CIT v. Artos Breweries Ltd. - Taxpublishers.in

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The Tax Publishers2013 TaxPub(DT) 0682 (AP-HC) : (2013) 351 ITR 0133 : (2013) 083 DTR 0277 INCOME TAX ACT, 1961 --Capital or revenue expenditure--Royalty and technical know-how fees Expenses in relation to carrying on business--Assessee was engaged in the business of manufacture and sale of beer. It had entered into a technical assistance agreement with MMB for the use of brand name of MMB. Assessee had paid royalty to MMB for the same. Assessing officer contended that the payments made by the assessee to MMB were in the nature of capital expenditure and, therefore, the assessee was not entitled to benefit under section 37. *Held:* Not rightly so, as in terms of the technical assistance agreement, the assessee was entitled to use the know-how supplied by MMB for the manufacture of the products. The know-how and information received by the assessee directly or indirectly from MMB was to be kept strictly confidential. Assessee was entitled to use the trade mark 'Golden Eagle' of MMB. The payment of royalty was, therefore, in the nature of expenditure incurred for carrying on business with available know-how, rather than for accretion to the capital base or gain an advantage in the capital field of the assessee. Income Tax Act, 1961 Section 37(1) IN THE Andhra Pradesh High Court Madan B. Lokur, C.J. & Sanjay Kumar, J. CIT v. Artos Breweries Ltd. ITTA Nos. 38 of 1999, 46 of 2000 & RC No. 31 of 2000 A.Y. 1983-34 to 1988-89 3 January, 2012 Income-tax Act, 1961, s. 37(1) In favour of: Assessee Appellant by : J.V. Prasad Respondent by : B. Ravindra & Venkateswar Rao Gudipati JUDGMENT *Madan B. Lokur, CJ.* In these two appeals as well as referred case the following substantial question of law has arisen for consideration : 'Whether on the facts and circumstances of the case, the Tribunal was justified in holding that the royalty paid by the assessee-company to M/s Mohan Meakins Breweries was in the nature of revenue expenditure?' 2. The assessee was in the business of manufacture and sale of beer. The assessee used to manufacture beer under the name and style of 'Golden Eagle', which is the popular brand name of M/s. Mohan Meakins Breweries Limited., Solan, U.P. (for short MMB). SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0682 (AP-HC) : (2013) 351 ITR 0133 : (2013) 083 DTR 0277

INCOME TAX ACT, 1961

--Capital or revenue expenditure--Royalty and technical know-how fees Expenses in relation to carrying on business--Assessee was engaged in the business of manufacture and sale of beer. It had entered into a technical assistance agreement with MMB for the use of brand name of MMB. Assessee had paid royalty to MMB for the same. Assessing officer contended that the payments made by the assessee to MMB were in the nature of capital expenditure and, therefore, the assessee was not entitled to benefit under section 37. Held: Not rightly so, as in terms of the technical assistance agreement, the assessee was entitled to use the know-how supplied by MMB for the manufacture of the products. The know-how and information received by the assessee directly or indirectly from MMB was to be kept strictly confidential. Assessee was entitled to use the trade mark 'Golden Eagle' of MMB. The payment of royalty was, therefore, in the nature of expenditure incurred for carrying on business with available know-how, rather than for accretion to the capital base or gain an advantage in the capital field of the assessee.

Income Tax Act, 1961 Section 37(1)

IN THE Andhra Pradesh High Court

Madan B. Lokur, C.J. & Sanjay Kumar, J.

CIT v. Artos Breweries Ltd.

ITTA Nos. 38 of 1999, 46 of 2000 & RC No. 31 of 2000

A.Y. 1983-34 to 1988-89

3 January, 2012

Income-tax Act, 1961, s. 37(1) In favour of: Assessee

Appellant by : J.V. Prasad

Respondent by : B. Ravindra & Venkateswar Rao Gudipati

JUDGMENT

Madan B. Lokur, CJ.

In these two appeals as well as referred case the following substantial question of law has arisen for consideration :

'Whether on the facts and circumstances of the case, the Tribunal was justified in holding that the royalty paid by the assessee-company to M/s Mohan Meakins Breweries was in the nature of revenue expenditure?'

2. The assessee was in the business of manufacture and sale of beer. The assessee used to manufacture beer under the name and style of 'Golden Eagle', which is the popular brand name of M/s. Mohan Meakins Breweries Limited., Solan, U.P. (for short MMB).