As per clause 11 expenses incurred for promotion of branded jewellery which give enduring benefit to the assessee can claim deduction

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The factual matrix of the case is that the assessee-company is engaged in the business of licensing, manufacturing, distribution and selling of diamonds under the brand “Nakshatra”. In the course of scrutiny proceedings, the Assessing Officer noted that the assessee has claimed sales promotion expenses of `.3,89,62,423/-, which was towards the payment to ‘Diamond Trading Company Limited’ (in short ‘DTC’) for its share on promotion of mark “Nakshatra”. From the perusal of the copy of the invoice raised by the DTC for sum $57300 & $160000, he took note of the remark appearing in the invoice that it is a reimbursement of share contribution by the assessee on the actual marketing campaign expenditure incurred during the period for promotion of the mark “Nakshatra”. In response to the query raised by the Assessing Officer as to why these expenses be not disallowed, it was submitted that the assessee company has entered into an agreement dated 8-11-2005 with the DTC and ‘D’Beers Centenary AG’ (in short ‘DBC AG’), a Swiss based company which has licensed the mark of “Nakshatra” to DTC Ltd., London, who in turn has sub-licensed the mark to the assessee company. The DTC has devised and deployed a marketing campaign to grow consumer demand for diamond jewellery in India by promoting the mark “Nakshatra”. The assessee’s contention was that as per the agreement, the assessee company is using the mark “Nakshatra” for creating awareness in the M/s Brightest Circle Jewellery Pvt. Ltd. market for highly standardised certified diamond jewellery to increase its sales.

Citation :
M/s Brightest Circle Jewellery Pvt. Ltd. Popular House, Plot No.119, Road No.19, MIDC, Andheri (East), Mumbai-400 093. PAN NO.AACCB4270E Appellant Vs. ACIT 8 (3) (OSD), Mumbai. Respondent Appellant by: Mrs.Aarti Vissamji Respondent by:Mr. Pravin Varma