TMI Blog2014 (8) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... period. Here in this case, the assessee has changed the design of the bottle and the colour of the cap as is a regular phenomenon to be carried out between one to two years which cannot be held to be for an enduring benefit or major change in the profit making apparatus. Such expenditures are required for either augmenting the sale or to survive in the market under stiff competition. Therefore, such expenditure has to be treated as revenue expenditure and, accordingly, the disallowance as confirmed by CIT(A) under the head product development expenditure is allowed. - Decided in favour of assesse. Eligibility for deduction under section 80- IB - additional ground raised - Held that:- Assessing Officer in the assessment year 2004-05, while passing the order under section 143(3), has allocated the business/depreciation losses to the demerged company. Such an order was also confirmed by the learned Commissioner (Appeals) also, however, the Tribunal, in that year has allowed the assessee's claim carried forward losses which was apportioned due to demerger. This order of the Tribunal is now subject matter of appeal before the hon'ble High Court. Learned counsel submitted that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-free advances of ₹ 75,00,000 given to subsidy company M/s. Parle Sales and Services Pvt. Ltd. The appellant submits that there is no justification in disallowing interest on advances given to subsidy company as the appellant and subsidy company were having business connection with each other and advances was given on commercial prudent. The appellant prays that the disallowance be deleted. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing product development expenses of ₹ 3,49,516. 2. Besides this, the assessee, vide letter dated May 9, 2012, has raised following as additional grounds : On the facts and in the circumstances of the case and in law the appellant prays that the hon'ble Income-tax Appellate Tribunal would direct that the appellant is eligible for deduction under section 80-IB and accordingly suitable direction may be given. 3. In so far as ground No. 1, is concerned, learned senior counsel, Shri Firoze Andhyarunjina, on behalf of the assessee, submitted before us that he did not wis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,13,134 Designing charges of Bailley packaged drinking water bottles. 2,30,000 Charges for designing performs and green caps. 1,19,516 Total 6,44,382 6. Out of the said sum, the learned Commissioner (Appeals) has allowed the first two items and in so far as designing charges of bailley packaged drinking water bottles and changes for designing performs and green caps, he treated the same as capital expenses as he held that they have enduring benefit. 7. Before us, learned senior counsel submitted that these expenditure have been incurred for designing of the packaged drinking water bottles and such design undergoes changes as per the market trend, once in one year or two years. The decision for changing the design of the bottles are done as per the strategies adopted by the competitors and also the market trend. There is no advantage of enduring benefit in changing the design and colour of product and no new product has been launched. Similarly, changes in colour of caps of the bottle for beverages was also on account of giving a new look ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the revenue account, even though the advantage may have an enduring benefit for a brief period. Here in this case, the assessee has changed the design of the bottle and the colour of the cap as is a regular phenomenon to be carried out between one to two years which cannot be held to be for an enduring benefit or major change in the profit making apparatus. Such expenditures are required for either augmenting the sale or to survive in the market under stiff competition. Therefore, such expenditure has to be treated as revenue expenditure and, accordingly, the disallowance as confirmed by the learned Commissioner (Appeals) under the head product development expenditure is allowed. Accordingly, ground No. 2, is allowed. 10. Regarding additional ground, learned senior counsel submitted before us that the return of income for the assessment year 2007-08, was filed claiming carried forward of losses, which resulted into nil income in the return of income filed. Therefore, the claim for deduction under section 80- IB, was not shown in the computation of income before the Assessing Officer. During the course of the assessment proceedings, it was brought to the notice of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture as capital expenditure instead of revenue expenditure adopted by the assessee. 13. The assessee has debited expenditure of ₹ 45,58,025, on account of market research expenditure . The Assessing Officer in the absence of any proper explanation, has treated the said expenditure as capital expenditure. However, he allowed depreciation at 25 per cent. on these expenditure. Brief facts, relating to the claim of such expenditure is that, the assessee is in the business of fast moving consumer goods for which the assessee is required to get the data from the market about the market trends and consumer preferences and to decide the strategies while dealing with the competitors in same nature of products. These expenditure include collection of data required from the market and some other expenditures incidental to market study. 14. Before the learned Commissioner (Appeals), the assessee submitted that the market research expenditures are necessary in the line of the assessee's business and they are incurred in the ordinary course of business. The assessee's detail explanation before the learned Commissioner (Appeals) has been incorporated from pages 31 to 35 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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