The ACIT,(OSD)Circle-8, Ahmedabad V. M/s. Zydus Wellness Ltd., Ahmedabad

ITA 1674/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1827 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Capital asset; Gift; Depreciation; Revenue expenditure; Capital expenditure
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO. 1674/AHD/2012 ASSESSMENT YEAR :2009-10 A.C.I.T.(OSD), CIRCLE-8, AHMEDABAD V S . M/S. ZYDUS WELLNESS LIMITED, ZUDUS TOWER, SATELLITE CROSS ROAD, S.G. HIGHWAY, SATELLITE, AHMEDABAD - 380052 PAN NO. AAACC7740G (APPELLANT) .. (RESPONDENT) ! ' / BY REVENUE SMT. SONIA KUMAR, SR. D.R. ' / BY ASSESSEE SHRI MUKESH M. PATEL, A.R. % ' /DATE OF HEARING 23.03.2016 &'() ' / DATE OF PRONOUNCEMENT 06.04.2016 O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER O F CIT(A)-XIV, AHMEDABAD, DATED 28.05.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 2 3. THE ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF MANUFACTURING AND SALE OF NEUTRACEUTICALS AND TRADI NG IN LOW CALORIE AND COSMECUTICALS PRODUCTS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 24.09.2009 DECLARING TOTAL INCOME AT RS.38,53,16 ,250/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER, ASSESSMENT WA S FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 23.12.2011 AND THE TOTAL INCOM E WAS DETERMINED AT RS. 39,85,69,781/-. AGGRIEVED BY THE ORDER OF A.O., AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 28.05.20 12 (IN APPEAL NO. CIT(A)XVI/JT. CIT, R-8/227/2011-12) GRANTED SUBSTA NTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), RE VENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUNDS: 1) THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-X IV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DE PRECIATION MADE ON NON COMPETE FEES. 2) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) -XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CLAIM OF REDUCTION OF RS.5,18,761/- FROM STOCK OF PACKING MATERIAL AND RS .27,17,342/- FROM STOCK OF FINISHED GOODS. 3) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI V, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CL AIM OF FOREIGN TRAVEL EXPENSES AT RS.3,20,467/-. 4) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE FOLLOWING EXPENSES WHICH WERE REVENUE IN NATURE. A) WEB DESIGNING CHARGES RS. 7,30,340/- B) TRADEMARK EXPENSES RS. 13,200/- C) SURVEY (PR) EXPENSES. RS.45,81,723/-. 5) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE MADE U/S.40(A)(IA) OF RS. 36,60,9817-. 4. GROUND NO.1 IS WITH RESPECT TO DELETION OF DEPRE CIATION ON NON-COMPETE FEES. ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 3 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A. O. NOTICED THAT ASSESSEE HAS CLAIMED DEPRECIATION ON INTANGIBLE ASSETS (IN T HE NATURE OF TRADEMARKS, TECHNICAL KNOWHOW AND NON-COMPETE FEES). THE ASSES SEE WAS ASKED TO JUSTIFY ITS CLAIM. THE A.O. ACCEPTED THE JUSTIFICATION OF CLAIM OF DEPRECIATION ON TRADEMARKS AND TECHNICAL KNOW HOW BUT THE CLAIM WIT H RESPECT TO DEPRECIATION OF NON-COMPETE FEES WAS NOT FOUND ACCEPTABLE TO THE A.O. AS HE WAS OF THE VIEW THAT THE NATURE OF INTANGIBLE ASSETS PROVIDED U/S.32 OF THE ACT DID NOT INCLUDE NON-COMPETE FEES. HE, THEREAFTER, RELYING ON THE DECISION OF ITAT, CHENNAI BENCH IN CASE OF SRIVATSAN SURVEYOURS P. LT D. VS. ITO, 32 SOT 268, DENIED THE CLAIM OF DEPRECIATION OF RS.1,40,625/- O N NON-COMPETE FEES. 5. