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2017 (12) TMI 1400 - AT - Income TaxNature of expenses - Trade Mark License Utilisation expenses - revenue or capital - Held that:- The aforesaid issue is covered, in favour of the assessee,in assessee’s own case for the assessment years 2010-11 and 2011-12. There is no dispute that the material facts of the case and reasoning, as set out in that order and which is not reproduced here for the sake of brevity though the same is deemed to be attached to and forming part of this order, equally applies to this assessment year as well. Respectfully following the said order, we uphold the impugned relief granted by the CIT(A) and decline to interfere in the matter. - Decided against revenue Addition on account of goods destroyed as per court’s order - allowable business expenses - Held that:- There is a paradigm shift in the scheme of the Act, by insertion of Explanation to Section 37(1) by Finance (No. 2) Act 1998 with retrospective effect from 1st April 1962, which lays down the rider to the mandate of Section 37(1) with the additional test to be satisfied, in order to ensure deductibility of an expenditure, is that it must not be incurred for any purpose which is an offence or prohibited by law. The reason as to why the stock had to be destroyed in the present case was that it contained impermissible high levels of a carcinogenic substance by the name of magnesium carbonate. Pan masala is a controversial product and, even when it is manufactured within the permissible legal norms, it is considered to be responsible for oral cancer and other severe ill effects on health. In the present case, the assessee has gone even further against the public interests. He has used the carcinogenic substance, which is direct cause of cancer, much in excess of permissible limits, resulting in manufacture of product with substantial health hazard sand that is the reason that the related stocks had to destroyed by the law enforcement agencies. Technicalities apart, even if manufacturing pan masala with impermissible carcinogenic contents, directly responsible for promoting cancer, is not treated as an offence, it is certainly prohibited in law. It is, of course, sad that our laws sometime appear to be so lax and unresponsive that even those responsible, with or without any ulterior motives, for such serious health hazards escape the exemplary punishment. As we note so, we may also place on record the gracious conduct by at least learned counsel of the assessee, who, on being told about what we feel about this situation, submitted that whatever be the legal merits of the claim for deduction, he leaves the matter to the bench. Be that as it may, as we have held on the merits, the Explanation 1 to Section 37(1) comes into play in this case, and, accordingly, the claim is legally inadmissible. - Decided against assessee.
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