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DCIT, Central Circle – 1 (1) , Pune Versus Serum Institute of India Ltd. and Serum Institute of India Ltd. Versus Addl. CIT, Range – 6, Pune

2016 (8) TMI 1047 - ITAT PUNE

Non treating the receipts in foreign currency from M/s. Akorn Inc., USA towards development of the products as ‘Income from Business’ for the purpose of allowing deduction u/s. 10AA - Held that:- In the present case, the assessee has claimed deduction u/s. 10AA of the Act on receipts from M/s. Akorn Inc., USA in lieu of granting exclusive marketing rights of its new product in North, Central and South America. The said receipts are not in relation to export of its products. The meaning of expres .....

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Akorn Inc., USA cannot be held to be gain or profit derived from export of its product. Therefore, the assessee is not eligible to claim deduction u/s. 10AA of the Act on the aforesaid receipts. We do not find any infirmity in the well reasoned findings of Commissioner of Income Tax (Appeals) in rejecting the claim of the assessee. - Disallowance of deduction u/s. 10B with reference to export invoice for want of ‘extension letter’ in spite of subsequent realization of export proceeds - Held .....

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allowance of contribution towards Manjari Gram Panchayat’s project for supply of drinking water where employees/workers of assessee company are also staying - Held that:- The present case the contribution has been made by the assessee for the benefit of its employees/workers, although in the process general public would also be benefited. The Govt. is seeking contribution from various corporate houses for strengthening infrastructure facilities by creating awareness of social corporate responsib .....

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ation due to technology changes cannot be said to be the software or enduring in nature. The Hon'ble High Court dismissing the appeal of the Department observed that the software MS Office, which is not a custom built software of the assessee requires regular up-gradation. Therefore, no error is committed by the Tribunal is treating the expenditure incurred on acquiring the same as revenue expenditure. Thus, in view of the facts of the case and decision of Hon'ble Delhi High Court we hold that e .....

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ther allowable expenditure u/s. 37(i) - Held that:- The assessee contributed ₹ 2,00,000/- towards celebration of Indian Cost Guard’s 31 years of service to the Nation. The intention of celebrating ‘Cost Guard Day’ is to spread awareness of the service which operates with Indian Navy during external aggression and independently guards Indian cost line from intruders during peace. The business motive behind contributing the fund was the assessee has taken godowns on lease from M/s. Sovereign .....

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Kumar ORDER PER VIKAS AWASTHY, JM : These cross appeals by the Revenue and assessee are against the order of Commissioner of Income Tax (Appeals)-III, Pune dated 02-01- 2012 for the assessment year 2008-09. 2. The brief facts of the case as emanating from records are: The assessee company is engaged in manufacturing, processing and sale of life saving drugs, export of vaccines, biotech and pharma products. The assessee is having three units engaged in manufacturing and processing of aforesaid pr .....

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sessee filed revised return of income on 30-03-2010 declaring income of ₹ 36,91,62,850/-. In revised return of income, the assessee claimed Product Development Expenses ₹ 19,96,93,543/- in respect of EOU and SEZ unit as revenue expenditure, which were not claimed in original return. Further, in the revised return, the assessee claimed deduction u/s. 10AA in respect of ₹ 3,87,57,400/- received from M/s. Akorn Inc., USA on account of exclusive marketing rights of its product in N .....

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ile computing deduction u/s. 10B and 10AA of the Act. iv. Disallowance of expenditure u/s. 14A ₹ 4,10,61,221/-. v. Provision for leave encashment ₹ 68,27,714/-. vi. Donations to Manjari Grampanchayat for creating water supply facilities claimed u/s. 37(1) ₹ 18,50,000/-. vii. Expenditure towards license fees paid for acquiring Microsoft XP and MS Office software ₹ 25,32,400/- claimed as revenue expenditure-capitalized. viii. Foreign Travel expenses of employees ₹ 25, .....

