TaxTMI 
TaxTMI 
2017 (2) TMI 791
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.... pharmaceuticals filed its return of income on 27/09/2008 declaring Loss of Rs. 27.97 crores under the normal provisions and book profit of Rs. 7.5 crores u/s.115JB of the Act. The AO completed the assessment u/s. 143(3), on 20.12.2010, determining its income at Rs. (-) 20.47 crores under normal provisions and at Rs. 13.25 crores under section 115JB of the Act. ITA/3091/Mum/2012: 3.First Ground of Appeal raised by assessee is about holding disallowance of Rs. 1.25 crores r.w.r.8D of the Income tax Rules, 1962(Rules).During the assessment proceedings the AO found that the assessee had made investment in shares of various companies and units of mutual funds, that the long term investment made by it amounted to Rs. 14.38 crores. He observed that investments would give rise to exempt income, that the assessee had not made any disallowance u/s.14A.He directed the assessee to file details of expenses incurred for earning exempt income and to show cause as to why the expenses incurred and claimed in respect of exempt income should not be disallowed. The assessee stated that it had not incurred any expenditure for earning exempt income. Referring to the case of Godrej and Boyce Mfg. ....
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....th upholding the disallowance of Rs. 4.74 crores being loss incurred due to revaluation of open forward exchange contract. During the assessment proceedings the AO found that the assessee had entered into derivative agreement to swap term loans taken in Rupees against foreign currency, that it had debited "marked to market" losses of Rs. 4,74, 24,891/- to the P&L A/c. stating that the said liability had crystallied owing to the revaluation. The AO called for details about the transaction. After considering the same he held that it had entered into derivative transaction by swapping the loan, that the liability was paid in the subsequent year, that the notional loss of Rs. 4.74 crores could not be allowed. He referred to Instruction of CBDT dt.23/3/2010 and added the disputed amount to the total income of the assessee. He further held that it was provision and not an ascertained liability, as specified in Explanation 1 to clause (c) to the provisions of section 115JB. Therefore, he added Rs. 4.74 crores to the book profit of the assessee. 4.1.After considering the submission of the assessee, the FAA held that the assessee had borrowed funds in foreign currency, that in order to h....
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....r 1.5 crores, that it had claimed that no expenditure was incurred for acquiring the patent, that the patent was a capital asset, that the entire receipt on assignment of patent were not taxable. The assessee submitted explanation in this regard, vide its letter dt.23.11.10, in response to the directions of the AO. The AO held that the assessee was engaged in the business of research development, manufacturing, wholesale trading and licensing of bio-pharmaceuticals, biotechnology products, serums and process related technology for human therapeutic, that it had manufacturing facility and state-of-art research facilities, that developing a process, a techno - logy was part of the business of the assessee, that it was not possible to develop a process / patent without input from specialised/skilled personnel in a state-of-art research facility, that process of developing a patent was a part of a business of the assessee, that it had claimed all the expenses for skilled personnel and research facility in the P&L account, that the claim made by it in not incurring any cost for developing the patent was not acceptable. Finally, he held that receipt from sale of patent was a revenue reci....
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....s and Industrial Establishment (348ITR1). The DR contended that the sole object was to earn profit, that the assessee had incurred huge expenditure, that it was wrong to claim that no expenditure was incurred, that the receipt in question was trade receipt, that the cases relied upon by the AR were of no help. 7.4.We have heard the rival submissions and perused the material before us. We find that the assessee had assigned patent of "Profofal" for a consideration of Rs. 1.5 crores, that it had claimed that same is not taxable, that the FAA held that provisions of section 55(2) were applicable to the facts of the case and the amount received by it was taxable under the head capital gains. 7.4.1.Before proceeding further , it would be useful to discuss the concept of patent and to take notice of the history of patents.Patent is a long-term process of visualising an idea, experimenting, reaching at certain conclusions and testing of such conclusions, so that the fruit of the labour are enjoyed by the person who tirelessly pursues a goal for years together.It is a culmination of extensive research work and logical analysis. Patent is a legal document that is granted by the Sovere....
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.... Patent Office and its branches have become receiving office for purpose of international application for patents. As per the Patent Rules,1972 applications for international patents can be filed at HO/ Branch Offices with effect from 17/11/1999. 7.5.Here, we would also like to mention two important things. Firstly, it is necessary to make a distinction between cases where consideration is paid to acquire the right to use a patent or a copyright and cases where payment is made to acquire patented or a copyrighted product or material.In cases where payments are made to acquire products which are patented or copyrighted, the consideration paid would have to be treated as a payment for purchase of the product rather than consideration for use of the patent or copyright. 7.6.Secondly, a trade mark fundamentally differs from a patent. In the case of the former the property and the right to protection are in the device or symbol adopted to designate the goods sold, and not in the article which is manufactured and sold. That article is open to the whole world to manufacture and sell; and all that the owner of the trade mark is entitled to prevent is the use of his trade mark by othe....
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....ch and developmetn initiatives and efforts. B. XXXXX C. The assignee is desirous of acquiring the patent and has requested the assignor to transfer and assign all its rights, title and interest in the patent to the assignee for the purpose of commercial exploitation of the same in India and in the rest of International market ....". From above is clear that the patent was for the purpose to have right to manufacture /produce/ process some article/thing. The patent was registered for commercial exploitation of the same in India as well as in the international market. It was transferred to the assignee for exploiting it commercially. Section 55(2)(a) talks of right to manufacture, produce or process any article or thing.Therefore, as per the amended provisions, the right to manufacture/ produce/ process would be taxable under the head capital gains and cost has to be taken at Rs. nil. In these circumstances, in our opinion the FAA has rightly invoked the provisions of Section 55 and taxed the disputed amount under the head capital gain. 7.8.We are also of the opinion that the cases relied upon by the assessee, are of no help to it.In the case of Kwality Biscui....