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DECIDED THE ISSUE IN FAVOUR OF ASSES SEE BY HOLDING AS UNDER: 3.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT NON-COM PETE FEE WAS CAPITALIZED AS AN INTANGIBLE ASSET IN F. Y. 2006-07 AND THE DEPRECIAT ION WAS ALLOWED IN TWO EARLIER ASSESSMENT YEARS I. E. A. Y. 2007-08 & 2008-09. ACC ORDINGLY, THE DEPRECIATION @ 20% WAS CLAIMED IN THIS YEAR ALSO. THE APPELLANT HA S ALSO RELIED ON THE DECISION OF CHENNAI BENCH IN THE CASE OF ITO VS. MEDICORP TECHN OLOGIES PVT. LTD. [122 TTJ 394] WHEREIN IT WAS HELD THAT NON-COMPETE FEE WAS A N INTANGIBLE ASSET AND WAS COVERED BY THE PROVISION OF SECTION 32(1)(II) OF TH E ACT. IT HAS FURTHER RELIED ON THE RECENT DECISION OF SERUM INSTITUTE OF INDIA LTD. [1 35 ITD 69(PUNE)] DATED 18/01/2012 WHEREIN NON-COMPETE FEE WAS HELD TO BE A N INTANGIBLE ASSET AND THE NON- COMPETE RIGHT ACQUIRED BY THE COMPANY WAS HELD TO B E ELIGIBLE U/S. 32(1) (II) OF THE ACT. THE A. O. ON THE OTHER HAND HAS RELIED ON THE JUDGMENT OF CHENNAI BENCH IN THE CASE OF SRIVATSAN SURVEYORS PVT. LTD. [32 SOT 268] WHEREIN IT WAS HELD THAT NO PRESCRIPTION FOR ALLOWANCE OF DEPRECIATION IN RESPE CT OF NON - COMPETE FEE WAS THERE. AFTER CONSIDERING THE REASONING GIVEN BY THE A. O. AND THAT OF THE APPELLANT, I AM INCLINED TO AGREE WITH THE SUBMISSION MADE BY TH E APPELLANT. THE APPELLANT HAD PAID RS.10,00,000/- TO THE PROMOTER OF THE COMPANY WHICH WAS TAKEN OVER AS NON- COMPETE FEE. THE DECISION OF ITAT, PUNE BENCH AND C HENNAI BENCH RELIED BY THE APPELLANT APPEARS TO BE QUITE LOGICAL AS THE PAYMEN T OF NON - COMPETE FEE TO ANOTHER PERSON TO REDUCE THE COMPETITION, TANTAMOUNTS TO A RIGHT AND IS, THEREFORE, A CAPITAL ASSET WHICH IS INTANGIBLE IN NATURE. THIS ASSET IS ELIGIBLE FOR DEPRECIATION U/S. 32(1)(II) OF THE ACT. FURTHER, THE CLAIM OF DEPRECI ATION HAS BEEN ALLOWED IN EARLIER TWO ASSESSMENT YEARS ALSO, THE DISALLOWANCE MADE BY THE A.O. IS, THEREFORE, DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 4 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE A.O . AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE HAS NOTED THAT NON-COMPETE FEE WAS CAPITALIZED AS AN IN TANGIBLE ASSET IN F.Y. 2006- 07 AND THE DEPRECIATION CLAIMED ON IT WAS ALLOWED I N A.Y. 2007-08 & 2008-09. HE FURTHER PLACED RELIANCE ON THE DECISION OF CHENN AI BENCH IN THE CASE OF ITO VS. MEDICORP TECHNOLOGIES PVT. LTD. 122 TTJ 394 AND THE DECISION IN CASE OF SERUM INSTITUTE OF INDIA LTD. 135 ITD 69(PUNE). BE FORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FI NDING OF LD. CIT(A). FURTHER, SINCE THE CLAIM OF ASSESSEE WAS ALLOWED IN A.Y. 2007-08 AND 2008-09, MEANING THEREBY THAT REVENUE HAS ACCEPTED THE CLAIM AND IN SUCH SITUATION, ON THE SAME NON-COMPETE FEES WITHOUT THERE BEING ANY C HANGE IN FACTS, NO DISALLOWANCE ON DEPRECIATION CAN BE MADE IN THE YEA R UNDER CONSIDERATION. WE, THUS, FIND NO REASON TO INTERFERE WITH THE ORDE R OF LD. CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 8. GROUND NO.2 IS WITH RESPECT TO DELETING THE DISA LLOWANCE OF CLAIM OF REDUCTION FROM STOCK OF PACKING MATERIAL AND FINISH ED GOODS. 