TMI Blog2022 (4) TMI 1528X X X X Extracts X X X X X X X X Extracts X X X X ..... law and in facts confirming the assessment order passed u/s. 143(3) of the Act without. considering the written submissions filed by the appellant. As such, the order is passed by the Ld. CIT(A) without complying with the principles of natural justice and hence is void ab initio. 3. The Ld. CIT(A) has erred in law and in facts in confirming the disallowance of product registration expenses of Rs.47,21,095/- made by the Assessing Officer allegedly treating the same as capital expenditure as against the revenue expenditure claimed by the appellant. 4. The Ld. CIT(A) ought to have appreciated that education cess on the tax payable on the assessed income was allowable as deduction while computing the income of the appellant. 5. The appellant craves leave to add to, alter, amend and/or delete in all the foregoing grounds of appeal. 3. The brief facts of the case are that the assessee filed its return of income on 28.11.2017 declaring total income to the tune of Rs.6,25,44,880/-. Subsequently, the assessee filed its revised return of income on 18.05.2018 declaring the same income which he had filed earlier. The return was processed u/s 143(1) of the Act. The case was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness purpose only, because the same helped the assessee in marketing its products in the foreign countries and promoting the sales. 6. For the aforesaid reasons, the Tribunal committed no error. Its findings are proper and in no way are perverse. No substantial question of law arises for consideration. 5. Subsequently, the matter of controversy has been adjudicated by the Hon ble ITAT in the case of M/s. Shreechem Pharmaceuticals Pvt. Ltd. (ITA. No.7080/Mum/2013) dated 26.10,2016. The relevant finding has given in para no.6 which is hereby reproduced as under: - 4. All the issues are interconnected, therefore are being taken up for adjudication. Under this issues the revenue has challenged the sole point that the CIT(A) has wrongly allowed an amount of Rs.43,06,904/- as revenue expenditure whereas the same should be considered as capital in nature. Before going further it is necessary to advert the finding of the CIT(A) on record:- 2.3 I have carefully considered the submission of the appellant and the impugned assessment order. The AR of the appellant had filed copies of Registration Certificate issued by Health and Drug administration of various countries suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e registered with the local authorities as also medical association in India. Such products were in existence and nothing new were acquired by the assessee in the process. The Tribunal, therefore, held that the expenditure only enable the assessee to run the existing business smoothly and therefore, it cannot be stated that the assessee acquired any tangible or intangible assets. With respect to patent and trademark registration, the Tribunal held that for protection of result of the research of the assessee, such patent had to be registered. It was observed that enduring benefit is not the only criteria. The same must be coupled with acquisition of asset. The finding of the Hon ble court is as under: With respect to the expenditure incurred for production registration charges, we agree with the view of the Tribunal that the assessee did not acquire my new asset. As per the rules and regulations, it was essential that the product, before marketing, would be registered with the regulating authorities. Any expenditure in the process would not be stated to ensure procurement of a new asset to the assessee. We are informed that a Division Bench of this Court in the case of CIT V. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that our indulgence in the present appeal has been sought by the revenue to adjudicate upon the validity of the order passed by the CIT(A), wherein he had concluded that the product registration expenses are in the nature of a revenue expenditure. We have perused the records and find that the assessee had claimed the product registration expenses as a revenue. However, the A.O being of the view that product registration expenses incurred by the assessee vested an enduring benefit with the assessee, thus the same were held by him as being in the nature of a capital expenditure. On the basis of the aforesaid observations, the A.O restricted the entitlement of the assessee only to the extent of depreciation on the amount of the capitalized value of product registration expenditure. We have deliberated at length on the issue under consideration, and find that the issue involved in the present appeal is squarely covered by the order passed by a coordinate bench of the Tribunal viz. ITAT F Bench, Mumbai in the assesses own case for A.Y. 2011-12 and A.Y. 2012-13 i.e. DCIT-13(2)(2), Mumbai Vs. M/s Sharda Worldwide Exports Pvt. Ltd. (now known as Sharda Cropchem Ltd., Mumbai) [ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in lump sum but by installments over a period of time. On the contrary, payment made in the course of and for the purpose of carrying on business or trading activity would be revenue expenditure even though the payment is of a large amount and has not to be made periodically. Respectfully following the above, we hold that to solve the knotty issue of capital/revenue expenditure the aim and object of the expenditure is to be considered not the quantum. As far as entries in the books of accounts and claiming depreciation in the earlier years is concerned, it is suffice to say that entries made in the books of accounts do not decide the true nature of expenditure. We would like to rely upon the case of Bhor Industries of the Hon'ble Bombay High Court (264 ITR 180). 5.2. The Hon'ble Courts are of the view that the issue of capital versus revenue expenditure has to be seen from the angle of an assessee rather than an AO. In the case of Edward Keventer (P) Ltd., the honourable Calcutta High Court has held as follows : The legitimate business needs of the company must be judged from the view-point of the company itself and from the view-point of a prudent busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofitability while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. Considering the above, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. So, we are not inclined interfere with it. Effective ground of appeal is decided against the AO We have perused the aforesaid order passed by the Tribunal, and finding ourselves as being in agreement with the view therein taken, thus respectfully follow the same. We thus in terms of our aforesaid observations are of the considered view that no infirmity emerges from the well-reasoned order of the CIT(A), who had rightly concluded that the product registration expenses were allowable as a revenue expenditure. We thus, uphold the order of the CIT(A) and dismiss the appeal of the revenue. 7. In view of the above mentioned decision, the Products Registration Expenses is revenue in nature, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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