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insurance from export turnover and total turnover for computing deduction u/s. 10B and 10AA of the Act, reclassifying certain assets as Plant and Machinery . The Commissioner of Income Tax (Appeals) upheld the findings of Assessing Officer in treating the receipts from M/s. Akorn Inc., USA as not part of Export Turnover, disallowance of deduction u/s. 10B ₹ 9,95,952/-, disallowance u/s. 14A ₹ 64,03,323/-, disallowance of Provision for Leave Encashment, disallowance of donation to Man .....

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peal) 4. The first ground raised by the assessee in its appeal is against not treating the receipts in foreign currency from M/s. Akorn Inc., USA amounting to ₹ 3,87,57,400/- (USD 8,92,000) towards development of the products as Income from Business for the purpose of allowing deduction u/s. 10AA of the Act. 5. In the original return of income, the assessee had shown the amount received from M/s. Akorn Inc., USA ₹ 3,87,57,400/- as capital receipts. Subsequently, in the revised return .....

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clonal Antibody (RMA) and Anti-D Monoclonal Antibody (ANTI-D) developed by the assessee. Thereafter for funding of the new products another agreement i.e. Development Funding Agreement dated 07-11-2006 (at page 87 of the paper book) was entered into between the assessee and M/s. Akorn Inc., USA. The funds received by the assessee from M/s. Akorn Inc., USA had direct nexus between the development of new products and the exclusive marketing rights of the newly developed products. There was proxima .....

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f the Act. 7. On the other hand Shri O.A. Mao representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in rejecting the claim of the assessee. The ld. DR submitted that sum received by the assessee under development funding agreement does not fall within the definition of export turnover. The funds received by the assessee for development of vaccines cannot be said to be profits and gains derived from the export of vaccines. The said receipts at the b .....

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ement dated 07-11-2006 shows that a sum of ₹ 3,87,57,400/- (US $ 8,92,000) were received by the assessee towards exclusive marketing rights of new products granted by the assessee to M/s. Akorn Inc., USA. The payments made by M/s. Akorn Inc., USA to assessee were against the milestones achieved during the product development. A perusal of Clause 2 of Memorandum of Understanding reveal that the Net Revenue from sale of new products shall be shared between the two parties equally. The assess .....

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product is primarily towards acquiring exclusive rights for marketing of specified products developed by assessee. To be eligible to claim deduction u/s. 10AA the SEZ unit inter alia should have profits and gains derived from the export. Thus, by no stretch of imagination the amount received by assessee from M/s. Akorn Inc., USA for development of product can be considered as income or gain derived from the export of article or things as has been envisaged under the provisions of section 10AA o .....

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can be attributable to the business. The Hon'ble Supreme Court of India in the case of Liberty India Vs. Commissioner of Income Tax reported as 317 ITR 218 in an unequivocal words has held that the connotation of the words derived from is narrower as compared to that of the words attributable to . By using the expression derived from , Parliament intended to cover sources not beyond the first degree. 9. In the present case, the assessee has claimed deduction u/s. 10AA of the Act on receipts .....

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es other than actual export of article or things or services. Thus, from perusal of documents on record and the law laid down by the Hon'ble Apex Court defining the expression derived from , the amount of ₹ 3,87,57,400/- received by the assessee from M/s. Akorn Inc., USA cannot be held to be gain or profit derived from export of its product. Therefore, the assessee is not eligible to claim deduction u/s. 10AA of the Act on the aforesaid receipts. We do not find any infirmity in the wel .....

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uction u/s. 10B on the profits derived from its EOU. The assessee had inter alia claimed deduction u/s. 10B on invoice outstanding at the time of filing of return of income. The assessee had filed an application for extension. The assessee subsequently received the payments. The assessee had filed copies of extension letter and bank realization certificates before the Commissioner of Income Tax (Appeals). However, the same were overlooked. The ld. AR contended that similar disallowance was made .....

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date. However, the same were realized subsequently. The Assessing Officer declined the claim of deduction u/s. 10B on the delayed export realization. The Commissioner of Income Tax (Appeals) upheld the order of Assessing Officer. We find that in immediately preceding assessment year similar disallowance was made in the case of assessee. The Tribunal by placing reliance on the decision of Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Morgan Stanley Advantage Services .....

