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TMI Blog2022 (10) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. Appeal filed by the Revenue is dismissed. - ITA No. 3115/Del/2019 - - - Dated:- 10-10-2022 - SHRI C. M. GARG , JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA , ACCOUNTANT MEMBER Assessee by : Shri KVSR Krishna , Advocate Revenue by : Shri Anil Kumar Sharma , Sr. DR ORDER PER C. M. GARG , JM : This appeal filed by the assessee is directed against the order dated 29.01.2019 of the CIT(A)-20, New Delhi, relating to Assessment Year 2015-16. 2. The grounds of appeal raised by the Revenue read as under:- (1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on account of disallowance of license fee of Rs.37,16,87,188/- paid to Remfry Sagar Consultants Pvt. Ltd. (RSCPL) by ignoring the fact that the assessee being law firm was using goodwill of RSCPL being a company prohibited from practicing law in India as per the Advocates Act, 1961 and Bar Council rule. (2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on account of disallowance of license fee of Rs.37,16,87,188/- paid to Remfry Sagar Consultants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14 vide order dated 21.01.2021; and lastly for AY 2014-15 vide order dated 22.09.2021 wherein the appeal of the Revenue has been dismissed by observing that the issue has already been decided by the Tribunal. 5. On careful consideration of above submissions, we are of the considered view that the ld. Sr. DR, except supporting the assessment order, has not controverted the factual matrix that the similar issue on identical facts and circumstances arose for the first time in AY 2003-04 and the ITAT Delhi F Bench, has decided the issue by order dated 06.09.2016 for AYs 2003-04 to 2010-11 in favour of the assessee with the following observations and findings:- 8. We have heard both the parties at length. We have considered the written submission, the papers on record as well as the case laws cited by both parties. On a careful consideration of the same we hold as follows: 8.1. Before we adjudicate the issue as to whether the disallowance of license fee paid by the assessee to RSCPL for license to practice as Remfry Sagar and for use of the said name, trade mark and goodwill by the A.O is to be upheld or not, for the purpose of the ready reference we recapitula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting and other supporting services. Feb 2011: Demise of Dr. V. Sagar In pursuance of the aforesaid license agreement dated June _5, 2001 entered into between the appellant and RSCPL, the _appellant paid license fee for use of goodwill to RSCPL w.e.f. _assessment year 2002-03, which continues till date, even _after the demise of Dr. V. Sagar. 8.2. M/s Remfry Sons , was carrying on a business of patent agents. Vide terms of the deed of partnership dated 6th April 1970, 50% of the goodwill of the business belonged to the partner Mrs. Holloway and other 50% to Mrs. Silver Stone. Both of them held 50% of all the other capital assets and properties of the firm. Though Mrs. Remfry was having a share in the net profits of the partnership, she had no ownership rights in the goodwill of this firm. This demonstrates that the name and goodwill of the business Remfry Sons is distinct and seperate from the other assets of the partnership firm and that it vested only in two partners of the firm and not the firm. This is clear from reading of Clause 2 3 of the said partnership deed. 8.3. On the fourth day of April 1973, Mr. Vidya Sagar purchased by way of sale, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty Law and Corporate Law with the object of carrying on, without break and in continuity, the practice, hither to carried on by Dr. V. Sagar. The four other partners were earlier associated with the practice of Dr. V. Sagar, in their individual capacities for number of years and have acquired expertise in this field of the profession. We notice that the partnership deed dated 5th June 2001 is under the name and style of Remfry Sagar and this partnership deed has come into force on 1st June 2001. Thus what is licensed by RSCPL to the assesse firm is Goodwill and its associated rights to practice as Attorneys-at-law and not to do business of trademark and Patent Agents. 8.8. Vide agreement dated 5th June 2001, RSCPL permitted to use of goodwill to the partnership and permitted them to use the name of Remfry Sagar with retrospective effect i.e. 1st June 2001. While Clause No. 16.1 of this agreement, the license fee in question is to be paid in pursuance to this agreement. 