8.1 A.O. ON PERUSING THE DETAILS OF CLOSING STOCK N OTICED THAT ASSESSEE HAD REDUCED RS.5,18,761/- FROM THE GROSS VALUE OF CLOSI NG STOCK OF PACKING MATERIAL AND RS.27,17,342/- ON ACCOUNT OF PROVISION S FOR DAMAGES OF FINISHED GOODS. ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. T HE SUBMISSION OF ASSESSEE ABOUT THE REASONS OF BEING SHORTAGE FOUND AT T HE TIME OF PHYSICAL ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 5 VERIFICATION IN RESPECT OF PACKING MATERIAL AND THE STOCK OF FINISHED GOODS WERE DAMAGED, WAS NOT FOUND ACCEPTABLE TO THE A.O., AS H E WAS OF THE VIEW THAT ASSESSEE HAS ONLY GIVEN A GENERAL EXPLANATION WITHO UT SUBMITTING ANY PROOF IN SUPPORT OF ITS CLAIM. HE, THEREFORE, DENIED THE CL AIM OF REDUCTION OF RS.5,18,761/- FROM CLOSING STOCK OF PACKING MATERIA L AND RS.27,17,342/- ON STOCK OF FINISHED GOODS AND THUS, MADE AGGREGATE AD DITION OF RS.32,36,003/- TO THE CLOSING STOCK. 9. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS U NDER: 4.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE ADDITION HAS BEEN MADE BY THE A. O. BY DISALLOWING THE CLAIM OF REDUCTION OF RS.5,18,761/-FROM STOCK OF PACKING MAT ERIAL AND RS.27,17,242/- FROM STOCK OF FINISHED GOODS. IT HAS BEEN HELD BY THE A. O. THAT NO PROOF REGARDING THE WRITE OFF HAS BEEN PRODUCED. THE REPORT OF THE TECH NICAL / AUDIT COMMITTEE WHO HAD VERIFIED SUCH STOCK HAS NOT BEEN SUBMITTED. THE A. O. HAS FURTHER HELD THAT THE REDUCTION OF RS.27,17,242/- WAS THE PROVISION OF DA MAGE REDUCED FROM THE STOCK OF FINISHED GOODS AND IT WAS NOT AN ACTUAL WRITE OFF. THE APPELLANT HAS SUBMITTED THAT THE AMOUNT OF RS.5 ,18,761/-WAS REDUCED DUE TO SHORTAGE FOUND AT THE TIME OF PHYSICAL VERIF ICATION, DISCONTINUATION OF PRODUCT, NON-MOVING MATERIALS AND THERE WERE THE NAME OF EAR LIER COMPANY CARNATION NUTRA ANALOG FOODS LTD. PRINTED ON THIS PACKING MATERIALS . THE APPELLANT HAS SUBMITTED A LIST INDICATING STOCK OF PACKING MATERIAL WHICH ALS O GIVES THE DETAIL OF THE STOCK THAT WAS WRITTEN OFF. REGARDING THE STOCK OF DAMAGED GOO DS, IT HAS SUBMITTED A DETAILED ANNEXURE CONTAINING LOCATION OF THE GOODS, QUANTITY RATE AND VALUE OF THE STOCK WRITTEN OFF. THE WRITE OFF IS DULY SUPPORTED BY THE PROCEDURE FOLLOWED BY THE APPELLANT COMPANY AND IS, THEREFORE, FULLY ALLOWABL E. THERE IS NO .REQUIREMENT OF ANY TECHNICAL OR AUDIT COMMITTEE BEFORE THE WRITE OFF. REGARDING THE WRITE OFF OF RS.27,17,242/-, THE APPELLANT HAS GIVEN A COMPLETE LIST OF THE ITEMS WHICH WERE MADE FOR WRITE OFF AND IT WAS MENTIONED THAT THE LIST WA S FOR THE PROVISION OF DAMAGED GOODS AND ON THAT BASIS, THE WRITE OFF HAS ACTUALLY BEEN MADE AND THE GOODS HAVE BEEN REDUCED FROM THE OVERALL STOCK STATEMENT. THE APPELLANT HAS, THEREFORE SUBMITTED THAT EVEN IF IT WAS MENTIONED AS PROVISIO N, THE STOCK WAS ACTUALLY WRITTEN OFF AND, THEREFORE, THE CLAIM SHOULD BE ALLOWED. AFTER CONSIDERING THE VARIOUS SUBMISSIONS AND THE E VIDENCES PLACED BEFORE ME BY THE APPELLANT, I AM INCLINED TO ACCEPT THE SU BMISSION MADE BY THE APPELLANT. THERE IS A PROPER PROCEDURE WHICH HAS BEEN FOLLOWED BY THE APPELLANT. THE LIST OF PACKAGING MATERIAL CONTAINS CLEAR DESCRIPTION .OF T HE GOODS THAT WERE CONSIDERED TO ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 6 BE NOT USABLE. SIMILARLY, THE LIST FOR DAMAGED STOC K CLEARLY SHOW THE MATERIAL, QUANTITY AND DESCRIPTION OF THE VARIOUS ITEMS WHICH WERE LYING AT DIFFERENT GODOWNS ACROSS THE COUNTRY