The Tax Publishers2021 TaxPub(DT) 0576 (Del-Trib)

INCOME TAX ACT, 1961

Section 37

Where license fee was paid by assessee, a firm of lawyers, to a private limited company which granted a licence to assessee to practise as a consultant in the name of company and for use of trademark and goodwill of the business of company, the licence fee was an allowable expense.

Business expenditure - Payment of licence fee for use of goodwill by a firm of lawyers - Allowability -

Assessee, a firm of lawyers, was paying licence fee for Rs. 27.56 crores to one Remfry & Sagar Consultants Pvt. Ltd. Assessee claimed expenditure of payment made as 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: The licence fee was an allowable expense given the earlier year decision of the assessee. Deduction claimed by the assessee on account of license fee paid to M/s. RSCPL was allowable as revenue expenditure under section 37.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14



IN THE ITAT, DELHI 'F' BENCH

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