MARVEL LIFE SCINECES PVT. LTD., MUMBAI V. I.T.O. 3(2)(2), MUMBAI

ITA 4875/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0311 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: H N MOTIWALA
• Keywords: Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 4875/MUM./2012 ( ASSESSMENT YEAR : 2008 - 09 ) MARVEL LIFE SCINECES PVT. LTD., C/O. H.N. MOTIWALLA & CO. 508, SHARDA CHAMBERS, 33 NEW MARINES LINES MUMBAI 400020 PAN AABCM9532M . APPELLANT V/S ITO 3(2)(2) MUMBAI . RESPONDENT ASSESSEE BY : SHRI. H.N. MOTIWALA REVENUE BY : SHRI. SUMAN KUMAR DATE OF HEARING - 14.06.2017 DATE OF ORDER 14 .06.2017 O R D E R PER: B.R. BASKARAN, ACCOUNTANT MEMBER THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18 - 05 - 2012 PASSED BY LD CIT(A) - 4, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2008 - 09. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF PRODUCT DEVELOPMENT EXPENSES. MARVEL LIFE SCINECES PVT. LTD., ITA NO.4875/MUM./2012 2 2. THE ASSESSEE HAD DEVELOPED PHARMA PRODUCTS VIZ., PYRANTER TABLETS, PRANTEL PAMOTE ORAL SUSPENSION, BIOSULINE AND REGISTERED THEM IN RUSSIA. THE ASSESSEE TR EATED THE PRODUCT DEVELOPMENT EXPENSES AS DEFERRED REVENUE EXPENSES AND AMORTISED THE SAME @ 20% EVERY YEAR FROM THE ASSESSMENT YEAR 2005 - 06 ONWARDS, SINCE IT STARTED RECEIVING ROYALTY FROM TH AT YEAR. THE RETURNS OF THE ASSESSEE WERE PROCESSED U/S 143(1 ) AND ACCORDINGLY THE CLAIM CAME TO BE ALLOWED. DURING THE YEAR, THE RETURN FILED BY THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. 3. BEFORE THE AO, THE ASSESSEE PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTR IAL INVESTMENT CORP LTD (225 ITR 802) AND CONTENDED THAT THE DEFERRED REVENUE EXPENDITURE SHOULD BE ALLOWED AS DEDUCTION. THE ASSESSEE ALSO SOUGHT TO CLAIM THE DEDUCTION U/S 35 OF THE ACT. THE AO WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AN D ACCORDINGLY DISALLOWED THE CLAIM OF RS.12,30,748/ - MADE BY THE ASSESSEE TOWARDS 20% OF PRODUCT DEVELOPMENT EXPENDITURE , AS THE EXPENSES WERE NOT INCURRED DURING THE YEAR UNDER CONSIDERATION, BUT IN AN EARLIER YEAR . 4. THE LD CIT(A) ALSO CONFIRMED T HE DECISION OF THE AO BY HOLDING THAT THERE IS NO SPECIFIC PROVISION FOR ALLOWING DEFERRED REVENUE EXPENDITURE. BEFORE LD CIT(A), THE ASSESSEE PLACED RELIANCE ON THE DECISION RENDERED IN THE CASE OF HARIGCRANK SHAFTS LTD (325 ITR 304)(DELHI). THE LD CIT( A), HOWEVER, DISTINGUISHED THE SAME BY HOLDING THAT THE AO, IN THE ABOVE SAID CASE, HAD ACCEPTED THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT, WHEREAS, IN THE INSTANT CASE, THE EARLIER YEARS ASSESSMENTS HAVE BEEN DONE U/S 1 43(1) OF THE ACT. 5. THE LD A.R PLACED HIS RELIANCE ON THE SUBMISSIONS MADE BEFORE THE TAX AUTHORITIES AS WELL AS THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION (SUPRA). HE SUBMITTED THAT THE ASSES SEE HAS RECEIVED ROYALTY OVER THE YEARS AND HENCE THE ASSESSEE HAS MARVEL LIFE SCINECES PVT. LTD., ITA NO.4875/MUM./2012 3 DECIDED TO CLAIM THE DEDUCTION IN INSTALMENTS. HE SUBMITTED THAT THE ENTIRE PRODUCT DEVELOPMENT EXPENDITURE HAS TO BE ALLOWED AS REVENUE EXPENDITURE, BUT THE ASSESSEE HAS CHOSEN TO CLAIM I T AS DEFERRED REVENUE EXPENDITURE. HE SUBMITTED THAT 80% OF THE EXPENDITURE HAS BEEN ALLOWED IN OTHER YEARS AND HENCE THE BALANCE 20% ALONE SHOULD NOT HAVE BEEN DISALLOWED DURING THE YEAR UNDER CONSIDERATION BY FOLLOWING THE PRINCIPLES OF CONSISTENCY . 6 . ON THE CONTRARY, THE LD D.R PLACED STRONG RELIANCE ON THE ORDER PASSED BY LD CIT(A). 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE CONCEPT OF DEFERRED REVENUE EXPENDITURE CAME TO BE DISCUSSED BY HONBLE SUPREME COURT IN THE CASE OF TAPARIA TOOLS LTD (CIVIL APPEAL NOS.6366 6368 OF 2003 DATED 23 - 3 - 2015), WHEREIN IT WAS HELD BY HONBLE APEX COURT AS UNDER: - 18 . WHAT FOLLOWS FROM THE ABOVE IS THAT NORMALLY THE ORDINARY RULE IS TO BE APPLIED, NAMELY, REVENUE EXPENDITURE INCURR ED IN A PARTICULAR YEAR IS TO BE ALLOWED IN THAT YEAR. THUS, IF THE ASSESSEE CLAIMS THAT EXPENDITURE IN THAT YEAR, THE IT DEPARTMENT CANNOT DENY THE SAME. HOWEVER, IN THOSE CASES WHERE THE ASSESSEE HIMSELF WANTS TO SPREAD THE EXPENDITURE OVER A PERIOD OF E NSUING YEARS, IT CAN BE ALLOWED ONLY IF THE PRINCIPLE OF 'MATCHING CONCEPT' IS SATISFIED, WHICH UPTO NOW HAS BEEN RESTRICTED TO THE CASES OF DEBENTURES '. WE NOTICE THAT THE HONBLE SUPREME COURT HAS HELD THAT THE DEFERRED REVENUE EXPENDITURE CAN BE ALLOWED PROVIDED THE PRINCIPLE OF MATCHING CONCEPT IS SATISFIED. IN THE INSTANT CASE, THE CASE OF THE ASSESSEE WAS THAT IT HAS DECIDED TO TREAT THE PRODUCT DE VELOPMENT EXPENSES AS DEFERRED REVENUE EXPENDITURE, SINCE IT HAS RECEIVED ROYALTY INCOME IN THE ENSUING YEARS. THUS, WE NOTICE THAT THE CLAIM OF THE ASSESSEE FALLS UNDER THE PRINCIPLE OF REVENUE COST MATCHING CONCEPT , AS OBSERVED BY HONBLE SUPREME CO URT . ACCORDINGLY WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE CLAIM MADE BY THE ASSESSEE. MARVEL LIFE SCINECES PVT. LTD., ITA NO.4875/MUM./2012 4 8. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW IMPUGNED CLAIM OF THE ASSESSEE . 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 .06.2017 SD/ - SD/ - AMARJIT SINGH B.R BASKARAN JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14 .06.2017 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE. BY ORDER NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI MARVEL LIFE SCINECES PVT. LTD., ITA NO.4875/MUM./2012 5