WHICH WERE CONSIDERED TO BE DAMA GED AND ACCORDINGLY THE STATEMENT FOR PROVISION FOR DAMAGE WAS PREPARED AND ON THAT BASIS THE GOODS HAVE ACTUALLY BEEN REDUCED FROM THE CLOSING STOCK OF FIN ISHED GOODS. THE APPELLANT HAS FOLLOWED DUE PROCEDURE AND THE AUDITORS MUST HAVE V ERIFIED THE VARIOUS LISTS BEFORE FINALIZING THE ACCOUNTS. THERE IS NO REQUIREMENT OF ANY SPECIAL REPORT FOR CONSIDERING THE REDUCTION IN STOCK AND THE PROCEDUR E NORMALLY FOLLOWED BY THE COMPANY AS PER ACCOUNTING PRACTICES HAS BEEN FOLLOW ED. THE CLAIM OF THE APPELLANT IS, THEREFORE, SUPPORTED BY FACTUAL EVIDENCES IS AC CORDINGLY ALLOWABLE. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 10. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE I S NOW IN APPEAL BEFORE US. 10.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O . ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE A.O . AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION MADE BY A.O. HAS GIVEN A FINDING THAT THE LIST OF PACKING MATERIAL WHICH WER E WRITTEN OFF CONTAINS CLEAR JUSTIFICATION THE GOODS THAT WERE CONSIDERED TO BE NOT USABLE AND IT SHOWED THE MATERIAL, QUANTITY AND DESCRIPTION OF THE VARIOUS I TEMS WHICH WERE LYING AT DIFFERENT GODOWNS AND WHICH WERE CONSIDERED TO BE A S DAMAGED. WITH RESPECT TO THE REDUCTION FROM CLOSING STOCK OF FINISHED GOO DS, THE LD. CIT(A) HAS GIVEN FINDING THAT ASSESSEE HAS FOLLOWED DUE PROCEDURE FO R WRITING OFF OF THE STOCK AND PROCEDURE HAS BEEN VERIFIED BY AUDITORS AND THE PROCEDURE FOLLOWED BY THE ASSESSEE WAS AS PER ACCOUNTING PRACTICES FOLLOWED B Y THE ASSESSEE. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO C ONTROVERT THE FINDING OF LD. CIT(A). WE, THUS, FIND NO REASON TO INTERFERE WIT H THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 12. GROUND NO.3 IS WITH RESPECT TO DELETING THE DIS ALLOWANCE OF CLAIM OF FOREIGN TRAVEL EXPENSES. ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 7 12.1 A.O., ON VERIFICATION OF THE DETAILS OF TRAVEL LING EXPENSES, NOTICED THAT ASSESSEE HAS INCURRED RS.3,20,467/- ON ACCOUNT OF F OREIGN TOUR. ON PERUSING THE DETAILS OF EXPENSES, A.O. NOTICED THAT ASSESSEE HAD ONLY SUBMITTED THE DETAILS OF PAYMENTS AND THE EXPLANATION OF THE ASSE SSEE WAS GENERAL IN NATURE AND HAD NOT FURNISHED ANY DETAILS OF THE PERSONS/PA RTIES WITH WHOM THE REPRESENTATIVES OF ASSESSEE HAD MET FOR BUSINESS PR OMOTION NOR HAD FURNISHED ANY TOUR REPORT OF THE MEETINGS HELD. A.O. WAS THE REFORE OF THE VIEW THAT IN THE ABSENCE OF DETAILS/PROOF, THE CLAIM OF ASSESSEE CAN NOT BE ALLOWED. HE, THEREFORE, DISALLOWED THE EXPENSES ON ACCOUNT OF FO REIGN TRAVEL EXPENSES OF RS.3,20,467/-. 13. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIE D THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS U NDER: 5.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT THE COMPLETE DETAILS OF EMPLOYEES WHO HAD TRAVELLED ABROAD, DURATION OF VISIT, COUNTR IES VISIT, NATURE AND AMOUNT OF EXPENSES AND PURPOSE OF TRAVEL WAS DULY PROVIDED TO THE A. O. WHICH HAS NOT BEEN ACCEPTED BY THE A. O. THE APPELLANT HAS SUBMITTED T HAT CONSIDERING THE ANNUAL TURNOVER OF MORE THAN RS.195 CRORES, THE FOREIGN TR AVEL EXPENDITURE OF RS.3,20,467/- WHICH IS DULY SUPPORTED BY DOCUMENTARY EVIDENCE SHO ULD BE ALLOWED. I AM INCLINED TO ACCEPT WITH THE SUBMISSION MADE BY THE