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2018 (3) TMI 790

red revenue expenditure” and the nature of deferred revenue expenditure in the present case could have been otherwise shown as revenue or capital expenditure by assessee as the case may be. Thus it is difficult to accept the contentions of Ld.Counsel on this issue regarding ‘change of opinion’ by assessing officer while initiating the reassessment proceedings. Argument of Ld.DR regarding application of sub clause (c) to Explanation 2 to section 147. Thus to reasons recorded to form basis for initiating reassessment proceedings as it falls under (i ), (iii) and (iv) of sub clause (c) to Explanation 2 to section 147. Thus respectfully following the decision of Hon’ble Supreme Court in the case of Calcutta Discount Company Ltd versus ITO (1960 (11) TMI 8 - SUPREME Court), we hold reopening of the assessment to be valid. - Disallowance of expenses made by assessee under ‘Legal and Professional head’ treating the same as capital in nature - Held that:- It is very much relevant for assessee in its type of business to register its brand with the Trademark Registry as there would be many other pharmaceutical companies coming out with a similar type of products which could infringe the .....

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he computer, thus these are part of the computer system and eligible for depreciation at the rate of 60%. - Addition on excess provision made under the head Fringe Benefit Tax (FBT) - Held that:- CIT(A) there is a categorical observation that from the computation of income and profit and loss accounts submitted by assessee it has been observed that no such provision for excess FBT has been claimed as deduction by assessee. In view of the above observation Ld. CIT (A) correctly deleted the addition made by Ld. AO. - ITA No. 6435/Del/2013, ITA No. 241/Del/2014, ITA No. 4543/Del/2013 And ITA No. 4530/Del/2013 - Dated:- 14-3-2018 - SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER For The Assessee : Sh. P.N.Monga, Adv. Sh. Manu Monga, Adv. For The Department : Sh. S.R.Senapati, Sr. D.R. ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present Cross Appeals filed by assessee as well as revenue against order dated 15/10/13 and 28/05/13 passed by Ld.CIT(A)-16, New Delhi for assessment years 2007-08 and 2009- 10 respectively on the following grounds of appeal: Assessment year 2007-08 ITA No. 6435/Del/2013 Grounds of Appeal 1. That, the learned Commissioner of Income T .....

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ng the disallowance of deferred revenue expenditure from ₹ 1,83,96,739/- to ₹ 35,84,201/- by ignoring the fact that the remaining expenses amounting to ₹ 1,48,12,538/- is an amount spent to acquire intangible asset which will bring long lasting benefit in the succeeding years. 1.3 On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in reducing the disallowance of deferred revenue expenditure ignoring the observation of the AO that the expenses on advertisement in any souvenir, brochure, tract, pamphlet etc. published are not revenue expenditure and not allowable under section 37 of the Act. 2.The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal. Assessment year 2009-10 ITA No. 4543/Del/2013 1.a) That, the learned Commissioner of Income Tax (Appeals) XVI, has legally and factually erred in sustaining the disallowance of ₹ 45,60,824/- under the head" Sales Promotion" b) That, the learned Commissioner of Income Tax (Appeals)XVI, failed to appreciate the fact that entire material in the form of evidence was placed before the Assessing Authority to justify t .....

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wed partial relief. Against the order of Ld.CIT(A) revenue as well as assessee preferred appeals before the Tribunal. This Tribunal vide consolidated order dated 25/08/17 passed order for assessment year 2007-08 and 2008-09. Be that as it may, while the appeal was pending before Ld. CIT (A) in first round of assessment proceedings, Ld. AO issued notice dated 26/03/12 under section 148 of the Income Tax Act, 1961 (the Act) by recording the following reasons: 3. The perusal of assessment records of M/s Ochoa Laboratories Ltd. for the A.Y. 2007-08 revealed that as per computation, assessee has claimed deferred revenue expenditure of ₹ 1,83,96,739/- instead of ₹ 1,21,14,765/-. The mistake resulted in under assessment of loss of ₹ 62,81,974/- involving potential tax of ₹ 21,14,512/-. I, therefore, have reasons to believe that on account of failure on the part of assessee to disclose truly and fully all material facts necessary for assessment for the A.Y. 2007-08 an income of ₹ 62,81,974/- has escaped assessment within the meaning of proviso to s.147 of the Act. 2.1. Appellant filed Objections for reopening of assessment challenging the very jurisdiction of .....

