IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 51 OF 2015 Commissioner of Income Tax Appellant V/s. Kirloskar Ferrous Industries Ltd. Respondent Mr.Tejveer Singh for Appellant. Mr.R. Muralidhar a/w. Mr.Rohan Deshpande i/b. Mr.Mihir C. Naniwadekar for Respondent. CORAM : S.V. GANGAPURWALA AND A.M. BADAR, JJ. DATE : 17th JULY, 2017. PER COURT : 1] present appeal pertains to Assessment Year 2009 10. 2] Mr.Singh, learned counsel for Appellant submits that Tribunal has committed error in deleting Royalty and License fees paid by Assessee to its legal owner as Revenue expenses without appreciating totality of facts. same is capital in nature and not revenue expenditure. learned counsel submits that following questions arises for consideration; 1/5 ::: Uploaded on - 20/07/2017 ::: Downloaded on - 21/07/2017 08:55:53 ::: osk 48 itxa 51 2015.odt (i) Whether on facts and circumstances of case and in law appellate authorities was right in treating Royalty and License fees to its legal owner 'Kirloskar Proprietary Limited', as Revenue expense without appreciating totality of facts viz., assessee company was already having name Kirloskar in their incorporated name, agreements for use of logo, brand, processes etc. were for perpetuity with only right of termination available on either side and such rights were given only after making assessee member of proprietary concern etc. (ii) Whether on facts and circumstances of case and in law, payment of sum of Rs.1,39,71,307/ made by assessee under terms of agreement entered into with M/s. Kirloskar Proprietary Limited, was item of revenue expenditure incurred in course of carrying on business of assessee, and thereby allowable u/s.37 of I.T. Act. 3] According to learned counsel, agreement has been misread by Commissioner (Appeals) and Tribunal. Assessing Officer has rightly considered nature of agreement. Even technical knowhow has been passed on to Assessee. Thereby said expenses are capital in nature. All this aspect has 2/5 ::: Uploaded on - 20/07/2017 ::: Downloaded on - 21/07/2017 08:55:53 ::: osk 48 itxa 51 2015.odt not been considered by authority. 4] learned counsel for Respondent supports order. 5] Tribunal in its order has observed as under; 7. We have carefully considered rival submissions. pertinent facts which emerge from orders of authorities below can be summarized as follows. assessee is using name 'Kirloskar' in its business operations. copyright of 'Kirloskar' name is with M/s. Kirloskar Proprietary Limited and in terms of agreement, assessee pays sum of Rs.1,00,000/ per annum as license or copyright fee to M/s. Kirloskar Proprietary Limited for use of name. Further, assessee has also entered into User Agreement with M/s. Kirloskar Proprietary Limited dated 24.11.2006 which was revised on 04.02.2008. In terms thereof said concern, M/s. Kirloskar Proprietary Limited has admitted assessee as member and assessee also agreed to maintain quality and to comply with specifications prescribed by said concern. M/s. Kirloskar Proprietary Limited is acknowledged as original conceiver, adopter, user and registered proprietor of trademark 'Kirloskar'. For allowing use of trademark, M/s. Kirloskar Proprietary Limited 3/5 ::: Uploaded on - 20/07/2017 ::: Downloaded on - 21/07/2017 08:55:53 ::: osk 48 itxa 51 2015.odt charges from assessee 0.25% of its annual turnover as royalty in terms of method prescribed in agreement. Similar payments were made in assessment years 2007 08 and 2008 09 as copyright fee and royalty to M/s. Kirloskar Proprietary Limited. Having regard to fact position, it is quite evident that payments to M/s. Kirloskar Proprietary Limited have been made only for use of 'Kirloskar' name and not for supply of any technical knowhow for production of goods. There is no material to support plea of Revenue that any enduring benefit has accrued to assessee which would be in capital field. In fact, during currency of agreement with M/s. Kirloskar Propritary Limited, benefit which accrues to assessee is in revenue field, namely, in course of carrying on of its business operations and expenditure incurred in connection thereof would be revenue in nature. Therefore, in our considered opinion, CIT(A) made to mistake in directing Assessing Officer to treat impugned expenditure as revenue expenditure. 6] It would be seen that Assessee pays amount of Rs.1 lakh per annum as license or copyright fees to M/s. Kirloskar Proprietary Limited for use of name. Assessee is also admitted as member of M/s. Kirloskar Proprietary Limited and Assessee has agreed to maintain quality and to comply with 4/5 ::: Uploaded on - 20/07/2017 ::: Downloaded on - 21/07/2017 08:55:53 ::: osk 48 itxa 51 2015.odt specifications prescribed by said concerned. There is no transfer of technical nohow. M/s.Kirloskar Proprietary Limited is acknowledged as original conceiver, adopter, user and registered proprietor of trademark Kirloskar . For allowing use of trademark M/s.Kirloskar Proprietary Limited charges from Assessee 0.25% on annual turn over as royalty. 7] For earlier years also i.e. for Assessment Years 2007 08 and 2008 09, same is accepted as revenue expenditure by Assessing Officer. finding of fact have been concurrently arrived at by Commissioner (Appeal) and Tribunal in plausible manner. 8] In view of above, no substantial question of law arises. appeal as such is dismissed. No costs. (A.M. BADAR, J.) (S.V. GANGAPURWALA, J.) 5/5 ::: Uploaded on - 20/07/2017 ::: Downloaded on - 21/07/2017 08:55:53 ::: TheCommissionerofIncome-tax v. KirloskarFerrousIndustriesLtd