DCIT, New Delhi V. M/s. Fortis Clinical Research Ltd., New Delhi

ITA 1254/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3845 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 19-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NO.1254/DEL/2010 ASSESSMENT YEAR : 2006-07 DY.COMMISSIONER OF INCOME TAX, CIRCLE-11(1), NEW DELHI. VS. M/S FORTIS CLINICAL RESEARCH LTD., 55, HANUMAN ROAD, CONNAUGHT PLACE, NEW DELHI. PAN NO.AAACO7343M. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.CHAND, DR. RESPONDENT BY : SHRI V.P.GUPTA AND SHRI BASANT KUMA R, ADVOCATES. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 11.1.2010 FOR THE AY 2006-07. 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO DIS ALLOWANCE ON ACCOUNT OF RECRUITMENT AND TRAINING EXPENSES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE COMPANY IS ENGAGED IN BUSINESS OF SCI ENTIFIC RESEARCH AND DEVELOPMENT LEADING TO TECHNOLOGY DEVELOPMENT AND P ROVIDING BIO-EQUIVALENCE STUDIES RELATED TO RESEARCH AND DEVELOPMENT IN PHAR MACEUTICAL INDUSTRY. DURING THE YEAR, IT INCURRED A SUM OF RS.5,53,878/- TOWARD S RECRUITMENT OF EMPLOYEES AND RS.2,77,555/- TOWARDS TRAINING OF ITS EMPLOYEES. T HE AO DISALLOWED BOTH THE AMOUNTS BY OBSERVING THAT EXPENDITURE SO INCURRED W ILL GIVE ENDURING BENEFIT TO THE ASSESSEE COMPANY AND THE SAME WAS CAPITAL IN NA TURE. BY THE IMPUGNED ORDER, CIT(A) DELETED THE DISALLOWANCE BY OBSERVING THAT E XPENDITURE INCURRED ON ITA-1254/DEL/2010 2 RECRUITMENT AND TRAINING WAS REVENUE IN NATURE, AGA INST WHICH REVENUE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORD THAT EXPENDITURE ON ACCOUNT OF RECRUITMENT WAS INCURRED FOR ARRANGING THE STAFF AS PER THE SPECIFICATIONS GIVEN BY THE ASSESSEE COMPANY KE EPING IN VIEW ITS BUSINESS REQUIREMENT OF TECHNICALLY SKILLED PEOPLE. EXPENDI TURE ON TRAINING WAS INCURRED TO UPGRADATION OF SKILLS AND TECHNOLOGY AND FOR ORIENT ATION PROGRAMMES. BOTH THE EXPENSES ARE ONGOING EXPENSES INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. SINCE THE EXPENDITURE WAS INC URRED TO RECRUIT AND UPDATE ITS EMPLOYEES WITH FAST CHANGING TECHNOLOGY OF PRODUCTI ON, THE SAME WAS REVENUE IN NATURE. BY INCURRING THE SAID EXPENDITURE, THE ASS ESSEE COMPANY HAS IMPROVED ITS EMPLOYEES SKILLS, MERELY BECAUSE EMPLOYEES ARE TO REMAIN IN BUSINESS FOR LONG DURATION WILL NOT CHANGE THE CHARACTER OF THE EXPEN DITURE INCURRED ON THEIR RECRUITMENT AND TRAINING, WHICH ARE ESSENTIALLY REV ENUE IN NATURE. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELET ING THE DISALLOWANCE OF THESE EXPENDITURE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2010. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31.05.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-1254/DEL/2010 3