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tifiable issue . 2.3. Aggrieved by the additions made by Ld. AO in the reassessment proceedings, assessee preferred appeal before Ld. CIT (A). 2.4. Ld. CIT (A) upheld the jurisdiction of Assessing Officer in reopening the assessment, however, granted substantial relief on merits to assessee. 2.5. Aggrieved by the order of Ld. CIT (A) assessee as well as revenue are in appeal before us now. 2.6. The issue raised by assessee in its appeal is regarding the jurisdiction of Ld. AO in reopening of assessment. As this issue goes to the root of the case, we are inclined to decide the appeal filed by the assessee in ITA No. 6435/Del/2013. 3. ITA No. 6435/del/2013.(A.Y. 2007-08) Ld.Counsel while advancing his submissions argued that the only condition which confers jurisdiction on Ld. AO to initiate proceedings under section 147 of the Act is that he should have reason to believe that income has escaped assessment. Ld. Counsel submitted that the reassessment in the case of assessee is a mere change of opinion, which is prohibited under law. He submitted that the reasons recorded are manifestation of mind of assessing officer and therefore must be self explaining entry. Ld.Counsel submitted t .....

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Deferred Revenue Expenses . It has been submitted by Ld. DR that these expenses anyway qualifies for deduction under section 37 (1) of the Act. Ld. DR further submitted that under Income Tax Act there is no concept of deferred revenue expenditure. The expenditure is either revenue in nature or capital in nature depending upon the conditions laid down in section 30 to section 37 of the Act. Further Ld. DR submitted that the issue regarding deferred revenue expenses has never been examined by assessing officer at the time of original assessment under section 143 (3) of the Act and there is no discussion on the issue in the assessment order as no details were called for by Ld.A.O. nor filed by assessee. He placed reliance upon various decisions of Hon ble Supreme Court as well as jurisdictional High Court, wherein it has been held that it is enough if the material on the basis of which reassessment proceedings are sought to be initiated came to the notice of assessing officer subsequent to the original assessment. He further submitted that the Courts have also held that if Assessing Officer has considered and formed an opinion on the said material in the original assessment itself onl .....

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been verified by assessing officer during the original assessment proceedings. 3.5. Further, we agree with the submissions advanced by Ld.DR that under Income Tax Act there is no concept of deferred revenue expenditure and the nature of deferred revenue expenditure in the present case could have been otherwise shown as revenue or capital expenditure by assessee as the case may be. Thus it is difficult to accept the contentions of Ld.Counsel on this issue regarding change of opinion by assessing officer while initiating the reassessment proceedings. Further we find force in the argument of Ld.DR regarding application of sub clause (c) to Explanation 2 to section 147 of the Act. Thus in our considered opinion the reasons recorded to form basis for initiating reassessment proceedings as it falls under (i ), (iii) and (iv) of sub clause (c) to Explanation 2 to section 147 of the Act. Thus respectfully following the decision of Hon ble Supreme Court in the case of Calcutta Discount Company Ltd versus ITO (supra), we hold reopening of the assessment to be valid. 3.6. Accordingly the preliminary issue raised by assessee in ground No. 1-4 stands dismissed. 4. Ground number 5A deals with t .....

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d by assessee. For all these permissions, assessee has to make statutory payments which are being included under the head fees and subscription . 5.2. Ld. DR placed reliance upon the orders of authorities below. 5.3. As assessee is into manufacturing and marketing of pharma products, it has to have a license to trade in the products which is to be obtained from appropriate authority in the state. We do not find any contrary observation made by authorities below in respect of the nature of payment which assessee has to incur time and again for the purposes of carrying on its business. In our considered view these expenses do not categorise to be in the nature of enduring benefit arising to assessee as the licenses issued by the State Government are for a fixed period of time which are revoke a will upon violation of the conditions stipulated there. Thus in our considered opinion these expenses incurred by assessee would be eligible for deduction under section 37 (1) of the act. 5.4. Accordingly this ground raised by assessee stands allowed. 6. In the result appeal filed by assessee stands partly allowed. 7. ITA No. 241/Del/2014(Revenue) Departmental appeal is in respect of the expen .....

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- stands upheld. 9.2. In respect of Advertisement Expenses amounting to ₹ 19,94,690/-is concerned, Ld.CIT(A) deleted the addition as it is incurred wholly and exclusively for the purposes of business. It is observed that assessee has already claimed advertisement expenses under the head selling and distribution expenses being schedule 19 to the statement of accounts amounting to ₹ 21,95,824/-. Thus we do not find the reason as to why assessee considered advertisement expenses amounting to ₹ 19,94,690/-under the head deferred revenue expenses . This amounts to double deduction as claimed by assessee. 9.3. Therefore the disallowance of advertisement expenses stands upheld. 9.4. Further it is observed that this Tribunal vide order dated 25/08/17/ for assessment year 2007-08 (a copy of which has been placed at page 19-49 of paper book dated 21/02/18) has already dismissed the claim of assessee. 9.5. Accordingly the appeal filed by revenue stands allowed. ITA No. 4543/Del/2013 (Assessment year 2009-10) 10. Present appeal has been filed by assessee against the addition confirmed by Ld. CIT (A) under the head sales promotion expenses as well as restricting the depreciati .....

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