India's largest IT company, Tata Consultancy Services (TCS), paid Rs 77 lakh to Tata Group's parent company, Tata Group, to use the Tata logo. The income-tax appellate tribunal allowed the payment to Tata Sons as a business deduction. This is not the first time TCS has faced tax litigation on this issue, with similar disputes in the past. ITAT's Mumbai bench approved the Rs 77 lakh payment as a business deduction, lowering taxable profits and income-tax outgo. Other group companies, such as Tata Chemicals, have also faced similar tax litigation.

Subscription fees for all members of the group

Under the Tata brand agreement, all companies in the group fold must pay annual subscription fees to Tata Sons, the registered owner of the 'Tata' name. Under the Tata Brand Equity and Business Promotion (TBEBP) scheme, group companies using the Tata brand must pay 0.25% of annual revenue or 5% of the profit before tax. The royalty payment is charged on revenues generated, not profits made, regardless of whether the entity is a loss-making entity.

TCS case

Tata Sons (TCS) has been denied a substantial deduction for a payment of Rs 77 lakh as a capital expenditure by the Income-tax Tribunal (ITAT). TCS argued that the subscription fees provided shareable resources for the Tata Group, which helps boost its image and sales. However, the company argued that the payment cannot be treated as a capital expenditure as it is recurring and tax at source has been deducted on making payment to Tata Sons. Tata Sons declined to comment on the matter. The company's submission to the ITAT bench emphasized the importance of sharing resources and promoting the collective image of the Tata Group.