TMI Blog2020 (8) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... in the financial year 2006-07. Thus, the assessee had produced a new product from which enduring benefit was derived. Therefore, the same has to be treated as capital expenditure. An asset was brought into existence for enduring benefit of the business and therefore, the same has to be treated as capital expenditure. The expenditure has not been made for bringing into existence an asset for running of the business or working with it with a view to produce profits. Same cannot be treated as revenue expenditure. It is pertinent to mention here that the assessee himself in the Books of account had shown it as capital expenditure. Therefore, the Assessing Officer, the Commissioner of Income Tax (Appeals) and the Tribunal have rightly treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the products, which were manufactured currently and exported by the appellant company? 2. The factual backdrop, in which the aforesaid substantial questions of law arise for consideration for this court need mention: The assessee is engaged in the business of manufacture and export of pharmaceuticals and neutralceutical products. The assessee is carrying on the business in two units viz., Hoodi Unit and Hosur Unit. During the Assessment years 2006-07 and 2007- 08, the assessee developed a product named as 'SUCRALOSE' in its unit at Hosur. The assessee filed its return of income for the Assessment years 2006-07 and 2007-08 declaring total income of ₹ 1,14,137/- and ₹ 25,38,923/- respectively. The assessee claimed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal', for short). The Tribunal by an order dated 04.11.2011 inter alia held that assessee by manufacturing the new product viz., 'SUCRALOSE' has obtained an enduring benefit and the assessee itself had capitalized the expenditure in the Books of accounts. The appeals preferred by the assessee were partly allowed. Being aggrieved, the assessee is in appeal before us. 4. Learned counsel for the assessee submitted that the authorities ought to have appreciated that assessee had not ventured into a new line of business but had developed a new product and by incurring expenses towards development of the product, the line of business was not changed and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;TUTICORIN ALKALI CHEMICALS FERTILIZERS LTD. VS. COMMISSIONER OF INCOME-TAX', (1997) 93 TAXMAN 502 (SC). 6. We have considered the submissions made by learned counsel on both the sides and have perused the record. Before proceeding further, it is apposite to take note of well settled legal principles to determine whether expenditure of the assessee was a capital expenditure or a revenue expenditure. The Supreme Court in 'ALEMBIC CHEMICAL WORKS CO. LTD. VS. CIT', (1989) 177 ITR 377 has laid down the following principles, which are reproduced below: (i) When an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of trade, I think that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackdrop of aforesaid well settled legal principles, the facts of the case in hand may be examined. It is pertinent to note that assessee had started a new Unit at Hosur in financial year 2004-05 by taking over machineries and properties of M/s V.B.Medicare Pvt. Ltd., Hyderabad on lease. The work of development of 'SUCRALOSE' viz., a new product was started in financial year 2005-06 in Hosur Unit. The product was developed in the financial year 2006-07. Thus, the assessee had produced a new product from which enduring benefit was derived. Therefore, the same has to be treated as capital expenditure. An asset was brought into existence for enduring benefit of the business and therefore, the same has to be treated as capital expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that expenses such as salaries, wages and traveling allowance etc. were revenue in nature. The Supreme Court in Hero Honda Motors Ltd. Supra was interpreting the terms and conditions of the agreement and in that context it was held that payments in question were made for right to use technical know how and information and the ownership and intellectual property rights in the know how or technical information were never transferred or became an asset of the assessee. Therefore, the aforesaid decision is also not applicable to the fact situation of the case. In view of preceding analysis, the substantial questions of law framed by a bench of this court are answered against the assessee and in favour of the revenue. In the result, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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