TaxTMI 
TaxTMI 
2008 (7) TMI 1003
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....er may be adjourned to a convenient date and the learned D.R. wanted us to post it on 26.05.08, accordingly, his request was considered. On 26.5.08, learned Sr. D.R., Sri Sanjiv Dutt filed a letter stating that the CIT (DR) who is to argue the matter before the Bench is feeling indisposed and is on leave and requested to give short adjournment. Accordingly, the matter was posted on 30th May, 2008. Again on 29th May, 2008, the learned D.R. filed a letter stating that the CIT(DR) who has to argue the matter is on leave till 15.6.2008 and the Bench was requested to give short adjournment. When the matter was placed before the Bench, the Bench has rejected the request of the D.R. and Mr. Sanjiv Dutt who was present did not have any instruction to argue the matter or reply the proceedings. We are therefore, left with no other alternative than to treat the matter as heard ex-parte of the Revenue. 3. The block assessment has been framed by the Department in respect of search and seizure action that took place in respect of Glenmark group of cases conducted on 27.03.2002. The Revenue's grievance against the order of the learned CIT(A) in the block proceedings are in the following gr....
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.... 5. The main issue as stated in the assessment order is whether the amount of Rs. 5.5 crores represented the first three items cited above constituted revenue outgoing or capital outlay and whether that can be considered as part of undisclosed income under Chapter XIV-B of the I.T. Act. The first three grounds extracted above are in relation to these three items. The assessee purchased three brands namely "Flucort", "Alex" and "Sensur" from M/ s. Lyka Labs Ltd. under a Deed of Assignment executed on 22.06.2000. As a result of such purchase, the ownership of the above named trade mark got transferred to the assessee and according to the Assessing Officer, there is no question of any further royalty payment in respect of the transactions arise and the Assessing Officer found that they were paying @ 5% of sale of these brands of a half yearly basis and such royalty was to the extent of Rs. 75,50,000/-. According to the Assessing Officer, the said payment of royalty forms part of some set of documents through which the ownership of trademarks got transferred, the royalty payment should be treated as capital expenditure like other payments made under the agreement irrespective of whe....
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....greement with M/s. Lyka Labs Ltd. The details of acquisition of its cost are summarised as under:- Sl. No. Particulars Alex Flucort Sensur Total 1. Acquisition of Brand/Trade Mark 5.00 3.95 3.00 11.95 2. Technical know-how 4.00 3.50 2.50 10.00 3. Marketing know-how 4.00 3.50 2.50 10.00 4. Non-compete fee 0.75 0.75 0.75 2.25 Total 13.75 11.70 8.75 34.20 All the above agreements were entered in the financial year 2000-01 and during the assessment year 2001-02 and were considered in the return of income for the said assessment year which was filed on 31.10.2001 much before the date of the search. The assessee treated the expenditure on acquisition of brand, technical know-how and marketing know-how as capital expenditure and claimed depreciation on the same. The non-competition payment and royalty @ 5% of the sales for the next three years was treated as revenue expenditure. The representative of the assessee contended before the learned CIT(A) that the disputed additions required to be made thereunder are subject matter of regular assessments and did not form part of ....
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....cial pronouncements thereon. These claims could at best be debatable or subject to interpretation but cannot fall within the definition of false claim. All these items have already been recorded and entered into the books of accounts, profit and loss account, balance sheet and they were duly declared by the assessee for the respective periods. The learned CIT(A) found that the ratio of the jurisdictional High Court in the case of CIT vs. Vikram A.Dhoshi, (2003) 127 Taxman 513 (Bom) is squarely applicable to this case, wherein their Lordships of the Jurisdictional High Court held that where transactions were disclosed in the returns, which were subject matter of regular assessments, the same ought to have been assessed in the regular assessment and not in the block assessment. He relied upon the decision of Jurisdictional High Court in the case of CIT vs. V.D.Godavat, 247 ITR 448(Bom) and also found the facts and circumstances in the case of Rainbow Distillers P.Ltd. vs. ACIT, 75 ITD 103 are exactly similar to the facts in the case of the assessee. The action of the Assessing Officer based on the statement obtained during the course of search from the Joint Managing Director and Vic....
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....ed by the assessee. The entries in the books of accounts are based on the agreements that are entered into by the parties. The transactions have taken place through regular banking channel and found recorded in the books of accounts of the assessee as well as in the books of account maintained by M/s. Lyka Labs Ltd., where consequential searches were also conducted. The genuineness of the transactions as recorded by the assessee in the books of accounts are not in serious dispute and they are not false. It is for these reasons, the learned CIT(A) has correctly come to the conclusion that by no stretch of imagination the transactions so recorded in the regular books of accounts maintained by the assessee could satisfy the test laid down under the provisions of section 158B(b) of the I.T. Act, as regards the undisclosed income. The learned CIT(A) has given sufficient basis to come to the conclusion that the claims made by the assessee were not false and are based on the agreements entered into by the parties. The parties may not have taken the same interpretation as the Revenue has tried to do. But, it is for the Assessing Officer based on such return of income in the regular assessm....
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.... by the assessor, during the year. The short submission of the assessee in this regard is that investments were made in the earlier years when there were no borrowing and therefore the investments have all come from out of own funds and not out of borrowing funds. We have gone through the records. The assessee has filed copies of written submissions in pages 37 to 44 before the learned CIT(A), wherein the assessee has clearly discussed the details of loan funds and investments made. On perusal of these details, which are placed at pages 41 and 42, we accept the claims made by the assessee and delete the addition in respect of the interest that is disallowed under section 14A of the Act. 11. The next dispute in the assessee's appeal relates to action of the learned CIT(A) with regard to the payment of Rs. 10 crores for acquiring marketing know-how in respect of three brands of M/s. Lyka Labs Ltd. as capital expenditure as against the claim of the revenue expenditure. It may be mentioned that the original return of the assessee company claimed depreciation of 25% on the said amount of Rs. 10 crores, which formed part of the total consideration of Rs. 34.25 crores paid for acqu....
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....essing Officer as well as CIT(A). The learned counsel for the assessee drew our attention to the components of the marketing know-how which has been acquired by the assessee. None of them represents acquisition of any capital asset or any sort of tangible asset. The expenditure should be allowed as revenue expenditure in the light of the decisions of the Tribunal in the case of USV Ltd. vs. JCIT., 14 SOT 49 and also the decision in the case of IBM Global Services India (P) Ltd. vs. DCIT, 113 TTJ 747, wherein identical issues have been dealt with by the Tribunal and identical expenditure under similar set of circumstances has been allowed to be treated as revenue expenditure. 12. We have gone through the copies of the agreements and considered the facts of the case and the decision of the Mumbai Tribunal in the case of USV Ltd. In this case, the assessee company has already engaged in manufacturing and marketing of pharmaceutical products with a view to expand its market base, it entered into agreement with another company. Apart from acquiring the brands, it also acquired data and details of all scientific and marketing know-how. The benefit of the expenditure and non competitio....