8.9. It is clear that Dr. V. Sagar has arranged his affairs in such a way that the goodwill earned by him over the years is enjoyed by his children who are his legal heirs. All the documenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional practice and professional firms across the globe are in the names of the original founders, though they are no longer part of the practice. This name and goodwill helps in the practice. The partnership was formed to continue the law practice of Dr. V. Sagar and this could be done only if the assessee firm is permitted to do so by the owner of the goodwill. 8.13. The submission of the Ld. Special counsel for the revenue that goodwill of a profession cannot be segregated from the persona of the person is against the propositions of law laid down by the Hon'ble Supreme Court in the case of Devi Das Mittal Daas Vithaldas Co. VS. CIT Bombay City (supra). The constitutional bench of the Hon'ble Supreme Court consisting of four findings was considering a case of chartered accountant who was carrying on his profession in the name of Devi Dass Co. Vide partnership dated 31 January 1948, wherein he retained/reserved the right of goodwill of the profession carried on by him earlier in sole proprietorship. On 2nd June 1951, he retired from the said partnership. The goodwill in the partnership was sold to the other partner and the consideration was to be paid to the Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in this case law to the facts of the case, we have to necessarily hold, that the argument of Revenue that the arrangement was for avoidance of tax and diversion of profits and hence the deduction was rightly denied by the Assessing Officer, has to be rejected. Even otherwise, it has been demonstrated by the assessee that the Revenue has accepted that both the entities i.e. the assessee as well as RSCPL, pay taxes, at the maximum rate and that there is no loss of Revenue on account of this arrangement. The taxes due to the Government have not been avoided or evaded by this arrangement. Thus the disallowance made on the ground of diversion of profits is devoid of merit. 8.17. Though the Ld. Special Counsel for the Revenue argued that good will of a profession cannot be sold to a company which does not have a right to carry on practice, no specific law or section was brought to the notice of the Bench in support of the argument. Only several submissions have been made. Certain judgements of Foreign Courts were cited, which were based on ethical considerations and not legal prohibition. In any event, the ITAT has no power or authority to adjudicate the issue as to whether, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in deleting the addition of Rs.6,17,832/- added by the A.O on account of personal nature, entertainment expenses. 8.22. The CIT(A) dealt with this issue which was raised as Ground No. 11 by the assessee. At page 58 the CIT(A) has recorded the facts and at page 60 allowed the ground of the assessee by observing that, the expenditure was incurred on the occasion of 180th years celebration and only 1/10th of the same was claimed in this year and no disallowance was made in any of the year on this count. We find no infirmity in the same. Thus, we dismiss these grounds of the assessee. 8.23. For the Assessment Year 2010-11 the assessee has raised Ground No. 4 5 which is against sustenance of disallowance of Rs.10,20,346/- being 5% of travelling and entertainment expenses and a further addition of Rs.3,41,102/- representing the stale cheques issued by the assessee but not cleared. Both these grounds were dismissed and not pressed. 8.24. In ITA No. 3668/Del/2013 ITA No. 3669/Del/13 for the Assessment Year 2005-06 2006-07 respectively , the Revenue raised Ground No. 4 which reads as follows:- 4. Whether on facts and circumstances of the case, the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uously harping and agitating identical issue repeatedly which should not be appreciated. 10. On careful consideration of the above rival submissions and from perusal of the relevant para 11 to 14 of the order of the Tribunal dated 22.09.2021, it is vivid that similar addition was made by the AO for AY 2014-15 and the ld.CIT(A) deleted the same. In the appeal filed by the Revenue, the coordinate Bench of the Tribunal decided the issue in favour of the assessee by holding that none of the expenditures claimed by the assessee as business expenditure can be disallowed merely on the surmises. The Tribunal also noted that the ld.CIT(A) deleted the impugned addition by following the earlier order of the Tribunal, allowing the identical expenditure and when the AO has not disputed the books of account qua the expenditure claimed by the assessee in any manner ad hoc disallowance of 10% on foreign travel expenses is not sustainable in the eyes of law. With these observations, the Tribunal dismissed the appeal for AY 2014- 15. On being asked by the Bench, the ld. Sr.DR could not show us any different fact and circumstances which may lead us to take a different or deviated view from view ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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