ACIT, CIRCLE-4(1)(1),, AHMEDABAD vs. M/S. VISHNU POUCH PACKAGING PVT. LTD, AHMEDABAD

These cross appeals are filed by the Revenue and assessee against the order dated 09.08.2021 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18.

The Revenue has raised the following grounds of appeal:

The assessee company is engaged in the business of manufacturing of Pan Masala without tobacco and Pan Masala containing tobacco. The return of income was filed on 31.10.2017 declaring total income at Rs.Nil. Thereafter, revised return of income was filed on 17.07.2018 wherein total income was determined at nil after setting off losses of earlier years amounting to Rs.3,71,34,438/-. The assessee declared book profit of Rs.15,54,063/- under Section 115JB of the Act. The Assessing Officer made disallowance of Trademark Licence Utilization Fees amounting to Rs.5,17,31,250/- and also made disallowance In respect of delayed payment of employees contribution to the PF/ESIC fund amounting to Rs.5,77,140/-.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

At the time of hearing, Ld. AR submitted that in assessee’s own case for A.Y. 2016-17 being DCIT vs. Vishnu Pouch Packaging Pvt. Ltd., order dated 29.09.2021, the Tribunal has decided the issue in favour of the assessee and dismissed the appeal of the Revenue. & 244/Ahd/2021 A.Ys. 2017-18 Page 3 of 4 6. The Ld. DR submitted that the Tribunal’s order is against the Revenue yet the Assessing Officer has rightly made the disallowance of Trademark Licence Utilization Fees. Thus, the Ld. DR relied upon the Assessment Order.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the issue related to addition on account of disallowance of Trademark Licence Utilization Fees was there in A.Y. 2012-13, 2013- 14, 2014-15, 2015-16 and 2016-17. The said observation was made by the CIT(A) in paragraph no.4.2 as well. The Tribunal in assessee’s own case for A.Y. 2016-17 has decided the issue thereby relying the decision of the Tribunal in earlier years (ITA No.1190 to 1192/Ahd/2018 ACIT vs. Vishnu Pouch Packaging Pvt. Ltd., order dated 18.12.2019). In the present A.Y. the CIT(A) has observed that the assessee paid a sum of Rs.6,89,75,000/- as trade mark licence utilization fees and debited the said amount under the head ‘selling and distribution expenses’, the assessee company came into existence after conversion of erstwhile firm namely M/s Vishnu Packaging (firm) and the firm was also carrying out the same business of manufacturing the pan masala under the brand name Vimal which was taken over by the assessee company. The assessee company has been paying trade mark licence utilization fee to the licensor for utilization of the brand Vimal under agreement to this effect. The assessee company claimed the entire licence fees paid during the year as revenue expenses whereas the Assessing Officer treated the same as payment made for acquisition of trademark and licence within the meaning of capital assets as defined in Section 32(1)(ii) of the Act. Respectfully following the decision of the Tribunal, the CIT(A) has rightly deleted the addition as in earlier years also it has been observed that there is no dispute that the trade mark “Vimal” is owned by Vishu & Company Trademark Pvt. Ltd. It is also true that the assessee has paid royalty as part of terms and conditions of the registered agreement. These facts were not disputed before us by the ld. DR in this A.Y. as well. Therefore, appeal of the Revenue is dismissed.

As regards assessee’s appeal, the same is covered against the assessee by the decision of Jurisdictional High Court in case of CIT vs. Gujarat State Road Transport Corporation (2014) 41 taxmann.com 100 (Guj). Thus, the appeal filed by the assessee is dismissed. & 244/Ahd/2021 A.Ys. 2017-18 Page 4 of 4 9. In the result, appeal filed by the Revenue & assessee are dismissed.