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aside the order of the CIT(A) on this issue and direct the AO to allow the claim of the assessee u/s.10B with respect to the export invoice of ₹ 9,19,934/- . Ground raised by the assessee is accordingly allowed. 13. We observe that in the assessment year under appeal disallowance has been made for similar reasons. No material has been placed on record to show any variation in the facts. Therefore, respectfully following the order of Co-ordinate Bench, we accept the prayer of the assessee a .....

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e total investments made by the assessee is ₹ 100 crores, whereas the own funds i.e. share holder funds is to the tune of ₹ 996 crores. Apart from own funds, the assessee has profit of ₹ 385 crores during the year. The total loans of the assessee during the previous year were ₹ 184.68 crores. The ld. AR contended that the assessee had made strategic investment of ₹ 6 crores in sister concern. While computing disallowance u/s. 14A r.w. Rule 8D, the Assessing Officer .....

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. Rule 8D has been rightly made by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals). The ld. DR prayed for dismissing this ground of appeal raised by the assessee. 16. Both sides heard. The main contention of the ld. AR is that for making investments own interest free funds have been used although there are borrowings, as well, but the same were not diverted for making investments. The ld. AR has also drawn our attention to the summary of investments at page 146 of th .....

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come-tax v. Reliance Utilities and Power Ltd. reported as 313 ITR 340 (Bom). Accordingly, ground No. 3 raised by the assessee in its appeal is allowed for statistical purpose. 17. The fourth ground raised by the assessee is in respect of disallowance of the provision for leave encashment amounting to ₹ 68,27,714/-. The ld. AR of the assessee submitted at the outset that this issue relating to provision for leave encashment pertaining to DTA unit was decided against the assessee by the Trib .....

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R Vs. Union of India reported as 292 ITR470 and Hon'ble Bombay High Court in the case of Universal Medicare Private Limited reported as 324 ITR 263. The ld. AR of the assessee in the preceding assessment years has not pressed this ground. The ld. AR has fairly conceded that the issue may be decided in line with the earlier order of the Tribunal. Accordingly, ground No. 4 raised in the appeal by the assessee is dismissed. 19. The fifth ground raised by the assessee in its appeal is in respect .....

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Hadapsar and village Manjari is in the immediate vicinity of Hadapsar. Several workers/employees of the company are staying in the village. The contribution of ₹ 15,00,000/- for water supply project would indirectly benefit the employees of assessee company staying in that area. The ld. AR contended that the said amount has been contributed by the assessee towards corporate social responsibility. The ld. AR referred to the decision of Co-ordinate Bench of the Tribunal in assessee s own cas .....

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he ld. DR contended that such expenditure is not allowable u/s. 37 of the Act. 21. Both sides heard. The disallowance has been made by the authorities below in respect of contribution made by the assessee for creating water facilities by Manjari Gram Panchayat. It is an undisputed fact that workers/employees of the assessee company are residing in village Manjari and would be benefited from the water supply project towards which the assessee has made contribution. The assessee has contributed th .....

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nal while allowing such expenditure held as under : 18. We have carefully considered the rival submissions. We find that the CIT(A) has relied upon the judgments of the Hon ble Bombay and Madras High court in the case of Mahindra & Mahindra Ltd (supra) and India Radiators Ltd (supra) respectively in coming to the conclusion that the impugned expenditure was allowable u/s 37(1) of the Act. The CIT(A) has pointed out that in the case before the Hon ble Madras High Court, the contribution was m .....

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of the Assessing Officer and therefore, the CIT(A) made no mistake in upholding the contention of the assessee that the impugned expenditure was a business expenditure allowable u/s 37(1) of the Act. Thus, on this ground, Revenue fails. 22. In the present case also the contribution has been made by the assessee for the benefit of its employees/workers, although in the process general public would also be benefited. The Govt. is seeking contribution from various corporate houses for strengthenin .....

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red on purchase of Microsoft XP and Microsoft Office 2007 software. The assessee had claimed the expenditure to be revenue in nature. The Assessing Officer held the expenditure as capital. In first appeal the Commissioner of Income Tax (Appeals) upheld the findings of Assessing Officer. The ld. AR of the assessee submitted that the software purchased by the assessee will not provide enduring benefit to the assessee. The software will have to be upgraded within short span of 2-3 years. The author .....

