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2015 (7) TMI 483 - MADRAS HIGH COURT

2015 (7) TMI 483 - MADRAS HIGH COURT - TMI - Expenses incurred under the head 'market research' - revenue v/s capital expenditure - Tribunal held it as revenue - Held that:- The main parameters that are necessary for the expense to be treated as revenue expenditure is where expenses are incurred in areas which supplement the existing business and is not a fresh or new venture and agreement relates to revenue and the said activity is for the purposes of improving the operations of the existing bu .....

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(12) TMI 25 - GUJARAT High Court ) is squarely attracted to the facts of the present case, justifying the loss of the assessee as a business loss, as admittedly, the assessee is in the business of marketing bulk drugs, formulations, etc., and one of its ventures has ended in a loss and that loss is attributable to business and it cannot be deemed to be a new enterprise and a capital expenditure. Thus the order passed by the Tribunal requires no interference.- Decided in favour of the assessee. .....

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ase, the Tribunal was right in holding that the expenses incurred under the head 'market research'can be treated as revenue, when the assessee had not furnished any details, and when the market research is for entry into new territories giving rise to an enduring benefit? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the expenses incurred under the head 'market research' can be treated as revenue, when the Supreme Court has held th .....

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the appeal by the assessee before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) accepting the contention of the assessee allowed the appeal holding that since the assessee had already in the business of supply of LPG Cylinders, the marketing research expenses for extending into new territories could be treated as revenue expenditure. Aggrieved by the same, the Revenue preferred an appeal before the Tribunal and the Tribunal dismissed the same, thereby confir .....

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that in the above-said decision, this Court, following the decision of the Gujarat High Court, in the case of Commissioner of Income Tax Vs Suhrid Geigy Ltd. (1996 (220) ITR 153 (Guj), held as follows: "9. Similar issue arose before the Gujarat High Court in the case of Commissioner of Income Tax Vs Suhrid Geigy Ltd. (1996 (220) ITR 153 (Guj)), wherein, the Gujarat High Court considering the decision of the Supreme Court in Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 (SC) held .....

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th Meiji, a reputed Japanese enterprise whereunder in consideration of a once for all payment of 50,000 US $, it agreed to supply the assessee a pilot plant, the technical information, know-how and written description of Meiji's process for fermentation of penicillin with a flow sheet of the process in the pilot plant and to arrange for the training of the appellant's representatives in various plants in Japan at the assessee's expense and advise the assessee in large scale manufactu .....

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in place of the old process and old plant. The High Court also rejected the assessee's claim. Reversing the decision of the High Court, the Supreme Court observed that there was no material before the Tribunal to come to the finding that the appellant had obtained under the agreement a completely new plant with a completely new process and a completely new technical know-how. The business of the appellant was to manufacture penicillin. Even after the agreement, the product continued to be p .....

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xisting business was revenue in nature and was allowable deduction in computing the business profits of the appellant. In coming to this conclusion, the court also noticed the principles which should govern while deciding such issues by the courts. The most important aspects relevant for the present purpose which can be culled out from the above discussion is that where expenses are incurred in areas which supplement the existing business and is not a fresh or new venture and agreement of acquir .....

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diture may be treated as capital and not revenue. In such cases the test of enduring benefit might break down. That is to say, the argument that the knowledge having become once part of the knowledge bank of the acquirer, cannot be taken back in a sense and will always remain with the assessee and is enduring. But looking to the business realities, namely, the purpose for which knowledge has been acquired becomes determining the true character of the expenditure. 10. From the decision as extract .....

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