MUMBAI: The income tax appeal committee has, as in the past, the Tata brand name payment by TCS to Tata Sons as a business deduction.
In a recent order, the Mumbai bench of ITAT approved an amount of Rs 77 lakh paid by TCS for the use of the name ‘Tata’ and logo by Tata Sons as a business deduction. If an expense is allowed as a business deduction, it reduces taxable profit and therefore income tax.
Under the Tata brand agreement, TCS, like other companies in the group, has to make an annual payment (known as a subscription fee) to Tata Sons, the registered owner of the name ‘Tata’. In the past too, TCS has faced tax lawsuits on this issue, with the case being decided in its favor. Other group companies such as Tata Chemicals have also faced similar tax disputes.
In the case of TCS for FY14, the income tax tried to treat this payment of Rs 77 lakh as a capital expenditure against which 25% depreciation was allowed. A substantial amount was therefore not allowed as a business deduction.
TCS submitted to the ITAT bench that “a whole lot of shareable resources of the Tata Group are made available taking into account the subscription fees”. Tata Sons protects and maintains the collective image and goodwill of the Tata Group, organizes the corporate identity, coordinates major campaigns around the promotion and development of the Tata name, and engages the services of specialists and professional consultants to promote the overall Tata name. stimulate and strengthen. “This in turn helps group companies like TCS to boost their image and increase sales.
The company pointed out that this cannot be treated as capital expenditure as it is recurring in nature and tax has been deducted at source on the payment to Tata Sons. When contacted, Tata Sons declined to comment.
In a recent order, the Mumbai bench of ITAT approved an amount of Rs 77 lakh paid by TCS for the use of the name ‘Tata’ and logo by Tata Sons as a business deduction. If an expense is allowed as a business deduction, it reduces taxable profit and therefore income tax.
Under the Tata brand agreement, TCS, like other companies in the group, has to make an annual payment (known as a subscription fee) to Tata Sons, the registered owner of the name ‘Tata’. In the past too, TCS has faced tax lawsuits on this issue, with the case being decided in its favor. Other group companies such as Tata Chemicals have also faced similar tax disputes.
In the case of TCS for FY14, the income tax tried to treat this payment of Rs 77 lakh as a capital expenditure against which 25% depreciation was allowed. A substantial amount was therefore not allowed as a business deduction.
TCS submitted to the ITAT bench that “a whole lot of shareable resources of the Tata Group are made available taking into account the subscription fees”. Tata Sons protects and maintains the collective image and goodwill of the Tata Group, organizes the corporate identity, coordinates major campaigns around the promotion and development of the Tata name, and engages the services of specialists and professional consultants to promote the overall Tata name. stimulate and strengthen. “This in turn helps group companies like TCS to boost their image and increase sales.
The company pointed out that this cannot be treated as capital expenditure as it is recurring in nature and tax has been deducted at source on the payment to Tata Sons. When contacted, Tata Sons declined to comment.
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