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osoft XP Professional operating system and Microsoft Office 2007 software. The contention of the assessee is that the life of the software is very short and requires regular upgradation. The assessee would not enjoy enduring benefit from the use of software. The assessee claimed the expenditure for acquiring the software/operating system as revenue expenditure. The Department has held the expenditure on acquiring the software/operating system as capital expenditure on the ground that the assesse .....

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adation due to technology changes cannot be said to be the software or enduring in nature. The Hon'ble High Court dismissing the appeal of the Department observed that the software MS Office, which is not a custom built software of the assessee requires regular upgradation. Therefore, no error is committed by the Tribunal is treating the expenditure incurred on acquiring the same as revenue expenditure. Thus, in view of the facts of the case and decision of Hon'ble Delhi High Court we ho .....

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sallowed the capitalization of foreign travel expenditure of employees. The ld. AR placed on record a copy of the order of Tribunal in assessee s own case in ITA No. 1383/PN/2011 for assessment year 2006-07 decided on 22-02-2013. The Assessing Officer disallowed the foreign travel expenditure incurred on employees for finalizing the proposal of purchasing the plant and machinery. The assessee had claimed expenditure as revenue in nature. The Assessing Officer held expenditure to be capital expen .....

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ome Tax (Appeals) in upholding the disallowance made by the Assessing Officer amounting to ₹ 25,77,069/- in order dated 04-02-2011 passed u/s. 154 of the Act. We find that the assessee had claimed the expenditure as revenue in nature. However, in an alternate submission before the Assessing Officer, the assessee prayed for treating the foreign travel cost as part of cost of machinery and allow depreciation on the same. The Assessing Officer allowed the capitalization of expenditure and als .....

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79/PN/2009. The Tribunal upheld the action of Assessing Officer in treating the expenditure as capital in nature and disallowed unrelated expenditure. The relevant extract of the findings of Tribunal are as under : 24. We have carefully considered the rival submissions. We find that in response to a specific query from the Assessing Officer as to the details of employees who made foreign tours for the purpose of purchase of machinery, assessee furnished details vide letter dated 27-11-2008 which .....

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such expenditure has been incurred on foreign tours of the employees for the purpose of purchase of machinery. Since the purpose of travel admittedly, is purchase of machinery, the CIT(A), in our view, made no mistake in holding that the cost of such foreign travel was liable to be treated as part of cost of machinery. Ostensibly, the purchase of the machinery was not finalized in the particular year but the same has been purchased in subsequent year, as adverted by the assessee before the Asses .....

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ned, we find it appropriate to reproduce operative part of the order of the Tribunal contained in para 13, which is as under:- We find that Revenue has not made out a case to demonstrate that the said foreign travel expenditure was incurred in connection with any capital asset. Therefore, Assessing Officer failed to discharge the onus successfully. When allegation is made by AO, it is expected that he should demonstrate with evidence against the assessee. In our opinion, the said judgments are r .....

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t, inasmuch as we have noted earlier that the assessee itself submitted before the Assessing Officer vide letter dated 27-11-2008 that the expenditure on foreign travel in question was undertaken for purchase of machinery, though the purchase of such machinery was finalized in subsequent year. Therefore, the decision of the Tribunal in the case of the assessee for A.Y. 2002-03 does not help the assessee in the instant year and thus on this Ground, assessee has to fail. 29. The ld. AR of the asse .....

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assessee submitted that similar disallowance was made by the Revenue in assessment year 2007-08. In first appeal the Commissioner of Income Tax (Appeals) upheld the findings of Assessing Office. The assessee carried the matter in appeal before the Tribunal in ITA No. 102/PN/2012 for assessment year 2007-08 decided on 10-04-2014. The Tribunal after considering the facts of the case and the decision of Co-ordinate Bench of the Tribunal in the case of KRA Holding & Trading (P) Ltd. Vs. DCIT in .....

