2015 (11) TMI 496 - SC - Income Tax

Appeal admitted on following question of laws Whether the Appellate Tribunal has substantially erred in holding that Product Registration expenses are revenue in nature when the Product Registration expenses made to Drug Regulatory Authorities in various countries give enduring benefit of exporting the registered drugs for many years? Whether the Appellate Tribunal has substantially erred in holding that Trademark Registration fee and Patent fee (Rs.37,92,606/- and ₹ 15,49,880/-) are revenue expenses, when the expenses were incurred for registration of Trademark in that country and also for registration of Patent, which are intangible assets under section 32(1)(ii) of the Act? Whether the Appellate Tribunal has substantially erred in holding that the expenses incurred outside the approved R & D facility would also get weighted deduction based on the word under on in house interpreting contradictorily to the finding of coordinate bench in Concept Pharmaceuticals Ltd. v. ACIT (2010 (11) TMI 147 - ITAT, MUMBAI)?

Summary

Issues:
1. Delay condonation and leave granted for appeal.
2. Refusal of High Court to frame certain questions of law under Section 260A of the Income Tax Act, 1961.

Issue 1: Delay Condonation and Leave Granted
The Supreme Court, comprising Justices Ranjan Gogoi and N. V. Ramana, condoned the delay and granted leave for the appeal. The revenue was aggrieved by the High Court's refusal to frame specific questions of law for consideration in the appeals filed under Section 260A of the Income Tax Act, 1961. The questions in contention were similar across multiple appeals, and the Court deemed them to be substantial questions of law that required consideration. The Court clarified that allowing the appeals did not imply any opinion on the merits of the contentions raised in the questions. Consequently, the Court directed the High Court to include the three identified questions of law in the appeals filed by the revenue for further examination.

Issue 2: Refusal to Frame Questions of Law
The primary issue revolved around the High Court's refusal to frame certain questions of law for consideration in the revenue's appeals under Section 260A of the Income Tax Act, 1961. The questions related to the nature of expenses incurred, such as Product Registration expenses, Trademark Registration fee, and Patent fee. The appellate tribunal's decisions on the revenue nature of these expenses were challenged, particularly concerning the enduring benefits and the treatment of intangible assets under the Act. Additionally, discrepancies in interpreting the eligibility for weighted deduction based on the location of incurred expenses outside the approved R & D facility were highlighted. The Supreme Court, after reviewing the materials on record and the impugned order, concluded that the questions raised by the revenue were substantial questions of law that warranted consideration in the appeals. The Court emphasized the importance of addressing these questions in the appeal process and directed the High Court to include them for further examination alongside other formulated questions of law.

This detailed analysis of the legal judgment highlights the key issues addressed by the Supreme Court, the arguments presented by the parties, and the Court's decision regarding the refusal to frame certain questions of law for consideration in the appeals filed under the Income Tax Act, 1961.