Delhi High Court Dismisses Income Tax Dept's Appeals Against Remfry & Sagar Law Firm Over Goodwill License Fees

A division bench of Justices V. Kameswar Rao and Vinod Kumar thus dismissed the appeals preferred by the Income Tax Department against the firm.

The Court heavily relied on Pr. Commissioner Of Income Tax -21 v. M/S.Remfry & Sagar (2025) where a coordinate bench of the Court rejected the Department's claim that the license to use goodwill was a ruse to avoid tax.

For context, Dr. V. Sagar acquired all the assets including the name and goodwill 'Remfry & Sons' from a British immigrant and constituted 'Remfry and Sagar'.

The goodwill of 'Remfry and Sagar' was eventually gifted to Remfry & Sagar Consultants Private Limited (RSCPL)- which was substantially held by Dr. Sagar's children who were not legal practitioners.

Soon thereafter, Dr. V. Sagar entered into a partnership and constituted the genesis of the law firm “Remfry & Sagar”. This firm executed a “License of the Use of Goodwill” with RSCPL on a Revenue sharing basis and sought deduction under Section 37.

The deduction came to be disallowed by the Assessing Officer, terming the whole transaction as a ruse to divert funds for personal benefit of Dr. Sagar's children and avoid tax.

The High Court however held that the agreement to utilise and derive benefits of goodwill cannot be viewed as a ruse or one aimed at tax avoidance.

As such, the Court held that no interference is called for in the matter and dismissed the appeals.

Appearance: Mr. Indruj Singh Rai SSC, Mr. Sanjeev Menon, Mr. Rahul Singh JSC and Mr. Gaurav Kumar, Adv. for Appellant; Mr. Ajay Vohra, Sr. Adv. with Mr. Aditya Vohra and Tanmay Dhakras, Advs. for Respondent

Case title: Pr. Commissioner Of Income Tax v. M/S. Remfry And Sagar

Citation: 2025 LiveLaw (Del) 1355

Case no.: ITA 525/2025 + ITA 526/2025 + ITA 527/2025 + ITA 528/2025 + ITA 531/2025

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