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e as under : 11.1 Facts of the case, in brief, are that the Assessing Officer observed that the assessee has claimed deduction of Portfolio Management Scheme fees amounting to ₹ 32,49,729/- out of the capital gains derived on sale of shares/securities. On being asked as to why such expenditure should not be disallowed while working out the resultant capital gains, the assessee submitted that the said expenditure having been incurred for managing the investment portfolio of the assessee by .....

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ment consultants are service intermediaries who carry out the research and analysis about the profitability of the scrips of various companies and keep track on the market conditions and the fees paid by the assessee to such professional managers could not be said to have been incurred wholly and exclusively for the purpose of transfer of the asset. Holding so, the PMS fees claimed by the assessee at ₹ 34,63,969/- from the cost of investment was disallowed by him while computing the capita .....

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efore us. 12. After hearing both the sides we find an identical issue had come up before the coordinate Bench of the Tribunal in the case of KRA Holding and Trading Investment Pvt. Ltd. Vs. DCIT. We find the Tribunal vide ITA No.703/PN/2012 order dated 19-09-2013 for A.Y. 2008-09 while deciding an identical issue has observed as under : 9. In the appeal of the assessee, the solitary issue is with regard to the action of the CIT(A) in confirming the stand of the Assessing Officer that fees paid t .....

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s i.e. assessment year 2004-05 to 2007-08, the Assessing Officer disallowed the expense against which assessee went in appeal before the CIT(A). The CIT(A) noted that similar issue for assessment years 2004-05 to 2006-07 was adjudicated by the Tribunal in the assessee s own case in favour of the assessee and against the Revenue vide order dated 31st May, 2011 (supra). However, the CIT(A) noticed that subsequently Mumbai Bench of the Tribunal in the case of one Shri Homi K. Bhabha vs. ITO in ITA .....

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l in the case of Shri Homi K. Bhabha (supra) which has been relied upon by the CIT(A), the issue has been decided in favour of the assessee. It was, therefore, contended that the issue is accordingly liable to be decided in favour of the assessee. 12. The learned CIT(DR) appearing for the Revenue has not controverted the factual matrix brought out by the learned counsel so however she has relied upon the order of the CIT(A) in support of the case of the Revenue. 13. We have carefully considered .....

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ted 31st May, 2011 (supra) and noticed that the issue has been decided in favour of the assessee. Thereafter, the Tribunal noted that against the decision of the Tribunal dated 31st May, 2011 (supra), Revenue preferred an appeal before the Hon ble Supreme Court only on the issue treatment of income from the sale of shares as capital gain or business income and that the Revenue had not preferred any appeal against the order of the Tribunal allowing the claim of deduction of expenditure by way of .....

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of the Pune Bench of the Tribunal in the case of KRA Holding & Trading was not followed by the Mumbai Bench in the above cited decision. The Mumbai Bench following other decisions of the coordinate Benches of the Tribunal declined to follow the decision in the case of KRA Holding & Trading (supra). It is the settled proposition of law that when two view are possible on the same issue the view which is favourable to the assessee has to be followed. [CIT vs. Vegetable Products 88 ITR 192 ( .....

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he Tribunal in assessee s own case for A.Y. 2004- 05 allow the claim of the Portfolio Management fees as an allowable expenditure. The ground raised by the assessee is accordingly allowed. 14. Following the aforesaid precedent, which has considered the similar objections of the CIT(A), in our considered opinion, the order of the CIT(A) in the present case is untenable and we accordingly set-aside the same and direct the Assessing Officer to delete the impugned addition. 12.1 Respectfully followi .....

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ets to the tune of ₹ 24,69,933/- viz. stainless steel tables, stools, racks etc. located at manufacturing unit as Furniture and Fixtures . The assessee had included the aforesaid assets in the block of assets as Plant and Machinery . The ld. AR of the assessee submitted that certain assets like stainless steel tables, stools, racks etc. were used by the assessee in laboratories in the factory premises. These assets are used while manufacturing/developing of new products, therefore, they ar .....

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g the functional test accepted the contentions of the assessee. The ld. AR placed on record a copy of the order of Tribunal in aforesaid appeal. 34. On the other hand the ld. DR vehemently supported the findings of Commissioner of Income Tax (Appeals) and prayed for dismissing this ground raised by the assessee. 35. Both sides heard. Findings of authorities below on the issue examined. We have also considered the decision of Co-ordinate Bench of the Tribunal on this issue. We find that the issue .....

