TaxTMI 
TaxTMI 
2018 (10) TMI 1491
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....acts and circumstances of the case and in law, the Commissioner of Income Tax(A) erred in confirming disallowance of Rs. 23,34,349/- being charges for the year included in the total expenses paid to REACH. The expenditure incurred of Rs. 1,08,69,332/- includes an amount of Rs. 23,34,349/- pertains to yearly charges towards registration which is of recurring nature 3) Without prejudice to above and on the facts and circumstances of the case and in law, the Commissioner of Income Tax(A) ought to have allowed 1/5'lh of the total expenditure incurred by way of amortization and 7 or depreciation on the said expenditure on the amount capitalized on payments to REACH. 4) On the facts and circumstances of the case and in law, the Commissioner of Income Tax(A) erred in disallowing Legal & Professional Charges of Rs. 14,74,991/-paid to Intertek India Pvt Ltd. for assisting in registration process with REACH by treating the said expenses as of capital nature though these expenses were of revenue nature. 5) Without prejudice to above and on the facts and circumstances of the case and in law, the Commissioner of Income Tax(A) erred in confirming the disallowance of Rs. 1,89,001/- out ....
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.... assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee but the assessee was not satisfied on account of the ground mentioned above, therefore, the assessee has filed the present appeal before us. GROUND NOs.1 to 6:- 4. Ground nos. 1 to 6 are inter-connected, therefore, are being taken up together for adjudication. On these issues the assessee has claimed the legal and professional charges of Rs. 1,08,69,332/- paid to Reach (Registration, Evaluation, authorization and Restrictions of Chemicals) which is the European Regulatory Authority and disallowance of Rs. 23,34,349/- yearly charges paid the Reach which has been included in the amount of Rs. 1,08,69,332/- and disallowance of legal and professional charges of Rs. 14,74,991/- paid to Intertek India Pvt. Ltd. for assisting in registration process with Reach. However, the assessee in alternative claimed the depreciation in the ground nos. 3, 5, & 6. It is liable to be seen whether the expenses incurred by assessee on account of disallowance of legal and professional charges of Rs. 1,08,69,332/- paid to Reach and an amount of Rs. 14,74,991/- paid to Intertek India Pvt. Ltd. for assisting in registr....
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....tion, thermo plastic elastomers used for tyre industry. In order to market its products in the European Countries, the assessee company had to get itself registered with the Registration, Evaluation, Authorisation and Restrictions of Chemicals (Reach) which is the European Regulatory Authority. The certification of this organization is necessary for marketing the product which do not adversely affect human health or environment. The registration fee as well as the fee paid to M/s. Intertek India Pvt. Ltd. being the professional charges has been denied. The similar has come before the ITAT in the case of ITA. No.241/Ahd/2008. The finding has been given in para no. 6 which is hereby reproduced below.: - "6 We have heard the rival contentions and gone through the facts and circumstances of the case. We find that explanation of the assessee is that these are the expenses incurred for obtaining registrations in foreign country for the product which the assessee-company proposes to market in overseas market and without registration of the products, the assessee-company would not be able to market the products in the overseas market. Further, these payments are made to drug regulatory a....
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....sis depending upon the validity of the various registrations. The fees have been paid on expiry of the registration and out of total payment of Rs. 8,03,706/- is in respect of product registration in Poland. Likewise payments have been made in Vietnam, Russia, Ghana and China etc. We find that the exports over the years have increased from the export sale of Rs,26 crores in financial year I9°.tt-I W to the exports have grown to Us, 160 crores in financial year 2005-2006 an increase of more than 600%. Accordingly, these expenses are rightly allowed by CTT(A) and we confirm (he same." 5. The findings of the Tribunal are justified on both the issues. The garden expenditure was for the purpose of maintaining garden to control the pollution. The company had put up un affluent treatment plant and pollution used to generate because the release of pollutants. The maintaining a garden helped in controlling pollution arising from the pollutants. It cannot be gainsaid that the expenses for garden had nexus with business activity. It can well be be treated for business purpose and can be claimed as expenditure. Similarly, the expenses for foreign country registration was for business p....
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....he study and business plan report is a devise strategy for the future year of the assessee company and therefore it would not be allowable the entire expenditure in the one year. The said disallowance has been confirmed by the CIT(A). The contention of the assessee is that the assessee expended the said amount in the year of consideration, therefore, the same is liable to be allowable in view of the law settled in the case of Taparia Tools Ltd. Vs. JCIT (372 ITR 605), Madras Industrial Investment Corporation Ltd. Vs. CIT (225 ITR 802 (SC). It is also argued that the advertisement also relates to future year but the Madras High Court in the case of CIT Vs. Brilliant Tutorials Pvt. Ltd. (292 ITR 399) and DCIT Vs. Cox & Kings (I) Ltd. (2011) 11 taxmann.com 444 (Trib.) allowed the claim of the assessee. The Hon'ble Supreme Court in the case of Taparia Tools Ltd. Vs. JCIT (372 ITR 605) has specifically held in para no. 17 as under.:- 17 What follows from the above is that normally the ordinary rule is to be applied, namely, revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the Income Tax Departm....
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.... of business must be allowed in its entirety in the year in which it is incurred it cannot be spread over a number of years even if the asses-see has written it off in his books over a period of years. However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year. Thus in the case of Hindustan Aluminium Corporation Ltd, v. CIT [1982] 30 CTR (Cal) 363 ; [1983] 144 ITR 474 (Cal), the Calcutta High Court upheld the claim of the assessee to spread out a lump sum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question. Issuing debentures at a discount is another such instance where, although the assessee has incurred the liability to pay the discount in the year of issue of debentures, the payment is to secure a benefit over a number of years. There is a continuing benefit to the business of the company over the entire period. The liability should, therefore, be spread over the period ....