The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that trademark registration expenses to sell products in foreign countries are allowable as business expenditure.
During the scrutiny assessment of the assessee, M/s Precision Bearing Pvt. Ltd., the Assessing Officer disallowed the expenditure of Rs. 7,96,041/- on the registration the of trade-mark of its products in different countries alleging that the expenditure gives the assessee enduring right and therefore it’s a capital expenditure.
On appeal, the CIT (A) by relying on the decision of the Supreme Court in Finlay Mills allowed the deduction and held that the expenditure is revenue nature only since the registration of various trade-marks in different foreign countries only to protect the business interest of assessee and not for the acquisition of any trade-mark. Aggrieved revenue filed an appeal before ITAT.
The counsel for the revenue submitted that out of the total expenditure of Rs. 7,96,041/, expenditure to the extent of Rs. 6,46,200/- was incurred in earlier years and only a sum of Rs. 1,49,841/- was incurred during the current year under consideration.
The Tribunal by relying on the decision of the Tribunal in Reckitt Benckiser Healthcare India Ltd. Vs. Addl. CIT observed that the expenses for registering products in various countries enable the assessee to sell the product in such counties. In absence of registration, the assessee would not be able to sell the product in the foreign countries as per the regulatory requirement of different countries, it is mandatory to get the product of the assessee registered in respect of counties to sell in the overseas markets. Therefore, the finding of the assessing officer that the assessee is getting the benefit of the enduring nature of registration of product has no merit.
The Coram of Ms. Suchitra Kamble, Judicial Member, and Mr. B.M. Biyani, Accountant Member has held that “we are satisfied that the expenditure of Rs. 7,96,041/- incurred by the assessee on registration of trade-mark is a revenue expenditure and therefore allowable as a deduction, yet we observe that a sum of Rs. 6,46,200/- does not relate to the year under consideration. Therefore, we uphold the disallowance to the extent of Rs. 6,46,200/-. Accordingly, this ground of revenue is partly allowed”.
Mr. S.S. Shukla appeared on behalf of the revenue and Mr. S.R. Shah appeared on behalf of the assessee.
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