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on the issue that the 'functional test' has to be applied in deciding if a particular tool constitutes plant and machinery or the furniture. Karnataka High Court In case of Hindustan Aeronautics Ltd, supra also decided the issue adopting the same logic. Therefore, we need to adopt the same 'functional test' to decide if the impugned items i.e. Stools, Tables, Stainless Steel racks, 55 cupboards, 55 trolleys. SS trays etc. constitutes 'plant & machinery' for the purpo .....

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pinion, the functional test implies if the said items are necessary for the production of the product in the laboratory premises. In other words, if the Stools, Tables, Stainless Steel racks, SS cupboards, SS trolleys, SS trays etc. are required for the laboratory purpose i.e. for the purpose of production or processing of the chemical tests in the laboratory premises leading to the production of the stocks, they must be categorized as plant and machinery. The impugned items like the case of  .....

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e rate of depreciation. As argued by the Ld DR, the special design is an irrelevant factor as the same item can be used for multiple functions. Therefore, the use of the item for the function of production related function: at the place of laboratory must be decides its block i.e. Plant & machinery or the furniture. It is the not the case of the revenue that they were not used for the function of the production of the vaccines. In our opinion, the revenue authorities have carried away more b .....

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is ground of appeal of the assessee. 37. The ground No. 10 in the appeal of assessee is general in nature and hence requires no adjudication. 38. In the result, the appeal of the assessee is partly allowed in the aforesaid terms. ITA No. 914/PN/2013 (Revenue s Appeal) 39. Now, we will advert to the appeal by the Department. The ground Nos. 1 and 2 raised by the Department are inter related and are taken up together for adjudication. The ground Nos. 1 and 2 in the Department s appeal read as unde .....

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ee has claimed the expenditure of ₹ 19,96,93,543/- on account of product development expenses as revenue in nature. The assessee in its books of account has claimed the said expenditure as capital. However, while filing revised return of income the assessee treated the said expenditure as revenue. The ld. AR of the assessee submitted that the assessee is engaged in manufacturing of life saving drugs. The development of new drugs or vaccines require time span of 2-3 years. There are certain .....

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t in the books of account is not decisive factor for determining the nature of expenditure. The ld. AR in support of his submissions placed reliance on the following decisions : i. Transweeigh (India) Ltd. Vs. Income Tax Officer, 22 SOT 338 (Mumbai); ii. Commissioner of Income Tax Vs. Sakthi Soyas Ltd., 283 ITR 194 (Mad); iii. Glaxo Smith Kline Consumer Healthcare Ltd. Vs. Assistant Commissioner of Income Tax, 112 TTJ (Chd.-Trib.) 94. 41. On the other hand the ld. DR vehemently supporting the fi .....

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the books of account. The assessee claimed product development expenditure as revenue in nature in the revised return of income due to change of mind. The ld. DR prayed for reversing the findings of Commissioner of Income Tax (Appeals) on this issue. 42. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. Undisputedly, in the original return of income and in the books of account the assessee has shown expenditure of ͅ .....

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le Supreme Court of India in the case of Kedarnath Jute Manufacturing Company Limited Vs. Commissioner of Income Tax reported as 82 ITR 363 and in the case of Sutlej Cotton Mills Limited Vs. Commissioner of Income Tax reported as 116 ITR 1. The Commissioner of Income Tax (Appeals) has further drawn strength to support his findings from the decision of Mumbai Bench of the Tribunal in the case of Kopran Ltd. reported as 137 TTJ 35 and Situ Electro Instruments (P.) Ltd. reported as 19 SOT 13. 43. A .....

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y the assessee on product development is not genuine or has not crystallized during the period relevant to assessment year under appeal. The ld. AR of the assessee in support of his submissions has placed reliance on the decision of Mumbai Bench of the Tribunal in the case of Transweeigh (India) Ltd. Vs. Income Tax Officer reported as 22 SOT 338 (Mumbai). In the said case the assessee in its books of account classified the expenditure on research and development as capital in nature. While filin .....

