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TMI Blog2023 (12) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... t manufacture and sell Aquafina bulk packaged drinking water in Mumbai as agreed under the aforesaid agreement dated 09/06/2003 during the year under consideration and the Royalty was paid to Pepsi Foods Private Ltd without usage of the trademark. It is also relevant to note that usage of the trademark without the consent of the owner is a violation of the provisions of the Trade Marks Act, 1999. Therefore accepting the submission of the Revenue that there was no agreement during the year under consideration will also lead to the conclusion that the assessee used the trademark of Pepsi Foods Private Ltd without any license, which is not the facts of the present case, as there is no material available on record to show that the assessee has infringed the trademark registered in the name of PepsiCo Inc. No basis in the submissions of the Revenue in denying the claim of deduction of Royalty paid by the assessee to Pepsi Foods Private Ltd during the year under consideration. Accordingly, AO is directed to allow the claim of Royalty paid by the assessee in the year under consideration. Decided in favour of assessee. - SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI SANDEEP SI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 09/06/2003. During this period various mails related to rates, and other issues were exchanged between appellant company and M/s Pepsico. All these documents were provided to assessing officer and to Ld Commissioner of Income Tax(A). However, they overlooked the same. Royalty expenses forms direct expense for the appellant and disallowance u/s 37(1) is erroneous and appellant prays you to delete the addition. 2. The original assessment was completed u/s 143(3) r.w.s 147 on 30/12/2016 determining total income of Rs. 1,42,72,340/- by making disallowance on account of depreciation of Rs. 49,185/-, expenses of PPF of Rs. 2,483/- and Royalty expenses of Rs. 1,44,01,878/-. All the records were produced before the assessing officer at that time. However, he has resorted to fresh assessment u/s 143(3) r.w.s 147 for disallowing expenses. 3. The appellant craves for the leave to aleter, amend, modify, delete any ground of appeal in course of hearing. 5. The only dispute raised by the assessee is against the disallowance of Royalty paid to Pepsi Foods Private Ltd. under section 37(1) of the Act. 6. The brief facts of the case pertaining to this issue, as emanating f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment to Pepsi Foods Private Ltd. Being aggrieved, the assessee is in appeal before us. 8. During the hearing, the learned Authorised Representative ( learned AR ) submitted that the assessee and Pepsi Foods Private Ltd continued the arrangement during the year under consideration and neither party had expressed any intent to terminate the agreement. The learned AR by placing reliance upon the correspondences between the assessee and PepsiCo India Holdings Pvt. Ltd. submitted that both the parties continued to honour the initial agreement entered on 09/06/2003. The learned AR also submitted that Pepsi Foods Private Ltd raised invoices on the assessee on a monthly basis during the assessment year under consideration, which were duly paid by the assessee after deducting tax at source. In this regard, the learned AR also referred to Form 16A forming part of the paper book. The learned AR further submitted that in the year 2012, both parties agreed to amend the initial agreement entered on 09/06/2003. Thus, it was submitted that the assessee paid Royalty to Pepsi Foods Private Ltd under a valid agreement during the year under consideration. 9. On the other hand, the learned Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in writing to the Franchisee of its intention not to renew the Appointment or of the terms under which the Appointment shall be renewed, the said notice is to be given at least 6 months prior to the expiry of the term of five (5) years or of any additional five-year terms. 11. As per the Revenue, since the agreement is dated 09/06/2003, the agreement was valid only till 08/06/2008 unless the same was extended for a further period of 5 years as per the terms of clause 3 of the aforesaid agreement. Since no evidence has been brought on record by the assessee that the aforesaid agreement was further renewed for a period of 5 years, it was held that there is no basis for payment of Royalty under the aforesaid agreement to Pepsi Foods Private Ltd. On the other hand, it is the plea of the assessee that the aforesaid agreement continued to subsist, and thus the payment of Royalty @ 7.5% during the year under consideration is only pursuant to the aforesaid agreement. In support of its submission, the assessee has placed on record the correspondences dated 27/06/2012, 26/12/2012, and 10/05/2013 between the assessee and PepsiCo India Holdings Pvt. Ltd. (erstwhile Pepsi Foods Private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antity of bulk packaging jar and rate of Royalty. 13. As evident from the record, much emphasis has been laid by the Revenue on the non-compliance of notice issued under section 133(6) of the Act to Pepsi Foods Private Ltd and non-production of the party for verification by the assessee, for proving the genuineness of the transaction. It cannot be disputed that Pepsi Foods Private Ltd. now merged with PepsiCo India Holdings Pvt. Ltd. is well-known beverage and soft drink Company, having a presence across the globe. Therefore, mere non-compliance with the notice issued under section 133(6) and non-production of the said entity by the assessee before the AO cannot lead to the conclusion that the said entity is a non-existent entity and the transaction is not genuine. It is further pertinent to note that no material has been brought on record by the Revenue to show that the assessee did not manufacture and sell Aquafina bulk packaged drinking water in Mumbai as agreed under the aforesaid agreement dated 09/06/2003 during the year under consideration and the Royalty was paid to Pepsi Foods Private Ltd without usage of the trademark. It is also relevant to note that usage of the trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pepsico. All these documents were provided to assessing officer and to Ld Commissioner of Income Tax (A). However, they overlooked the same. Royalty expenses forms direct expense for the appellant and disallowance u/s 37(1) is erroneous and appellant prays you to delete the addition. 2. The original assessment was completed u/s 143(3) r.w.s 147 on 30/11/2015 by making addition of Rs. 2,990/ on account of bogus purchases made. All the records were produced before the assessing officer at that time. However, he has resorted to fresh assessment u/s 143(3) r.w.s 147 for disallowing royalty expenses 3. The appellant craves for the leave to aleter, amend, modify, delete any ground of appeal in course of hearing. 17. The only dispute raised by the assessee is against the disallowance of Royalty paid to Pepsi Foods Private Ltd. under section 37(1) of the Act. Since a similar issue has already been decided in assessee s appeal for the assessment year 2010-11, therefore the findings/conclusions rendered therein shall apply mutatis mutandis. Accordingly, the impugned order passed by the learned CIT(A) is set aside and the AO is directed to allow the claim of Royalty paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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