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Tax Publishers
ACIT v. Remfry & Sagar [ITA No. 6699/Del/2017,
dt. 22-1-2021] : 2021 TaxPub(DT) 576 (Del-Trib)
Payment of licence fee for use of goodwill by a firm of
lawyers -- Allowability
Facts:
Assessee a firm of lawyers was paying licence fee for Rs.
27.56 crores to one Remfry & Sagar Consultants Pvt. Ltd. a licence fee for
use of the erstwhile goodwill of the historical legal practice housed in the
said Private Limited company. It was the case of the revenue that the
said payment was a futile spend which did not bring any additional benefit to
the assessee and deserves to be disallowed. On higher appeal by the assessee
the Commissioner (Appeals) allowed the spend basing the historical backdrop as
to how this goodwill and this licence fee came to be paid. Aggrieved revenue
went in further appeal to ITAT --
Held against the revenue by dismissing their appeal that
the licence fee was an allowable expense given the earlier year decision of the
assessee.
Editorial Note: In
cross border taxation under transfer pricing one of the most litigious issue is
on payment of licence/royalty for use of goodwill brand name. This is a
domestic tax decision which has allowed the same based on certain historical
pedigree behind the reputation and the name of the legal name used by the firm.
The same principles ought to be applicable even to a transnational entity.
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