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ncurred by the assessee which mainly comprise of salary, travelling, raw materials, consumables, hardware etc. is revenue in nature. The relevant extract of the findings of the Tribunal are as under : 8. We have considered the submissions made by both sides, material on record and orders of authorities below. It is noted that the assessee company is engaged in the business of manufacturing of capital goods i.e. plant and machinery to be employed by cement and steel companies and other companies .....

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nature of expenses which mainly comprise of salaries, travelling (including foreign travel), raw materials, consumables, hardware etc. It is also noted that in house research and development facilities have also been recognized by the Government of India though such recognition is subject to the condition that the assessee has to claim the deduction as per the provisions of IT Act, 1961. However, this fact of recognition by itself means that assessee is carrying out certain R&D activities. N .....

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t the treatment given in the books of account is not conclusive to determine the deductibility or otherwise of an expenditure, hence, such treatment in the books of account is not relevant for the purpose of allowability of the expenditure. We would like to further state that R&D activities carried on by the assessee resulted into product development, process development, indigenization, product support and these activities have been carried on by the assessee in a continuous manner for year .....

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rd is allowable under s. 35(1)(iv) r/w s. 35(2) of the Act. Thus, this ground of the assessee stands accepted. Since we have held so, therefore, the alternate contention raised by the assessee by way of additional ground is not adjudicated. Accordingly, ground No.1 stands accepted. 44. The Chandigarh Bench of the Tribunal in the case of Glaxo Smith Kline Consumer Healthcare Ltd. Vs. Assistant Commissioner of Income Tax reported as 112 TTJ (Chd) 94 while considering the nature of expenditure on p .....

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known brand. The expenses include development expenses for new products namely Nutirbar chocolate, Ribena soft drink, Horlicks relaunch expenses. Certainly such expenditure has the potential to improve the profitability of the assessee. However the issue to, be considered is whether the expenditure seeks to enlarge the profit-yielding capacity or it increases the efficiency of the business. This aspect, in our considered opinion is to be decided in the light of the business realities under which .....

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ng of newer products is an advantage in the revenue field or not. In our humble opinion the expenditure in question has merely enabled the assessee to remain competitive in the market and retain the customer preferences and/loyalty towards its brand of products. The said advantage certainly is not limited to the period under consideration but spills over to the future also. So however this is not conclusive to hold that the expenditure in question is a capital expenditure. The parity of reasonin .....

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on of new varieties of products result in creation of a new line of business. Factually speaking, prior to the development and introduction of the impugned new products the assessee was in the business of manufacturing and sale of food and health care products. Even post development and introduction of new products, the business of the assessee remains that of manufacturing and sale of food and health care products. Therefore it is erroneous to conclude that the assessee acquired a new line of b .....

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subsequently while filing revised return of income has claimed the same to be revenue due to change of mind is not tenable. It is a well settled law that entries made in the books of account does not determine the true nature of transaction. 46. The Hon'ble Supreme Court of India in the case of Sutlej Cotton Mills Limited Vs. Commissioner of Income Tax (supra) has clearly enunciated that the books of account are not determinative of the question whether the assessee has earned any profit or .....

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ermining the nature of income. This law laid down by the Hon'ble Apex Court have been reiterated by the Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Gopal Purohit reported as 336 ITR 287 (Bom). Recently, in the case of Commissioner of Income Tax Vs. Smifs Securities Ltd. reported as 348 ITR 302 (SC) the Hon'ble Supreme Court of India has reaffirmed the view that the accounts maintained by the assessee are not conclusive for deciding the nature of ex .....

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chinery? 48. The third ground of appeal by the Revenue is corresponding to the ground No. 9 raised in the appeal by the assessee. The issue regarding reclassification of certain assets used in the laboratory as plant and machinery has been dealt in detailed while dealing with ground No. 9 of the assessee s appeal. For the detailed reasons given therein this ground of appeal by the Revenue is dismissed. 49. The ground No. 4 raised by the Revenue in appeal is as under : iv. Whether Ld. CIT(A) was .....

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