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2016 (1) TMI 252 - ITAT MUMBAI

2016 (1) TMI 252 - ITAT MUMBAI - TMI - Penalty levied by the AO u/s 271(1)(c) - disallowance of license expenditure - CIT(A) deleted the penalty - Held that:- There is no dispute that the assessee has furnished all the particulars relating to the payment made to M/s GDS. There is also no dispute with regard to the fact that the assessee has already been using the trade mark and technical knowhow for the past several years by payment of annual royalty. By way of an amendment agreement, the assess .....

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TMI 293 - BOMBAY HIGH COURT). Before us, the assessee also placed reliance on the decisions rendered by Hon'ble Supreme Court in the case of Alembic Chemical works Co. Ltd (1989 (3) TMI 5 - SUPREME Court ); Assam Bengal Cement Vs. CIT (1954 (11) TMI 2 - SUPREME Court ), M.K. Bros Vs. CIT (1972 (8) TMI 5 - SUPREME Court ).

Thus, we notice that the assessee has made a claim on the basis of certain judicial pronouncements and the same was not acceptable to the AO. Thus, the impugned is .....

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s P Gaikwad For the Respondent : Shri K B Desai ORDER Per B. R. Baskaran The appeal filed by the revenue is directed against the order dated 04-08-2012 passed by Ld CIT(A)-13, Mumbai and it relates to the assessment year 1999-2000. The revenue is challenging the decision of Ld CIT(A) in cancelling the penalty levied by the AO u/s 271(1)(c) of the Act. 2. We heard the parties and perused the record. The assessee company is engaged in the business of manufacture and sale of pharmaceutical products .....

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xpenditure. The amount so disallowed was ₹ 2,52,09,490/- and the AO allowed depreciation of ₹ 63,02,702/- thereon. Accordingly, the net addition made by the AO was ₹ 1,89,07,118/- and the AO levied penalty of ₹ 66,20,000/- u/s 271(1)(c) of the Act on the above said disallowance. In the appeal filed by the Assessee, the Ld CIT(A) deleted the penalty by following the decision rendered by Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt Ltd (322 ITR 158). .....

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ent dated 16.12.1983, GDS granted license and right to manufacture, use and sell products listed in the agreement and also agreed to provide technical data and assistance to enable the Appellant to produce and market pharmaceutical products as specified in the agreement. By another agreement dated 05-07-1984, the assessee was given non-exclusive right to use Trademarks of M/s GDS in India, Nepal and Bhutan. In connection with the use of name "SEARLE" and for use of trademarks, the asse .....

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t), as per which the assessee was permitted to use the name "SEARLE" as part of its corporate name for a further period of 5 years. Upon expiry of second 5 year period, the assessee changed its name to "RPG Life Sciences Ltd" and the assessee was allowed to use the registered trademarks of GDS and produce the goods for additional period of 50 years upto 31-05-2048 on payment of consolidated payment of US $ 500000. As per the amendment agreement, no annual royalty is payable. .....

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see for a period of 50 years and hence, in view of the enduring benefit of expenditure, the AO rightly treated the same as capital expenditure and the same was also confirmed by the Tribunal. The Ld D.R submitted that the assessee was aware that the impugned payment is capital in nature, but chose to claim the same as revenue expenditure. Accordingly he submitted that the assessing officer was justified in levying penalty. 7. The Ld A.R, on the contrary, submitted that the assessee treated the l .....

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the trade mark and also license to use the technical know. Hence the payment is in the nature of revenue expenditure only. He further submitted that the assessee has paid a lump sum amount for using the license for a period of 50 years instead of paying on annual basis. Hence the assessee claimed the same as revenue expenditure and the view taken by the assessee is now supported by the decision rendered by the Hon'ble jurisdictional Bombay High Court in the case of CIT Vs. Essel Propack Lim .....

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