TMI Blog2008 (7) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... s to post it on 26.05.08, accordingly, his request was considered. On 26.5.08, learned Sr. D.R., Sri Sanjiv Dutt filed a letter stating that the CIT (DR) who is to argue the matter before the Bench is feeling indisposed and is on leave and requested to give short adjournment. Accordingly, the matter was posted on 30th May, 2008. Again on 29th May, 2008, the learned D.R. filed a letter stating that the CIT(DR) who has to argue the matter is on leave till 15.6.2008 and the Bench was requested to give short adjournment. When the matter was placed before the Bench, the Bench has rejected the request of the D.R. and Mr. Sanjiv Dutt who was present did not have any instruction to argue the matter or reply the proceedings. We are therefore, left with no other alternative than to treat the matter as heard ex-parte of the Revenue. 3. The block assessment has been framed by the Department in respect of search and seizure action that took place in respect of Glenmark group of cases conducted on 27.03.2002. The Revenue's grievance against the order of the learned CIT(A) in the block proceedings are in the following grounds:- 1. Whether on the facts and in the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res 5. Unexplained expenditure Rs.0.62 crores 6. Omission /Commission Rs.0.38 crores Total Rs.7.50 crores 5. The main issue as stated in the assessment order is whether the amount of ₹ 5.5 crores represented the first three items cited above constituted revenue outgoing or capital outlay and whether that can be considered as part of undisclosed income under Chapter XIV-B of the I.T. Act. The first three grounds extracted above are in relation to these three items. The assessee purchased three brands namely Flucort , Alex and Sensur from M/ s. Lyka Labs Ltd. under a Deed of Assignment executed on 22.06.2000. As a result of such purchase, the ownership of the above named trade mark got transferred to the assessee and according to the Assessing Officer, there is no question of any further royalty payment in respect of the transactions arise and the Assessing Officer found that they were paying @ 5% of sale of these brands of a half yearly basis and such royalty was to the extent of ₹ 75, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made in the block assessments. Before the learned CIT(A), the assessee pleaded that it acquired three products namely Flucort , Alex and Sensui from M/s. Lyka Labs Ltd. and for the said purposes, it purchased brands/ trademarks, technical know-how, marketing know-how and also entered into non-competition agreement with M/s. Lyka Labs Ltd. The details of acquisition of its cost are summarised as under:- Sl. No. Particulars Alex Flucort Sensur Total 1. Acquisition of Brand/Trade Mark 5.00 3.95 3.00 11.95 2. Technical know-how 4.00 3.50 2.50 10.00 3. Marketing know-how 4.00 3.50 2.50 10.00 4. Non-compete fee 0.75 0.75 0.75 2.25 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and then he examined the claims of the Assessing Officer that the claim of deduction was a false claim. According to him, a genuine and bonafide claim though found to be not in accordance with the provisions of law and/or any debatable allowance or disallowance cannot be treated as undisclosed income. The learned CIT(A) appreciated the fact that expenditure in question were reflected in the books of accounts and the regular return was duly filed in which such expenditure was claimed. The search action did not reveal any difference in the figures of these items of expenditure as reflected in the books of accounts vis-a-vis the material found in the course of search. The expenses and deductions claimed in the return of income were based on the assessee's appreciation of the provisions of the Act and judicial pronouncements thereon. These claims could at best be debatable or subject to interpretation but cannot fall within the definition of false claim. All these items have already been recorded and entered into the books of accounts, profit and loss account, balance sheet and they were duly declared by the assessee for the respective periods. The learned CIT(A) found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 83 ITD III 6. Abdulgafar A.Nadiadwala vs. DCIT, 75 ITD 394 7. CIT vs. Vinod DanchandGhodawat, 247 ITR 448 8. M/s.Shree Krishna Silk Inds.P.Ltd.vs. ACIT - (ITA No. 84/Mum/97) 7. We have carefully considered the assessee's contentions in the light of the discussions in the order of the learned CIT(A) as well as the order of the Assessing Officer and gone through meticulously all the agreements and the financial statements placed in the paper book, which have been properly appreciated by the Revenue authorities. The learned CIT(A) in coming to the conclusion has properly appreciated the fact that the agreements entered into were the basis of the drawing of the total income for the assessment year 2001-02. The payments made in pursuance thereof have been recorded in the regular books of accounts maintained by the assessee. The entries in the books of accounts are based on the agreements that are entered into by the parties. The transactions have taken place through regular banking channel and found recorded in the books of accounts of the assessee as well as in the books of account maintained by M/s. Lyka Labs Ltd., where consequential searches were also conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings as there was no material found during the course of search action. We agree with the learned CIT(A) in deleting that addition for the same reasons as are discussed in relation to major addition deleted by the learned CIT(A). 9. As regards the other two cross appeals as already stated arise out of the regular assessment framed for the assessment year 2001-02. The first two grounds in the assessee's appeal relating to validity of the assessment proceedings and violation of principles of natural justice were not pressed during the course of hearing and therefore, the order of the learned CIT(A) on these two issues is confirmed. 10. The next dispute in the assessee's appeal relates to addition of interest, under section 14A of the Act to the extent of ₹ 3,60,900/- calculated @ 10% of dividend earned by the assessor, during the year. The short submission of the assessee in this regard is that investments were made in the earlier years when there were no borrowing and therefore the investments have all come from out of own funds and not out of borrowing funds. We have gone through the records. The assessee has filed copies of written submissions in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any; k) Free issues for the last three years; l) Overall marketing plant and/or strategy. The marketing know-how has been acquired by the assessee in respect of the brands acquired by it absolutely forever to the exclusion of others. The learned CIT(A) was of the view that the payment made was for out and out sale of a capital asset of enduring nature and therefore, the expenditure made to acquire the said marketing know-how is in the nature of capital expenditure. The addition made by the Assessing Officer was upheld. As regards the alternative claim that the assessee should be granted depreciation, the CIT(A) accepted the claims and directed allowance of depreciation. The Revenue has challenged in its appeal, this direction of the CIT(A). We have heard the learned counsel for the assessee, who reiterated the contentions that were taken before the Assessing Officer as well as CIT(A). The learned counsel for the assessee drew our attention to the components of the marketing know-how which has been acquired by the assessee. None of them represents acquisition of any capital asset or any sort of tangible asset. The expenditure should be allowed as revenue expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the reasoning that it is in respect of unnecessary liability. The action of the Assessing Officer was not in accordance with law. The debits are in respect of ascertained liabilities. It is not the case of the department that these provisions which are debited are really in the nature of reserves. The adjustment made by the Assessing Officer, in our opinion, cannot be supported in the light of the decision of the Apex Court in the case of Apollo Tyres, 255 ITR 275 The addition while computing the income for the purpose of Section 115JB therefore stands deleted. 14. The last dispute in the assessee's appeal relates to levy of interest charged under section 234B and 234C of the Act on the tax payable under section 115JB of the Act. We have heard the learned counsel for the assessee and find that the issue is directly covered in favour of the assessee by the decision of the Cochin Bench of this Tribunal in the case of Escapade Resorts (P) Ltd. vs. ACIT., 107 TTJ (Coch) 871 and also the decision of the Delhi Bench of this Tribunal in the case of Amtek Auto Ltd. vs. Addl.CIT., 112 TTJ (Del) 464, wherein the Tribunal after following the decision of Apex Court in the case of Kwal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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