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TMI Blog2004 (3) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... his transaction. To demonstrate that a transaction is sham, it will have to be shown that the assessee made a payment of about Rs. 6 crores for some purpose other than it made the payment for trademark for ten years or that he made the payment for no purpose at all. In the absence of this being demonstrated the transaction cannot be considered as sham. It may be useful to refer the Hon'ble Madhya Pradesh High Court was in CIT v. M.B.Umbrella Industries [ 1982 (10) TMI 18 - MADHYA PRADESH HIGH COURT] . In the said case the assessee paid a sum of Rs. 25,001 per year for use of trademark without acquiring the same. The agreement was for a limited period of five years. Hon'ble High Court considering the fact held that the payments are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BPL to M/s. BPL Limited. The Assessing Officer held that 1/14th of such expenses is allowable in view of section 35A. Thus the Assessing Officer treated the expenses as capital in nature. Learned CIT(A) held that the transaction between the assessee and the BPL Limited is a sham transaction. Since the companies name itself is M/s. BPL Refrigerators Limited the assessee is entitled to use the word BPL in all its products, letter heads etc. The arrangement is designed to serve the purpose of tax avoidance. He accordingly disallowed the entire sum. The assessee is in appeal before us. 2.2 Learned counsel for assessee Sri H.V. Gowthama submitted that the assessee BPL Refrigeration Limited and the payee M/s. BPL Limited are both companies of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue expenditure, for permission to use the trademark for a limited period of ten years. 2.3 Learned D.R. Mr. Amitabh Kumar submitted that even without this arrangement the assessee was using the logo BPL in it correspondence etc. The name itself suggests that the word BPL is available to assessee even without entering into any agreement for use of such trademark. Thus the entire transaction is a sham transaction and accordingly the order of learned CIT(A) needs to be upheld. 3.1 We have considered the relevant facts and argument advanced. The amount of Rs. 6 crores spent by the assessee is not in the nature of an outright purchase, nor does it bring any benefit of a permanent nature. The payment only permits use of the trademark for a limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the excess paid over the fair market value payable in an arm's length transaction by invoking provision of section 40A(2). Revenue has not made out any case that in an arm's length transaction, the fair market value of the right to use the trademark for a period of ten years could be determined as Nil. Only a determination of the value at NIL could justify disallowance of the entire payment. As it has not been demonstrated that the fair market value of the trademark was anything less than the amount of about Rs. 6 crores paid, by invoking provision of section 40A(2), Revenue to have held that the entire payment of about Rs. 6 crores was an admissible amount. The following observations of the learned Commissioner in para 17 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or a sham for the avoidance of tax, whereas the transaction in fact results in a higher tax liability for the group as a whole; this itself would go to prove that the transaction cannot be a sham. 3.3 It may be useful to refer the Hon'ble Madhya Pradesh High Court was in CIT v. M.B. Umbrella Industries [1984] 145 ITR 292. In the said case the assessee paid a sum of Rs. 25,001 per year for use of trademark without acquiring the same. The agreement was for a limited period of five years. Hon'ble High Court considering the fact held that the payments are to be treated as revenue in nature and allowed the claim of assessee. The facts before us also are identical. Though the assessee is part of BPL Group of Companies yet the trademark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly rubber and plastic goods. Thus the moulds used in manufacture of such rubber and plastic goods are to be held as used in rubber and plastic goods factories. There need not be a separate and distinguishable factory for production of such items and the moulds need not be used in such separate factory. Once the moulds are used for manufacture of rubber and plastic goods parts though in a composite factory manufacturing washing machine, vacuum cleaners, etc., the assessee is eligible for deduction at higher rate of depreciation i.e., 40 per cent as per Appendix I to the Income Tax Rules. We are therefore in agreement with the submission of ld. counsel for assessee. In view of our discussion above, we reverse the finding of ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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