APPELLANT. THE APPELLANT HAS GIVEN ALL DOCUMENTARY EVIDENCES. IT I S NOTED THAT EMPLOYEES OF THE COMPANY SUCH AS SENIOR VICE PRESIDENT AND MARKETING PERSONS HAVE VISITED DHAKA AND COLOMBO ON VARIOUS DATES FOR BUSINESS PROMOTION . THE EXPENSES SHOWN ARE ALSO VERY REASONABLE AND THE A. O. HAS MERELY DISALLOWED IT ON THE BASIS THAT BUSINESS PURPOSE HAS NOT BEEN ESTABLISHED. THE A. O. WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES MERELY ON THE SUSPICION. THE EVIDENCES THA T HAVE BEEN PLACED ON RECORD ALSO INCLUDES THE CORRESPONDENCE MADE TO THE TRAVEL AGENT WHICH SHOW THAT IT WAS A BUSINESS VISIT. THE DESTINATION THAT HAVE BEEN TRAV ELLED ARE ALSO OF SUCH NATURE WHICH ARE NORMALLY NOT THE DESTINATION FOR PLEASURE VISIT . THE EXPENSES ARE ALSO VERY REASONABLE AND MOST OF THE EXPENSES HAVE DIRECTLY B EEN INCURRED BY THE COMPANY DIRECTLY AND, THEREFORE, THE CLAIM OF THE APPELLANT IS CLEARLY ALLOWABLE. THE DISALLOWANCE MADE BY THE A.O. IS, THEREFORE, DIRECT ED TO BE DELETED AND THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 8 14. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE I S NOW IN APPEAL BEFORE US. 14.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O . ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE A.O . AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAD GIVEN A FINDING THAT THE ASSESSEE HAD FURNISHED COMPETE DETAILS OF EMPLOYEES WHO HAD TRAVELLED ABROAD, DURATION OF VISIT, COUNTRIES VISITED, NATURE AND AM OUNT OF EXPENSES AND PURPOSE OF TRAVEL. HE HAS ALSO NOTED THAT THE EVIDENCES PL ACED ON RECORD INCLUDE THE CORRESPONDENCES MADE WITH THE TRAVEL AGENTS AND THE EXPENSES WERE REASONABLE AS COMPARED TO THE TOTAL TURNOVER OF THE COMPANY. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FI NDING OF LD. CIT(A). WE, THUS, FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 16. GROUND NO.4 IS WITH RESPECT TO DELETING THE EXP ENSES CONSIDERED TO BE CAPITAL IN NATURE. 16.1 A.O. NOTICED THAT ASSESSEE HAS CLAIMED EXPENSE S ON ACCOUNT OF WEB DESIGNING CHARGES (RS.7,30,340/-), TRADEMARK EXPENS ES (RS.13,200/-) AND SURVEY (PR) EXPENSES (RS.45,81,723/-). A.O. WAS OF THE VIEW THAT THE EXPENSES INCURRED FOR WEB DESIGNING WAS TOWARDS DEV ELOPMENT OF A NEW WEBSITE AND THEREFORE, THE EXPENESES WERE CAPITAL I N NATURE. WITH RESPECT TO THE EXPENSES OF TRADEMARK EXPENSES, HE WAS OF THE V IEW THAT ACQUISITION OF TRADE MARK WAS CAPITAL IN NATURE AND EXPENSES RELAT ED TO ITS ACQUISITION SHOULD BE TREATED AS CAPITAL EXPENSES. WITH RESPECT TO EX PENSES INCURRED ON MARKET SURVEY, HE WAS OF THE VIEW THAT SURVEY GIVES ASSESS EE BETTER INPUT TO DEVISE ITS ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 9 STRATEGY FOR FUTURE EXPANSION AND DEVELOPMENT OF BU SINESS AND THEREFORE, THE EXPENSES ON SURVEY GIVES ENDURING BENEFIT AS THE BE NEFIT FLOWS IN VARIOUS YEARS AND THEREFORE, EXPENSE IS OF CAPITAL IN NATURE. HE , ACCORDINGLY, DISALLOWED THE AGGREGATE EXPENSES AMOUNTING TO RS.53,25,263/-. 17. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIE D THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS U NDER: 7.