TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1528
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....firming the disallowance of product registration expenses of Rs.47,21,095/- made by the Assessing Officer allegedly treating the same as capital expenditure as against the revenue expenditure claimed by the appellant. 4. The Ld. CIT(A) ought to have appreciated that education cess on the tax payable on the assessed income was allowable as deduction while computing the income of the appellant. 5. The appellant craves leave to add to, alter, amend and/or delete in all the foregoing grounds of appeal." 3. The brief facts of the case are that the assessee filed its return of income on 28.11.2017 declaring total income to the tune of Rs.6,25,44,880/-. Subsequently, the assessee filed its revised return of income on 18.05.2018 declaring the same income which he had filed earlier. The return was processed u/s 143(1) of the Act. The case was selected for scrutiny under CASS. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee company was engaged in the business of manufacturing, trading and marketing of healthcare products especially for Veterinary. The company was in the business of veterinary pharmaceuticals since 2002. The assessee claimed ....
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....adjudicated by the Hon'ble ITAT in the case of M/s. Shreechem Pharmaceuticals Pvt. Ltd. (ITA. No.7080/Mum/2013) dated 26.10,2016. The relevant finding has given in para no.6 which is hereby reproduced as under: - "4. All the issues are interconnected, therefore are being taken up for adjudication. Under this issues the revenue has challenged the sole point that the CIT(A) has wrongly allowed an amount of Rs.43,06,904/- as revenue expenditure whereas the same should be considered as capital in nature. Before going further it is necessary to advert the finding of the CIT(A) on record:- "2.3 I have carefully considered the submission of the appellant and the impugned assessment order. The AR of the appellant had filed copies of Registration Certificate issued by Health and Drug administration of various countries such as Zambia, Ghana, Georgia, Vietnam, Nigeria, Ukrain, etc. with the registration number and the details of product and expiry period of the license. The fees is paid towards vendor registration, quality control checks, testing and verification of such products for human consumption impact over environment over disposal, etc. Once the product passes through above tests....
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....sets. With respect to patent and trademark registration, the Tribunal held that for protection of result of the research of the assessee, such patent had to be registered. It was observed that enduring benefit is not the only criteria. The same must be coupled with acquisition of asset. The finding of the Hon'ble court is as under: "With respect to the expenditure incurred for production registration charges, we agree with the view of the Tribunal that the assessee did not acquire my new asset. As per the rules and regulations, it was essential that the product, before marketing, would be registered with the regulating authorities. Any expenditure in the process would not be stated to ensure procurement of a new asset to the assessee. We are informed that a Division Bench of this Court in the case of CIT V. Torrent Pharmaceuticals Ltd. (2013) 29 taxmann.com 405 (Gujarat) also in somewhat similar facts had upheld the decision of the Tribunal." The facts are identical in appellants case. Going by the ratio laid down by the Hon'ble court the Product Registration would not create any new asset to the appellant as the products are the existing one. Further in my opinion test of enduri....
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.... of the view that product registration expenses incurred by the assessee vested an enduring benefit with the assessee, thus the same were held by him as being in the nature of a capital expenditure. On the basis of the aforesaid observations, the A.O restricted the entitlement of the assessee only to the extent of depreciation on the amount of the capitalized value of product registration expenditure. We have deliberated at length on the issue under consideration, and find that the issue involved in the present appeal is squarely covered by the order passed by a coordinate bench of the Tribunal viz. ITAT "F" Bench, Mumbai in the assesses own case for A.Y. 2011-12 and A.Y. 2012-13 i.e. DCIT-13(2)(2), Mumbai Vs. M/s Sharda Worldwide Exports Pvt. Ltd. (now known as Sharda Cropchem Ltd., Mumbai) [ITA No. 3804 & 3805/Mum/2016; dated 16.03.2018]. We find that the Tribunal while disposing off the aforementioned appeals concurred with the view taken by the CIT(A), and had concluded that the product registration expenditure was rightly allowed by him as a revenue expenditure, observing as under : "5.1.1.We find that one of the major objections of the AO was that the assessee was getting e....
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....nd object of the expenditure is to be considered not the quantum. As far as entries in the books of accounts and claiming depreciation in the earlier years is concerned, it is suffice to say that entries made in the books of accounts do not decide the true nature of expenditure. We would like to rely upon the case of Bhor Industries of the Hon'ble Bombay High Court (264 ITR 180). 5.2. The Hon'ble Courts are of the view that the issue of capital versus revenue expenditure has to be seen from the angle of an assessee rather than an AO. In the case of Edward Keventer (P) Ltd., the honourable Calcutta High Court has held as follows : "The legitimate business needs of the company must be judged from the view-point of the company itself and from the view-point of a prudent businessman. It is not for the Income-tax Officer to dictate what the business needs of the company should be. The term "benefit" to a company in relation to its business has a very wide connotation and may not necessarily be capable of being accurately measured in terms of pounds, shillings and pence in all cases. Both these points have to be considered judiciously and dispassionately from the view-point o....