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TMI Blog2018 (3) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... y assessee under ‘Legal and Professional head’ treating the same as capital in nature - Held that:- It is very much relevant for assessee in its type of business to register its brand with the Trademark Registry as there would be many other pharmaceutical companies coming out with a similar type of products which could infringe the rights of assessee in case the same is not properly registered with the appropriate authority. No reason to confirm this addition, as these are genuine expenditure incurred by assessee for the purposes of business. Further section 32 (1) (ii) now categorically considers trademark to be an eligible expenditure in the category of intangible assets. Thus in our considered opinion the addition made by AO deserves to be deleted. Disallowance of towards the expenditure incurred under the head ‘Fees and Subscription’ - Held that:- As assessee is into manufacturing and marketing of pharma products, it has to have a license to trade in the products which is to be obtained from appropriate authority in the state. We do not find any contrary observation made by authorities below in respect of the nature of payment which assessee has to incur time and again for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LAI, JUDICIAL MEMBER Present Cross Appeals filed by assessee as well as revenue against order dated 15/10/13 and 28/05/13 passed by Ld.CIT(A)-16, New Delhi for assessment years 2007-08 and 2009- 10 respectively on the following grounds of appeal: Assessment year 2007-08 ITA No. 6435/Del/2013 Grounds of Appeal 1. That, the learned Commissioner of Income Tax (Appeals) XVI, New Delhi has legally and factually erred in sustaining the proceedings initiated under section 147 of the Income- Tax Act, 1961 by the Dy.CIT Circle 13(1), New Delhi.', 2. That, the learned Commissioner of Income Tax (Appeals) XVI, New Delhi, has failed to appreciate the fact that the condition precedent for invoking the jurisdiction under section 147 is conspicuously absent and the assumption of jurisdiction is devoid of any legal sanctity. 3. That, the reliance placed on the decisions of Delhi High Court is misplaced and has no applicability to the facts and circumstances of the case. The interpretation placed by Supreme Court on section 147 has not at all adverted to which squarely cover the case of the appellant. 4.That, the reason recorded by the Dy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. Assessment year 2009-10 ITA No. 4543/Del/2013 1.a) That, the learned Commissioner of Income Tax (Appeals) XVI, has legally and factually erred in sustaining the disallowance of ₹ 45,60,824/- under the head Sales Promotion b) That, the learned Commissioner of Income Tax (Appeals)XVI, failed to appreciate the fact that entire material in the form of evidence was placed before the Assessing Authority to justify the admissibility of the expenditure under the head Sales Promotion c) That, the learned CIT(A) did not afford sufficient opportunity to enable Appellant to adduce evidence in support of its claim of deduction under the head Sales Promotion d) That, the principle of res-judicata is applicable to the facts of the present case and learned CIT (A) should have followed the order of the preceding years passed by predecessor on the said issue. 2.That, the learned CIT(A) has gone wrong in sustaining the impugned action of ACIT in restricting depreciation on UPS, Rack and Battery @ 15% as against the claim of 60% by the Appellant. 3. That, the order of the CIT(A)XVI is bad in law and against the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tead of ₹ 1,21,14,765/-. The mistake resulted in under assessment of loss of ₹ 62,81,974/- involving potential tax of ₹ 21,14,512/-. I, therefore, have reasons to believe that on account of failure on the part of assessee to disclose truly and fully all material facts necessary for assessment for the A.Y. 2007-08 an income of ₹ 62,81,974/- has escaped assessment within the meaning of proviso to s.147 of the Act. 2.1. Appellant filed Objections for reopening of assessment challenging the very jurisdiction of issuing notice under section 148 of the Act. It was submitted that there existed no reason to believe that income has escaped assessment. 2.2. Ld. AO rejected the submissions advanced by assessee vide order dated 28/01/13 wherein it is held that assessee s case falls within the purview of Explanation 2 to Section 147, wherein the Act stipulates circumstances in which income chargeable to tax shall be deemed to have escaped assessment. The Ld. AO was of the opinion that sub clause (c) to Explanation 2 to include cases, wherein income chargeable to tax has been under assessed or assessed at too low rate or cases in which income has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 6435/Del/2013. 3. ITA No. 6435/del/2013.