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TMI Blog2020 (3) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 (7) TMI 1096 - ITAT AHMEDABAD] which the learned CIT(A) had deleted. The learned CIT(A) has also allowed relief to the assessee by following the order of Hon ble ITAT in the case of assessee itself for AYs. 2005-06 2009-10. - Decided against revenue Disallowance on account of prior period expenses - HELD THAT:- CIT-A after noting down the break up of expenses which were classified by the assessee as per prior period expenses and the year of their crystallization rightly deleted the addition by holding that it is clear from the details given by the appellant that the appellant had proper explanation with supporting evidence to prove that the liability is crystallized only in the previous year - AO is directed to allow prior period expenses - Decided against revenue TDS u/s 195 - disallowance on account of foreign commission expenses for non deduction of TDS - HELD THAT:- This issue is also covered in favour of the assessee vide order of Hon ble ITAT for AY 2009-10 [ 2010 (7) TMI 1096 - ITAT AHMEDABAD] in the case of assessee itself where the Hon ble Tribunal after discussing the entire fact and after noting down the provisions of Section 9(1)(vii) and Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KAPOOR - AM: This is an appeal filed by the Revenue against the order of learned CIT(A)-8, Ahmedabad, dated 20/03/2017 relating to assessment year 2010-11. 2. The Revenue has taken the following grounds of appeal: 1) Whether the Id. C1T(A) is right in law and on facts in deleting the disallowance of ₹ 74,50,738/- made by the A.O. out of deduction claimed by the assessee u/s. 35(2AB) of the I. T. Act in respect of research arid development expenditure. 2) Whether the Ld. C1T(A) is right in law and on facts in deleting the disallowance of ₹ 5,03,066/- made by the A.O. on account of depreciation on electric installation. 3) Whether the Ld. CIT(A) is right in law and on facts in deleting the disallowance of ₹ 3,72,824/- made by the A.O. on account of prior period expenses. 4) Whether the Ld. O1T(A) is right in law and on facts in deleting the disallowance of ₹ 40,01,829/- made by the A.O. on account of foreign commission expenses. 5) Whether the Ld. CIT(A) is right in law and on facts in allowing the product registration fee of ₹ 34,42,638/- and professional fee on patent of ₹ 11,48,325/-. 3. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on record. 11. We find that the first issue raised by Revenue is regarding the deduction under s.35(2AB) of the Act which the AO had disallowed as the assessee had carried out certain expenditures outside the in-house R D center. The learned CIT(A) has however allowed relief to the assessee keeping in view the judgment of Hon ble Gujarat High Court in the case of Cadila Healthcare Ltd. (supra) where the Hon ble Court had held that clinical trials conducted outside approved facility were eligible for exemption under s.35(2AB) of the Act. The judgment of Hon ble Gujarat High Court as reproduced by the CIT(A) along with his finding is reproduced below: 5.3 As the facts and circumstances of the present caase of the appellant are covered by the judgment of Hon ble High Court of Gujarat in the case of Cadila healthcare Ltd. (supra), the relevant portion of the order of Hon ble High Court is quoted as under: HELD -Section 35(2AB) provides for deduction to a company engaged in business of biotechnology or in the business of manufacture or production of any article or thing notified by the Board towards expenditure of scientific research development facility approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred within the in-house facility and those were incurred outside, by itself would not be, sufficient lo deny the benefit to the assessee under section 35(2AB). It is not as if that the said authority was addressing the issue for deduction under section 35(2AB) in relation to the question on hand. The certificate issued was only for the purpose of listing the total expenditure under the Rules. Therefore, no question of law arises. 5.4 In view of the above discussion and the ratio laid down by the Hon ble High Court of Gujarat, the AO is directed to allow the weighted deduction of ₹ 74,50,738/- incurred by the appellant outside the approved facility. Accordingly, Ground No.1 of the appeal is allowed. 12. The Revenue was not able to controvert the findings of learned CIT(A) who had relied on the judgment of Gujarat High Court and allowed relief to the assessee. Therefore, finding no infirmity in the order of learned CIT(A), ground no.1 of Revenue s appeal is dismissed. 13. Now coming to ground no.2 regarding depreciation on electrical items, we find that AO had restricted the depreciation to 15% instead of 25% by holding that electrical fittings are eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 1961 dated 20. 