Appeal details
Counselvise Citation
[2010] 136 COUNSELVISE.COM (IT) 3975 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-05-2010
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
G
Assessment Year
2005-2006
Appeal Filed On
25-03-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.1295/DEL./2010 (ASSESSMENT YEAR : 2005-06) M/S. SIMPLEX PHARMA PVT. LTD., VS. DCIT, CIRCLE 8 (1), B-4/160, SAFDARJUNG ENCLAVE, NEW DELHI. NEW DELHI 110 027. (PAN : AABCS7865B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN & MS. RANO JAIN, CAS REVENUE BY : SHRI KISHORE B., SENIOR DR ORDER PER R.P. TOLANI, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT (APPEALS) FOR THE ASSESSMENT YEAR 2005-06 CHALLENGING THE CON FIRMATION OF PENALTY UNDER SECTION 271(1)(C) AT RS.1,72,191/-. 2. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT A SSESSEE HAD PAID AN AMOUNT OF RS.5,22,591/- AS FEES AND DRUG REGISTRATI ON CHARGES. THE DETAILS WHEREOF WERE PLACED BEFORE A.O. THE EXPENSES HAVE BEEN HELD TO BE GENUINE. THE ASSESSEE CONTENDED THAT THE ASSESSEE BEING IN PHARMACEUTICAL BUSINESS FOR DOING BUSINESS IN FOREIGN COUNTRIES, I T IS MANDATORY TO GET REGISTERED THERE FOR SELLING ANY PRODUCT. ALL THE DETAILS OF REGISTRATION WERE FILED BEFORE A.O., WHO HELD THAT THE REVENUE EXPEND ITURE OF RS.52,000/- PERTAINS TO THIS YEAR AND BALANCE AMOUNT OF RS.4,70 ,591/- WAS TREATED AS ITA NO.1295/DEL./2010 2 DEFERRED EXPENDITURE QUA WHICH PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED. ASSESSEE FILED A REPLY DATED 24.3.2009. A.O. HOWEVER SUMMARILY HELD THAT THE EXPLANATION IS NOT FOUND TO BE SATISF ACTORY AND IMPOSED A PENALTY. 3. IN FIRST APPEAL, THE SAME HAS BEEN CONFIRMED. 4. IT IS PLEADED BY LEARNED COUNSEL THAT FEES PAID FOR DRUG REGISTRATION CHARGES IS CLEARLY REVENUE EXPENDITURE. SAME HAVE BEEN FOUND TO BE GENUINE, ALL THE DETAILS WERE FURNISHED WHICH WERE ACCEPTED. A.O. HOWEVER ON AD HOC BASIS HELD THAT RS.52,000/- ONLY IS REVENUE EXPENSE PERTAINING TO THIS YEAR, CLEARLY IMPLYING THAT A.O. TREATED IT AS DEFERRED R EVENUE EXPENDITURE. THE EXPENSES FOR DRUG REGISTRATION CHARGES ARE REVENUE IN NATURE WITHOUT WHICH THIS CANNOT BE SOLD IN FOREIGN MARKETS AND THE REGI STRATION IS GIVEN FOR A LIMITED PERIOD TO KEEP THE CREDENTIAL AND DETAILS A BOUT MANUFACTURERS, THE EXPENDITURE HAVING BEEN INCURRED FOR EFFECTING SALE CANNOT BE HELD EVEN TO BE A DEFERRED REVENUE EXPENDITURE THOUGH ACCEPTED BY A SSESSEE TO AVOID LITIGATION. CIT (A) HAS CONFIRMED THE PENALTY RELY ING ON THE HON'BLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. ESCORTS FINANCE LTD., 226 CTR 105, AND OTHER CASE LAWS. IN SUCH CASES, PENALTY H AS BEEN CONFIRMED WHERE THE EXPENSES HAVE BEEN HELD TO BE PRIMA FACIE NOT A LLOWABLE AND THERE EXISTED NO BONAFIDES IN KEEPING ANOTHER VIEW. IN ASSESSEE S CASE, THE A.O. HIMSELF TREATED PART OF IT AS REVENUE EXPENDITURE. THE EXP ENSES BEING CLEARLY REVENUE IN NATURE AND IN ANY CASE BEING DEBATABLE AS DEFERR ED REVENUE EXPENDITURE, THE IMPOSITION OF PENALTY U/S 271(1)(C) IS UNJUSTIFIED. 5. LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES . ITA NO.1295/DEL./2010 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE DRUG REGISTRATION FEE PAID BY THE ASSESSEE FOR SALE IN FOREIGN MARKET HAS BEEN HELD TO BE GENUINELY INCURRED. A.O. HELD ONLY PART OF IT ALLOWABLE AS REVENUE EXPENDITURE. IN OUR VIEW, PENALTY SHOULD N OT BE LEVIED MERELY BECAUSE IT IS LAWFUL TO DO SO, AS HELD BY HON'BLE S UPREME COURT IN THE CASE OF HINDUSTAN STEEL LIMITED VS. STATE OF ORISSA 83 ITR 26 (SC). LOOKING AT ENTIRETY OF FACTS AND CIRCUMSTANCES, IN OUR VIEW, A CLEAR AND BONAFIDE DEBATE EXISTED VIS--VIS ASSESSEE INCURRING EXPENSES ON DR UG REGISTRATION FEES BEING CAPITAL OR REVENUE. WITH THIS BONAFIDE DEBATE, IT CANNOT BE HELD THAT ASSESSEE FURNISHED INACCURATE PARTICULARS OR CONCEALED THE P ARTICULARS IN RESPECT OF THESE EXPENSES. IN OUR VIEW, THE ASSESSEES CASE B Y NO MEANS CALLS FOR IMPOSITION OF PENALTY U/S 271(1)(C) WHICH IS DELETE D. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH DAY OF MAY, 2010 AFTER THE CONCLUSION OF THE HEARING. SD/- SD/- (K.D. RANJAN) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 25 TH DAY OF MAY, 2010 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.
