Income-tax appellate tribunal relief for TCS over use of 'Tata' brand name

Mumbai, Sep 26, 2023

Income-tax appellate tribunal relief for TCS over use of 'Tata' brand name

The income-tax appellate tribunal has, like in the past, allowed the Tata brand name payment by TCS to Tata Sons as a business deduction.

In a recent order, ITAT's Mumbai bench approved Rs 77 lakh paid by TCS for the use of the 'Tata' name and logo to Tata Sons as a business deduction. If an expense is allowed as a business deduction, it lowers taxable profits and hence the income-tax outgo.

Under the Tata brand agreement, TCS, like other companies in the group fold, has to make an annual payment (referred to as subscription fees) to Tata Sons, which is the registered owner of the 'Tata' name. In the past, too, TCS faced tax litigation on this issue, with the matter being decided in its favour. Other group companies such as Tata Chemicals have also faced similar tax litigation.

In the case of TCS for FY14, the income-tax sought to treat this payment of Rs 77 lakh as a capital expenditure against which it allowed a depreciation of 25%. Thus, a substantial amount was disallowed as a business deduction.

TCS submitted to the ITAT bench that in "consideration of the subscription fees, a whole lot of shareable resources of the Tata Group are made available". Tata Sons protects and enforces the collective image and goodwill of the Tata Group, organises corporate identity, coordinates major campaigns involving the promotion and development of the Tata name, and engages the services of specialists and professional consultants for energising and enhancing the overall Tata name." This, in turn, helps group companies like TCS to boost their image and enhance sales.

The company pointed out that it cannot be treated as a capital expenditure as it is recurring in nature and tax at source had been deducted on making payment to Tata Sons. When contacted, Tata Sons declined to comment.

[The Times of India]