12.2011. The appellant company has filed as appeal with the Ld CIT (A) for A- Y 2009-10 and while rendering the order the Ld. CIT (A) has allowed the claim of the appellant company. The relevant Para -1.3 of the order are reproduced hereunder for your honour 's ready reference: 4.3 Decision: I have carefully considered the assessment order and the submission filed by the appellant It is brought to mv notice that ITAT, Ahmedabad for A.Y. 2005-06 in the assessee's own case has ruled that We find that the lower authorities have decided She issue by merely looking at the nomenclature given to the asset without verifying the actual details of the asset and the nature of the assets. In our considered opinion the electrical fittings which form integral part of the plant machinery and those electrical fittings which are used along with the plant machinery and cannot he used separately as such are part of plant machinery and depreciation @ 25% is allowable in respect of the some. However, in case of those electrical fittings which are independently used a electrical fittings in raspect of those assets depreciation @ 15% is only allowable. The facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id. But, at the same time it is also accepted principle of taxation that even when tin' Masses is following the mercantile system of accounting, it is supposed to file an explanation that the expenses were not booked in earlier years due to some reasonable cause like lo non-receipt of details, pending litigation, decision regarding unliquidated damage, an agreement entered in to for making payment for earlier period etc and that such expenses go/crystallised during subsequent assessment year. It is clear from the details given by the appellant that the appellant had proper explanation with supporting evidence to prove that the liability is crystallized only in the previous year. Therefore, following the ratio laid down by Hon'ble ITAT Mumbai in above mentioned case and the decision of Hon'ble Bombay High Court quoted by the appellant, the AO is directed to allow prior period expenses of ₹ 3,72,824/- claimed by the appellant. Accordingly, appeal on this ground is allowed. Therefore, finding no infirmity in the order of learned CIT(A), ground no.3 of Revenue s appeal is also dismissed. 15. Now coming to ground no.4 regarding disallowance on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abroad. 14. The contention of the learned counsel for the Revenue is that the Tribunal ought not to have relied upon the decision G.E.India Technology's case, cited supra, in view of insertion of Explanation 4 to Section 9(1)(i) of the Act with corresponding introduction of Explanation 2 to Section 195(1) of the Act, both by the Finance Act, 2012, with retrospective effect from 01-04-1962. 15. The issue raised in this case has been the subject matter of the decision, in the recent case, CIT v. Kikani Exports (P.) Ltd. [2014] 369 ITR 96/[2015] 232 Taxman 255/49 taxmann.com 601 (Mad.) wherein the contention of the Revenue has been rejected and assessee has been upheld and the relevant observation reads as under:- '... the services rendered by the non-resident agent could at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services and, therefore, section 9 was not applicable and, consequently, section 195 did not come into play. Therefore, the disallowance made by the Assessing Officer towards export commission paid by the assessee to the non-resident was rightly deleted.' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved and is in appeal before us. 10. Having heard the rival contentions and having perused the material on record, we find that this issue is now covered, in favour of the assessee, by Hon'ble jurisdictional High Court's judgments in the cases of CIT v. Torrent Pharmaceutical Ltd. [2013] 29 taxmann.com 405 (Guj) and CIT v. Cadila Healthcare Ltd. [2013] 31. taxmann.com 300/214 Taxman 672 (Guj.) wherein Their Lordships have, inter alia, held that the product registration expenses is eligible for deduction as revenue expenditure. Respectfully following esteemed views of Hon'ble jurisdictional High Court, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. Respectfully following the judicial precedent in the case of assessee itself the ground is also dismissed. 17. As regards the professional fee on patents, the learned CIT(A) has allowed relief to the assessee by relying on the judgment of Hon ble Gujarat High Court in the case of Cadila Healthcare Ltd. (supra) and has further relied on the judgment of Hon ble Supreme Court in the case of CIT vs. Finely Mills Ltd. (supra). The findings of the learned CIT(A) are reproduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail. It is not contended that by the Trade Marks Act a new asset has come into existence. It was contended that an advantage of an enduring nature had come into existence. It was argued that just as machinery may attain a higher value by an implementation causing greater productive capacity, in the present case the trade mark which existed before the Trade Marks Act acquired an advantage of an enduring nature by reason of the Trade Marks Act and the fees paid for registration thereunder were in the nature of capital expenditure. In our opinion, this analogy is fallacious. The machinery which acquires u greater productive capacity by reason of its improvement by the inclusion of some new invention naturally becomes a new and altered asset by that process. So long as the machinery lasts, the improvement continues to the advantage of the owner of the machinery. The replacement of a dilapidated roof by a more substantial roof stands on the same fooling. The result however of the Trade Marks Act is only two-fold. By registration, the owner absolved from the obligation to prove his ownership of the trade mark. It is treated as prima facie proved on production of the registration certific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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