Royalty for Trademark sub-license paid - Whether capital expenditure creating goodwill via brand value

Facts:

Assessee paid to a UK non-resident royalty for trademark sub-licensing which was disallowed holding it to be capital expenditure of enduring benefit by creating brand goodwill for the assessee. On appeal CIT(A) deleted the addition. On further appeal by the revenue -

Held against the revenue based on the earlier year cases of the assessee that the expenditure was revenue in nature.

Applied:

Own case of assessee -

(i) ITA No. 5669/Del/2011 for AY 2007-08order dated 30.06.2016;

(ii) ITA No. 5923/Del/2012 for AY 2008-09 order dated 01.07.2016; and

(iii) ITA No. 1651/Del/2014 for AY 2009-10 order dated 28.09.2016.

Ed. Note: Reference be made to the decision in Flipkart India Private Limited v ACIT/ITA No. 1141/Bang/2022and another/AY 2017-18/Blr ITAT/Favour of the Assessee/09.03.2023 where selling goods below wholesale price at a loss was also read as cost of goodwill being created.

Case: ACIT v. GKN Driveline (India) Ltd. 2023 TaxPub(DT) 1842 (Delhi B Branch)