9911796707
TMI Blog1983 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... iters, spare parts, Facit calculators, accounting machines, etc., produced by the Rayala Corporation Private Limited. For the assessment years 1967-68, 1968-69, 1969-70 and 1970-71, the assessee filed returns claiming deduction in respect of each year of a sum of Rs. 30,000 said to be agency consideration paid to one Mrs. Sarada on the ground that it is an expenditure incurred for the purpose of the business. That claim of the assessee was rejected by the assessing authority on two grounds. One is that the transaction by which the assessee acquired exclusive right of franchise to purchase and sell the goods produced by the Rayala Corporation Private Limited amounts to a camouflage of the real nature of the transaction, that the real nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction of acquisition of the right of franchise. The Tribunal also held that, in any event, the amount of Rs. 30,000 paid each year to Mrs. Sarada can only be taken as capital in nature, since the amount has to be taken as part of the consideration for getting the assignment of the, right of franchise. In this view, the Tribunal set aside the order of the AAC and upheld the disallowance of the sum of Rs. 30,000 for each year by the ITO. Aggrieved by the decision of the Tribunal, the assessee has obtained this reference on the question set out above. The question referred involves two aspects : (1) what is the nature of the transaction that was entered into between the assessee and Mrs. Sarada in relation, to the right of franchise which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of the reasonable consideration is accepted. Subsequently, the said assignment has taken effect after Mrs. Sarada got the approval from the Rayala Corporation Private Ltd., who had given the franchise. Subsequently, the arrangement between the assessee and Mrs. Sarada for assignment of the franchise was reduced to writing and that is given in annex. 12. That agreement refers to the fact that Mrs. Sarada had obtained the consent of the Rayala Corporation Private Ltd. and was desirous of assigning the right in favour of the assessee company on certain terms and conditions. One of the terms and conditions is that Mrs. Sarada should be paid a sum of Rs. 30,000 per year as consideration for assignment of the agreement which she had e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 which sets out the memorandum of agreement is taken as the basis for deciding the rights and liabilities of the assessee and Mrs. Sarada, then it is clear that Mrs. Sarada after getting an appointment in her favour as a distributor for the purchase and sale of the articles manufactured by the Rayala Corporation Private Ltd., parted with her rights for a stated consideration in favour of the assessee company, that is a sum of Rs. 30,000 payable in equal monthly instalments. The fact that the consideration for the assignment of the rights was paid in monthly instalments will not affect the character of the payment, which is in the nature of a consideration for acquiring the distribution rights from Mrs. Sarada which she had in turn acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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