,210/- and ` 3,42,498/-. The Assessing Officer while completing the assessment disallowed bad debts written off to the extent of ` 67,87,176/-. The Commissioner of Income Tax (Appeals) deleted the disallowance of bad debts written off amounting to ` 34,25,804/- out of ` 67,87,176/- following the decision of the Hon'ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is cessation of liability. 30. The counsel for the assessee relying on the order of the Commissioner of Income Tax (Appeals) submits that the Commissioner of Income Tax (Appeals), after considering the submissions of the assessee held that there is no cessation of liability in respect of these creditors as the assessee has either reversed or paid some of these creditors in the subsequent assessment years. 31. Heard both sides. Perused the orders of lower authorities. The Commissioner of Income Tax (Appeals) deleted the disallowance made by the Assessing Officer holding that there is no cessation of liability in respect of the balances in creditors accounts so as to disallow the same and bring the same to tax under section 41(1) of the Act. . While deleting the disallowance the Commissioner of Income Tax (Appeals) observed as under:- "7.1 The Id. AR has vehemently argued against the above disallowance. He stated that these amounts are payable to parties in normal course of business. Due to some disputes / claims etc. these amounts had not been paid and kept pending. In the subsequent submission, he has argued as follows: "List of parties to whom the amounts are payable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rejected. 33. The last issue in the grounds of appeal of the Revenue is that the Commissioner of Income Tax (Appeals) erred in holding that the expenditure incurred towards payment of logo charges is revenue in nature. At the time of hearing, the counsel for the assessee submits that this issue has been decided in favour of the assessee by the co-ordinate Bench of this Tribunal in ITA Nos. 1791 to 1796/Mds/2011 and 1826 to 1830/Mds/2011 dated 31.10.2012 in the case of TTK LIG Ltd., a group concern of the assessee on identical facts and circumstances. Copy of the said order is placed on record. 34. The Departmental Representative supports the order of the Assessing Officer. 35. We have gone through the order of the co-ordinate Bench of this Tribunal in ITA Nos. 1791 to 1796/Mds/2011 and 1826 to 1830/Mds/2011 dated 31.10.2012 and find that this Tribunal has decided this issue in favour of the assessee holding that logo charges paid by the assessee are revenue expenditure within the meaning of section 37 of the Act. While holding so, the Tribunal observed as under:- "20. We have given our thoughtful consideration to the issue and also perused the relevant findings, contents of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval accorded by the Government of India vide letter No.2/M-7964 dated 3rd May, 2000. Copy of Government approval is annexed to this Agreement. 2. The License and permission granted by TTK in favour of TTK-LIG as aforesaid, shall entitle TTK-LIG, so long as this agreement in force, to use the said monogram on or in relation to the goods of TTK-LIG and in relation to the business activities of TTK-LIG, including the use of the said monogram on stationery, trade literature, packing of goods, labels, wrappers and advertisements of TTL-LIG. TTK-LIG shall not under any circumstances transfer or assign any of their rights under this agreement. 3. TTK-LIG accepts that the said monogram shall be used by TTKLIG under this agreement in a manner indicative of the fact that the copyright in the said monogram is owned by TTK. Illustrative of the words to appear in close proximity to the said monogram, for the purpose of carrying out the requirements of this clause are: 1981 T.T.Krishnamachari & Co 1. When the said monogram is used on or in relation to the goods of TTK-LIG A Unit 1981 T.T.Krishnamachari & Co When the said monogram is used otherwise in relation to the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of payment made by assessee of logo charges @ 2% of the gross sales. The only strife is that per revenue, it is capital expenditure whereas the assessee's plea of treating it as a revenue expenditure stands accepted by CIT(A). We find that in exactly the similar circumstances, the Hon'ble Delhi High Court in the case of G4S Securities System had held as under:- "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 assessee was to return all the know-how obtained by it under the agreement. The payment of royalty was also to be on year to year basis on the net sales of the assessee and at no point of time was the assessee entitled to become the exclusive owner of the knowhow and trade mark. Hence, the expenditure incurred by the assessee as royalty was revenue expenditure and was deductible under section 37(1) of the Income-tax Act, 1961." 20.1. Similarly, the Co-ordinate Bench of Delhi ITAT in the case of DCM Benetton(supra) has also held usage of such brand name etc. to be revenue expenditure by observing as follows:- "From the agreement it is clear that the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that the logo charges incurred by the assessee are revenue expenditure. ITA No.1783/Mds/2012 (A.Y. 2009-10):- 37. The first issue in the grounds of appeal of the Revenue is that the Commissioner of Income Tax (Appeals) erred in allowing the assessee's appeal treating the logo charges as revenue in nature. This issue has been decided in favour of the assessee by the co-ordinate Bench of this Tribunal in ITA Nos.1791 to 1796/Mds/2011 & 1826 to 1830/Mds/2011 by order dated 31.10.2012. The facts and circumstances being similar, respectfully following the said order, we hold that logo charges incurred by the assessee are revenue expenditure. This ground of appeal of the Revenue is rejected. 38. The last issue in the appeal of the Revenue is that the Commissioner of Income Tax (Appeals) erred in holding that the depot service charges paid to TTK & Co. @ 3% was not excessive. The Assessing Officer while completing the assessment disallowed ` 73,28,227/- out of depot service charges incurred by the assessee on sales effected by TTK & Co. stating that service charges paid by the assessee are excessive. The assessee incurred these depot service charges at 3% on sales but the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bangalore, Hyderabad, Chennai etc. Due to its long experience, TTK & Co. is able to undertake the marketing and distribution services in a smooth, safe and professional manner. What is also to be considered is the quality and timely service rendered by C & F Agent. Considering the experience that TTK & Co has in this line of business for nearly eight decades and since the Ministry of Corporate Affairs has also given approval for such rate, I am of the considered opinion that the depot service charges paid to M/s. TTK & Co was not excessive and unreasonable having regard to the fair market value of the services rendered by it. It has provided uninterrupted hassle-free secure and timely service to the appellant over a long period of time. Hence, the addition is not warranted. The ground is accordingly allowed." 42. On going through the order of the Commissioner of Income Tax (Appeals) and the letter issued by the Ministry of Corporate Affairs dated 17.01.2006 in respect of clearing and forwarding agent charges fixing rate at 3.2% on sales, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) in holding that the depot service charges incurred by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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