TaxTMI 
TaxTMI 
2018 (10) TMI 2054
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....ucts Registration expenditure of Rs. 39,81,96,235/ - as capital expenditure. 3. The appellant prays that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored 4. The appellant craves leave to add, amend or alter all or any of the grounds of appeal." 2. Briefly stated, the assessee company which is engaged in the business of trading in agrochemicals, dyes, V-belts, dye intermediates, converter belts etc. had e-filed its return of income for A.Y. 2013-14 on 28.09.2013, declaring income of Rs. 90,57,38,880/ -. Thereafter, the assessee company e-filed a revised return of income on 30.09.2013, declaring income of Rs. 90,43,85,740/- wherein the disallowance under Sec. 14A r.w. Rule 8D was rectified. Subsequently, the case was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. The issue involved in the present appeal revolves around the issue as regards the allowability of product registration expenses of Rs. 39,81,96,235/- claimed by the assessee as a revenue expenditure. During the course of the assessment proceedings, it was observed by the A.O that the assessee had earlier claimed depreciation @ 25% on ....
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....ssessee only to the extent of depreciation on the amount of the capitalized product registration expenses. 6. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) observed, that a similar disallowance by the A.O of the product registration expenses which was claimed by the assessee as a revenue expenditure was vacated by his predecessor while disposing off the appeals of the assessee for A.Y. 2011-12 and A.Y. 2012-13. Being of the view that the facts and the issue involved in the present case remained the same, the CIT(A) following the view taken by his predecessor, therein held the product registration expenditure of Rs. 39,81,96,235/- as a revenue expenditure in the hands of the assessee. 7. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The Learned Authorized Representative (for short 'A.R') of the assessee, at the very outset of the hearing of the appeal submitted that the only issue involved in the present appeal was as to whether the product registration expenditure was in the nature of a revenue expenditure as claimed by the assessee, or a capital expenditure as held by the A.O.....
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....s not having any brand or patent rights over the exported commodities. The expenses incurred by it were in the field of selling and marketing activity rather than manufacturing. Without incurring PRE the assessee could not have exported the products. Thus, essentially the expenses were in the field of day to day business activities of the assessee. After registration process was over, the sale of product would depend upon the procurement of goods from third parties and the prices prevailing in the respective markets. In short, the PRE would not bring any benefit of enduring nature. Besides, the data exercises paid by it were for a right to access the data-it did not give right over the data. It is also found that assessee was incurring such expenditure is year after year. It had incurred PRE of Rs. 17.46 crores,Rs.23.73 crores,Rs.39.82 crores and Rs. 28.05 crores for the AY.s 2011-12 to 2014-15 respectively. So, it can safely be held that the PRE was of recurring nature. As far as quantum of expenditure is concerned we would like to mention that the full bench of Hon'ble Apex Court has decided the issue long back in the case of MK Brothers Private Ltd.(supra).The relevant porti....
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....s of Panacea Biotech Ltd. (supra)and Cadila Healthcare Ltd (263 CTR 686) the Hon'ble Delhi High Court and the Hon'ble Gujarat High Court has clearly held that PRE had to be allowed as revenue expenditure. We are reproducing the relevant portion of judgment of Cadila Healthcare Ltd. and it reads as follow: "9. With respect to the expenditure incurred for production registration charges, we agree with the view of the Tribunal that the assessee did not acquire any 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) 263 CTR(Guj)683 :[2013] 87 DTR (Guj) 54 (2013) 29 taxmann.com 405 (Gujarat) also in somewhat similar facts had upheld the decision of the Tribunal." We would also like to rely upon the following portion of the judgment of the Hon'ble Apex Court in the matter of Empire Jute Mills: "There may be cases where expenditure, even if i....