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE A. O. HAS DISALLOWED THE EXPENSE S AS IT WAS HELD BY HIM THAT THESE WERE IN THE NATURE OF CAPITAL EXPENSES. FOR THE SAK E OF CONVENIENCE EACH ITEM IS DISCUSSED SEPARATELY. (I) WEB DESIGNING CHARGES: THE A. O. HAS HELD THAT THE CHARGES WERE INCURRED F OR CREATING NEW WEBSITE WHICH IS THE PROPERTY OF THE ASSESSEE AND ANY EXPENSE INCURR ED FOR ACQUIRING ANY PROPERTY IS A CAPITAL EXPENDITURE. THE APPELLANT HAS RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. INDIAN VISIT.COM PVT. LTD. [ 176 TAXMAN 164]. THE JUDGMENT IS DIRECT ON THE ISSUE. IT HAS BEEN HELD B Y THE HONOURABLE COURT THAT IN CASE OF EXPENDITURE ON WEBSITE, THERE IS NO CHANGE IN THE FIXED ASSETS OF THE ASSESSEE. ALTHOUGH THE WEBSITE MAY PROVIDE AN ENDURING BENEFI T TO AN ASSESSEE, THE INTENT AND PURPOSE BEHIND THE CREATION OF WEBSITE IS NOT TO CREATE ,AN ASSET BUT ONLY TO PROVIDE MEANS FOR DISSEMINATING THE INFORMATION ABOUT THE ASSESSEE. THE COURT HAS FURTHER HELD THAT THE WEBSITE ENABLE COMPANIES TO D O WHAT PRINTED BROCHURES DID BUT IN A MUCH MORE EFFICIENT MANNER. THE DECISION MENTI ONED BY THE APPELLANT IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE. THERE IS NO AS SET THAT HAS BEEN CREATED BUT IT IS A TOOL FOR FACILITATING THE BUSINESS OF THE APPELLANT COMPANY AND, THEREFORE, THE EXPENDITURE ON WEBSITE IS HELD TO BE OF REVENUE NAT URE. (II) TRADE MARK EXPENSES: THE A. O. HAS HELD THE TRADE MARK EXPENSES, WHICH W ERE INCURRED FOR REGISTRATION OF TRADE MARK, AS CAPITAL EXPENSE AS IT WAS INCURRED F OR ACQUIRING THE TRADE MARK WHICH IS CAPITAL IN NATURE. THE APPELLANT HAS RELIED ON T HE DECISION OF FINLAY MILLS LTD. [20 ITR 475 (SC)] AND HAS SUBMITTED THAT IT IS A REVENU E EXPENDITURE. I AM INCLINED TO ACCEPT THE EXPLANATION GIVEN BY THE APPELLANT. THE REGISTRATION OF TRADE MARK IS NOT A REVENUE EXPENDITURE. IT DOES NOT CREATE ANY ASSET O R IT DOES NOT RESULT INTO ANY ADVANTAGE OF ENDURING NATURE. IT IS ONLY DONE TO AV OID THE FUTURE LITIGATION TO PROVE THAT THE TITLE OF THE TRADEMARK IS OWN BY THE PERSO N WHO HAS REGISTERED IT. THEREFORE, THE ADVANTAGE DERIVED IS OF REVENUE IN NATURE. THER EFORE, THE EXPENDITURE IS HELD TO BE REVENUE IN NATURE. (IV) SURVEY EXPSNSES: ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 10 THE A. O. HAS TREATED THE EXPENSES AS CAPITAL AS IT WAS HELD BY HIM THAT IT GIVES ENDURING BENEFIT AND AN EXPENDITURE CAN BE TREATED AS ATTRIBUTABLE TO CAPITAL WHEN IT IS MADE NOT ONLY ONCE FOR ALL BUT WITH A VIEW TO BR INGING IN EXISTENCE AN ASSET OR AN ADVANTAGE FOR AN ENDURING BENEFIT OF TRADE. THE APP ELLANT HAS RELIED ON THE DECISION OF KJS INDIA PVT. LTD. [45 SOT 70 (DEL.)]. IT HAS B EEN SUBMITTED BY HIM THAT THE EXPENSES INCURRED ON MARKET SURVEY SHOULD BE TREATE D AS REVENUE EXPENDITURE AS IT WOULD ENABLE THE APPELLANT TO CONDUCT THE BUSINESS MORE EFFICIENTLY. AFTER CONSIDERING THE SUBMISSION GIVEN BY THE APPELLANT, I AM OF THE CONSIDERED OPINION THAT THE EXPENDITURE INCURRED ON SURVEY SHOULD BE T REATED AS REVENUE IN NATURE FOR THE REASON THAT THE SURVEY EXPENSES HAVE BEEN INCUR RED TO IMPROVE THE EFFICIENCY OF THE BUSINESS BY FINDING OUT CUSTOMERS PREFERENCES F OR SUGAR SUBSTITUTE, MARKET RESEARCH FOR BUTTER MARGARINE, EVALUATION OF COSMET IC PRODUCT, SOFTWARE SUPPORT AND MAINTENANCE ETC. THE APPELLANT COMPANY IS A CONSUME R RELATED COMPANY AND IT HAS TO KEEP THEIR PRODUCTS CONSTANTLY UPDATED KEEPING I N VIEW THE CUSTOMER PREFERENCES AND THE MARKET DEMAND AND REQUIREMENT TRENDS. IT IS A CONTINUOUS