Case Law Details
ACIT Vs CRI Pumps Pvt. Ltd (ITAT Chennai)
ITAT Chennai held that amount of royalty payment to holding company for using brand name is allowable as revenue expenditure.
Facts- The assessee company has paid Rs. 4,12,50,564/- as royalty to M/s. CRI Amalgamations Pvt Ltd, the holding company for using the trade mark ‘CRI’. The assessee claims before the AO that, it is using trade mark CRI for more than three decades and said trade mark was originally with M/s. CRI Amalgamations Pvt. Ltd. AO, however was not convinced with explanation furnished by the assessee and according to the AO, after amalgamation of CRI Industries Pvt. Ltd. with CRI Pumps Pvt. Ltd, the assessee company itself is the owner of the company and thus, question of payment of royalty to M/s. CRI Amalgamations Pvt. Ltd., does not arise and thus, disallowed royalty payment to holding company u/s. 40A(2)(b) of the Income-tax Act, 1961.
CIT(A) deleted the additions made by AO towards disallowance of royalty. Being aggrieved, present appeal is filed by the revenue.
Conclusion- In this view of the matter and consistent with the view taken by the co-ordinate bench in assessee’s own case for earlier assessment years, we are of the considered view that the assessee is entitled for deduction towards royalty payment to holding company for using brand name CRI and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the Revenue.
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