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TMI Blog2013 (1) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... this court. a) Whether on the facts and in the circumstances of the case, the ITAT is correct in law in upholding the CIT(A) order of deleting the addition of Rs.17,26,124/u/ s. 14A of the I.T. Act, 1961? b) Whether on the facts and in the circumstances of the case, the ITAT is correct in law in upholding the CIT(A) order in deleting the addition of Rs. 2,25,00,000/- on account of the non-compete fees paid by the Assessee by treating the same as Revenue Expenditure? c) Whether on the facts and in the circumstances of the case, the ITAT is correct in law in upholding the CIT(A) order in deleting the addition of Rs.10,00,00,000/- on account of marketing knowhow claimed by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to show how the finding of fact arrived at by the Tribunal that no expenses were incurred to earn the dividend income is either arbitrary or perverse. In view of the finding of fact, question (a) does not raise any question of law and is therefore dismissed. The appeal is admitted on questions (b) to (e). At the instance of the Advocates of the parties to the appeal, the appeal is itself taken up for final disposal. 4. Brief Facts: a) The respondent-assessee is pharmaceutical company engaged in manufacturing and marketing of pharmaceutical products. For the Assessment Year 2001-2002, the respondent-assessee had filed its return of income declaring a loss of Rs.27.53 crores. In its return of Income, the respondent-as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation at 25% on Rs.10 crores expended on acquiring marketing knowhow as applicable to plant was granted. So far as charging of interest on book profit is concerned the order of the Assessing Officer holding that interest is payable under Section 234B & 234C of the Act is concerned, was left undisturbed. c) Being aggrieved by the order of the CIT(A) dated 22.07.2004 both the appellant as well as respondent-assessee preferred appeals to the Tribunal. The Tribunal, in its order dated 09.07.2008 held that the expenditure of Rs.2.25 crores on non-compete fees was dictated by business necessity and commercial expediency and it related to enhancement of its profitability. Therefore, was revenue in nature. In respect of, marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not revenue expenditure. However, it has upheld the finding of the CIT(A) that non-compete fees would be classified as revenue expenditure. At paragraph 12 of the impugned order the Tribunal while dealing with marketing knowhow expenses has also observed that non-compete fee was also dictated by business and commercial expediency and was not an expenses incurred for acquisition of capital assets but only enhanced its profitability. However, there is no discussion on the issue before coming to the above conclusion. Therefore, the issue with regard to the nature of non-compete fees whether revenue or capital has to be remanded to the Tribunal so as to enable it to pass an order with reasons while determining whether non-compete fees was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the question would have to be answered in favour of the respondent-assessee and against the appellant-revenue. 7. Regarding Question (d) So far as Royalty payment is concerned both the CIT(A) as well as the Tribunal has reached a finding of fact that the royalty payment as paid by the respondent-assessee to M/s. Lyka Labs Ltd was a part of the cost of the acquisition of the brand and therefore, would form a part of the cost of the assets namely the brand. In the result, respondent-assessee was entitled to depreciation on the amount of royalty fees as the same is a part of the consideration paid for acquiring the brand and would be entitled to depreciation under Section 32 of the said Act as a part of the brand. In view of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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