TaxTMI 
TaxTMI 
2014 (10) TMI 1042
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.... on account of product registration less depreciation, with a direction to allow this expenses as revenue withdrawing the depreciation of Rs. 21,51,623/- allowed by the AO. 2. The ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 3,97,006/- made by the AO on account of additional depreciation on power plant." 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) dated 24.12.2009 were that the assessee company is in the business of manufacturing of pharmaceuticals and medical equipments. It was noted by the AO that the assessee had debited a sum of Rs. 1,24,54,283/- as "product registration expenses". A show cause was issued and the assessee was asked to substantiate the expendi....
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....ducts. This registration will only enable the company to sell their products if there are buyers or there is a demand for company's product in that country................. The company does not get the benefit of enduring nature as it may happen that after registration, the company may not be able to sell in that country for various reasons like non acceptance of the product in the domestic market, economic circumstances of that country including realization of remunerative prices, extent of competition and relative competitive position of the sellers, availability of facilities for manufacture of such product in domestic market and its cost of production, etc., domestic per capita income, consumer preferences, government polic....
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....ibution to infrastructure development fund was treated as revenue. Without incurring these expenses, the assessee could not start its business as Share broker. Similarly in the appellant's case, without registering its products, appellant could not have sold its products. Since these expenses are normal business expenses required for running business, the same are revenue in nature. As a result of these expenses, appellant may get benefit in subsequent years but that does not mean that these expenses are capital in nature. All expenses in the nature of advertisement have potential future benefits but advertisement expenses are not capital in nature. Therefore one cannot conclude that future benefits will result in creation of capital as....
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....e hereby held that such an enduring benefit may not tantamount to rendering of capital expenditure. [DCIT versus Core healthcare 308 ITR 263 (Gujarat)]. A very identical case law has also been cited pronounced by the Hon'ble Supreme Court in the case of CIT versus Finley Mills Ltd. 20 ITR 475 and the opinion expressed was that an expenditure incurred in registering for the first time its trademark, then by registration the owner is merely absolved thereafter from obligation to prove his ownership of trademark. As per the Hon'ble Court the expenditure is neither for the creation of an asset nor an advantage for ever. We, therefore, hold that this precedent has direct application on the present issue, therefore, following the same and....
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....ct 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 1998-1999 to the exports have grown to Rs. 160 crores in financial year 2005-06 an increase of more than 600 per cent. Accordingly, these expenses are rightly allowed by learned CIT(A) and we confirm the same." 6. Considering the submission of both the sides in the light of the case law cited and the reason given by the AO for such disallowance, we hereby hold that in a situation when the genuineness of the expenditure was not doubted by the AO but only on a technical point the impugned disallowance was made we hereby ....
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....lowable. In the case of appellant, plant and machinery was acquired after 31 March 2005 and appellant is already manufacturing pharmaceutical products which are articles or things. Therefore appellant fulfilled all the conditions for claim of additional depreciation. Appellant during appeal hearing also relied upon following decisions of Madras High Court in which it is held that there is no requirement that the setting up of a new machinery or plant should have any operational connectivity to article or things that were already manufactured by the assessee. (1) CIT vs. Hi Tech Arail Ltd., (321 ITR 477 - Mad) (2) CIT vs. Texmo Precision Castings (321 ITR 481 - Mad) (3) CIT vs. VTM Ltd. (229 CTR 70 - Mad) ....