ENDEAVOR BY THE APPELLANT COMPANY AND IT CANNOT BE CONSIDERED THAT IT HAS RESULTED IN AN ENDURING BENEFIT. THE COMPANIES IN THESE LINE OF BUSINESS KE EP ON DOING THIS KIND OF RESEARCH AND SURVEYS TO KEEP ABREAST OF THE CONSUMER PREFERE NCES AND THE REQUIREMENTS. WITHOUT CONSTANT UPGRADATION, IT WOULD BE DIFFICULT TO SURVIVE IN THE PRESENT TYPE OF MARKET. THE JUDGMENT RELIED BY THE APPELLANT IS ALS O APPLICABLE ON THE PRESENT FACTS. THEREFORE, THE EXPENDITURE INCURRED BY THE APPELLAN T COMPANY ON SURVEY IS HELD TO BE OF REVENUE NATURE. IN VIEW OF THE ABOVE DISCUSSION, ALL THE THREE EXPE NSES WHICH HAVE BEEN HELD BY THE A. O. AS CAPITAL IN NATURE ARE HELD TO BE OF REVENUE NATURE AND THE DISALLOWANCE MADE BY THE A. O. IS DIRECTED TO BE DE LETED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 18. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE I S NOW IN APPEAL BEFORE US. 18.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O . ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE A.O . AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION ON ACCOUNT OF WEB DESIGNING CHARGES HAS GIVEN A FINDING THAT NO ASSET HAS BEEN CREATED BUT WEB DESIGNING IS ONLY A TOOL FOR FACILITATING THE BUSIN ESS OF THE ASSESSEE AS IT PROVIDES THE MEANS FOR MANAGING THE INFORMATION ABO UT THE ASSESSEE. WITH RESPECT TO TRADE MARK EXPENSES, HE HAS GIVEN A FIND ING THAT THE EXPENSES DID NOT CREATE ANY ASSET OR RESULT INTO ANY ADVANTAGE OF EN DURING NATURE AND THE ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 11 EXPENSES WERE ONLY INCURRED TO AVOID FUTURE LITIGAT ION AND THEREFORE, EXPENSES WERE REVENUE IN NATURE. WITH RESPECT TO SURVEY EXP ENSES, HE HAS GIVEN A FINDING THAT THE EXPENSES HAVE BEEN INCURRED TO IMP ROVE EFFICIENCY OF THE BUSINESS BY FINDING OUT CUSTOMERS PREFERENCES FOR S UGAR SUBSTITUTE, MARKET RESEARCH FOR ITS PRODUCT, EVALUATION OF ITS PRODUCT AND THE EXPENSES ARE NECESSARY IN LINE OF THE BUSINESS. BEFORE US, REVEN UE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDING OF LD. CIT(A). WE, THUS, FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 20. GROUND NO.5 IS WITH RESPECT TO DELETING THE DIS ALLOWANCE MADE U/S.40(A)(IA) OF THE ACT OF RS.36,60,981/- ON ACCOU NT OF GIFT ARTICLES AND PROMOTIONAL ARTICLES. 20.1 A.O. NOTICED THAT ASSESSEE HAD INCURRED EXPENS ES OF RS.36,60,981/- ON ACCOUNT OF GIFT ARTICLES AND WHILE MAKING PAYMENT, ASSESSEE DID NOT DEDUCT TDS. THE SUBMISSION OF THE ASSESSEE THAT IT WAS NO T REQUIRED TO DEDUCT TDS AS IT WAS PURCHASE OF GOODS ON PRINCIPAL-TO-PRINCIPAL BASIS AND IT WAS NOT A CONTRACT FOR CARRYING OUT ANY WORK, WAS NOT FOUND A CCEPTABLE TO THE A.O. AS HE WAS OF THE VIEW THAT EXPENSES ON GIFT ARTICLES CONT AINED THE LOGO OF THE ASSESSEE AND FOR ACQUIRING GIFT AND PROMOTIONAL ART ICLES, ASSESSEE HAD GIVEN WORK CONTRACTS TO THE VENDORS WHO HAD SUPPLIED THE GOODS AS PER THE SPECIFICATION GIVEN BY THE ASSESSEE AND THE GOODS S UPPLIED BY THE VENDORS CANNOT BE SUPPLIED TO ANYONE AND THEREFORE, THE NAT URE OF CONTRACT ENTERED BY THE ASSESSEE WITH THE VENDORS WAS IN NATURE OF WORK S CONTRACT AND THEREFORE, ASSESSEE WAS LIABLE TO DEDUCT TDS U/S.194C OF THE A CT AND THE FAILURE OF WHICH WOULD RESULT IN DISALLOWANCE OF EXPENSES U/S.40(A)( IA) OF THE ACT AND THUS, HE DISALLOWED THE EXPENSES U/S.40(A)(IA) OF THE ACT AN D MADE ADDITION OF RS.36,60,981/-. ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 12 21. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIE D THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS U NDER: 8.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE A. O. HAS TREATED THE EXPENDITUR E ON CERTAIN ITEMS OF SALES PROMOTION EXPENSES AMOUNTING TO RS.36,60,981/- AS L IABLE FOR DEDUCTION OF TDS U/S. 194C OF THE ACT HOLDING IT AS WORK CONTRACT. THE AP PELLANT HAS SUBMITTED THAT IT WAS NOT A WORK CONTRACT. THESE EXPENSES WERE RELATED TO PURCHASE OF PROMOTIONAL ARTICLES AND SAMPLE EXPENSES WHICH CANNOT BE TERMED AS WORK CONTRACT. THE APPELLANT FURTHER MENTIONED THE CBDT CIRCULAR NO. 7 14 AND HAS SUBMITTED THAT IN VIEW OF THE CIRCULAR THE PROVISIONS OF SECTION 194C ARE NOT ATTRACTED. AFTER CONSIDERING THE MATERIAL ON RECORD, IT IS NOT ED THAT THE APPELLANT HAS PURCHASED CERTAIN ITEMS SUCH AS DANGLERS, WALL MOUN TED DISPENSERS, PRINTED LEAFLETS, BAGS ETC. WITH THE LOGO OF THE COMPANY FOR SALES PR OMOTION. THE ITEMS WERE IN THE NATURE OF READY GOODS AND ONLY LOGO OF THE COMPANY WAS PRINTED ON THE ITEMS. THESE ITEMS APPEARED TO BE THE ITEMS AVAILABLE IN THE MAR KET OFF THE SHELF. THE APPELLANT HAS ONLY ADDED ITS LOGO ON THOSE ITEMS TO PROMOTE I TS BUSINESS. IT IS NOWHERE INDICATED IN THE ASSESSMENT ORDER OR THE FACTS THAT THE DESIGN AND DESCRIPTION OF THE ARTICLE WAS PROVIDED BY THE APPELLANT. THE RELIANCE PLACED BY THE A. O. ON THE DECISION OF ITAT, PUNE BENCH IN CASE OF BDA LIMITED (SUPRA) IS ALSO NOT JUSTIFIED AS IN THAT CASE, THE SPECIFICATIONS OF THE LABELS TO B E PRINTED ON LIQUOR BOTTLES WERE GIVEN BY THE BUYER AND THOSE LABELS WERE SPECIFICALLY PRI NTED FOR THE BUYER AND, THEREFORE, IT WAS IN THE NATURE OF WORKS CONTRACT. IN THE PRES ENT CASE, THERE ARE NO SUCH FACTS ON RECORD. IN VIEW OF THE ABOVE DISCUSSION, THE DISALLOWANCE M ADE BY THE A. O. U/S. 40(A)(IA) IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 22. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE I S NOW IN APPEAL BEFORE US. 22.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O . ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE A.O . AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAD NOTED THAT THE ITEMS THAT WERE PURCHASED BY THE ASSESSEE WERE FOR SALES PROMOTION, WERE IN THE NATURE OF READY GOODS AND ONLY LOGO OF THE COMPANY WAS PRINTED ON THE ITEMS ITA NO.1674/AHD/2012 A.Y. 09-10 [ACIT(OSD) VS. M/S. ZYDUS WELLNESS LTD.] PAGE 13 AND THE LOGO WAS ADDED TO PROMOTE THE BUSINESS. HE HAS FURTHER DISTINGUISHED THE DECISION OF ITAT, PUNE BENCH IN CASE OF BDA LIM ITED VS. ITO 84 ITD 442, WHICH WAS RELIED UPON BY THE A.O. REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDING OF LD. CIT(A) N OR HAS PLACED ANY CONTRARY BINDING DECISION. WE, THUS, FIND NO REASON TO INT ERFERE WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 24. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 06 / 04/2016 SD/- SD/ ( SHAILENDRA KUMAR YADAV) (ANIL CHA TURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD: DATED. 06/04/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- *+ , -. / APPELLANT /+ 01-. / RESPONDENT 2+ 345 6 / CONCERNED CIT 4+ 6- , / CIT (A) 9+ :; < 045 , 45) = 3 / DR, ITAT, AHMEDABAD >+ < ?@ A B / GUARD FILE. BY ORDER/ ,/= ,! , 45) = 3