(A.Y. 2007-08) Ld.Counsel while advancing his submissions argued that the only condition which confers jurisdiction on Ld. AO to initiate proceedings under section 147 of the Act is that he should have reason to believe that income has escaped assessment. Ld. Counsel submitted that the reassessment in the case of assessee is a mere change of opinion, which is prohibited under law. He submitted that the reasons recorded are manifestation of mind of assessing officer and therefore must be self explaining entry. Ld.Counsel submitted that in the garb of admissibility of deferred revenue expenses claimed by assessee, assessing officer is trying capriciously to reopen concluded assessment, as the reasons recorded are vague, whimsical and not specific. Ld.Counsel submitted that the amount of ₹ 1,21,14,765/-mentioned in the reasons recorded represents deferred revenue expenditure for the preceding assessment year i.e. 2005-06 and 2006-07, the benefit of which has already been taken in the preceding years. He further submitted that the sum of ₹ 1,21,14,765/-is not the component of ₹ 1,83,96,739/-which actually is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussion on the issue in the assessment order as no details were called for by Ld.A.O. nor filed by assessee. He placed reliance upon various decisions of Hon ble Supreme Court as well as jurisdictional High Court, wherein it has been held that it is enough if the material on the basis of which reassessment proceedings are sought to be initiated came to the notice of assessing officer subsequent to the original assessment. He further submitted that the Courts have also held that if Assessing Officer has considered and formed an opinion on the said material in the original assessment itself only then he would be powerless to start the proceedings for the reassessment. Where however the assessing officer has not considered the material and subsequently came by the material would form a reason to believe that income has escaped assessment which would fall within the scope of section 147 of the act. It was therefore Ld. AO in the reasons recorded has observed that assessee in computation of income had added back deferred revenue expenditure amounting to ₹ 1,21,14,765/-and reduced deferred revenue expenditure of ₹ 1,83,96,738/- thereby an understatement of loss of ₹ 62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find force in the argument of Ld.DR regarding application of sub clause (c) to Explanation 2 to section 147 of the Act. Thus in our considered opinion the reasons recorded to form basis for initiating reassessment proceedings as it falls under (i ), (iii) and (iv) of sub clause (c) to Explanation 2 to section 147 of the Act. Thus respectfully following the decision of Hon ble Supreme Court in the case of Calcutta Discount Company Ltd versus ITO (supra), we hold reopening of the assessment to be valid. 3.6. Accordingly the preliminary issue raised by assessee in ground No. 1-4 stands dismissed. 4. Ground number 5A deals with the disallowance of expenses made by assessee under Legal and Professional head treating the same as capital in nature. 4.1. On perusal of the records placed before us it is observed that assessee incurred expenditure of ₹ 14,87,323/- for registration of product with the trademark authority. It is observed that assessee is engaged in the activity of manufacturing and marketing of pharmaceutical formulations. Ld. Counsel submitted that assessee is the owner of number of brands and also acquires other brands which it intends to launc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has to incur time and again for the purposes of carrying on its business. In our considered view these expenses do not categorise to be in the nature of enduring benefit arising to assessee as the licenses issued by the State Government are for a fixed period of time which are revoke a will upon violation of the conditions stipulated there. Thus in our considered opinion these expenses incurred by assessee would be eligible for deduction under section 37 (1) of the act. 5.4. Accordingly this ground raised by assessee stands allowed. 6. In the result appeal filed by assessee stands partly allowed. 7 . ITA No. 241/Del/2014(Revenue ) Departmental appeal is in respect of the expenditure allowed by Ld.CIT (A) by considering it to be revenue in nature. 7.1. Ld.CIT (A) had allowed expenditure under the head salary and wages amounting to ₹ 46,80,847/-, travelling expenses amounting to ₹ 22,34,939/-, advertisement expenses at ₹ 19,94,690/-and printing and stationary at ₹ 59,02,063/- to be revenue in nature. 7.2. Ld. CIT (A) deleted the addition of Travel Expenses amounting to ₹ 22,34,939/-, as according to Ld. CIT (A) they we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee considered advertisement expenses amounting to ₹ 19,94,690/-under the head deferred revenue expenses . This amounts to double deduction as claimed by assessee. 9.3. Therefore the disallowance of advertisement expenses stands upheld. 9.4. Further it is observed that this Tribunal vide order dated 25/08/17/ for assessment year 2007-08 (a copy of which has been placed at page 19-49 of paper book dated 21/02/18) has already dismissed the claim of assessee. 9.5. Accordingly the appeal filed by revenue stands allowed. ITA No. 4543/Del/2013 (Assessment year 2009-10) 10. Present appeal has been filed by assessee against the addition confirmed by Ld. CIT (A) under the head sales promotion expenses as well as restricting the depreciation on UPS and battery at 15% as against the claim of 60% by assessee. Ground No. 1 , is regarding the disallowance of sales promotion expenses. We are of the considered opinion that this Tribunal vide consolidated order dated 25/08/17, passed for assessment year 2006-07 and 2007-08 has dealt with this issue extensively in paragraphs 13-22. This Tribunal has dismissed the claim of assessee. 10.1. Respectfully following the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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