ASST CIT CEN CIR 1, MUMBAI V. SEMINIS SEEDS INDIA LTD ( FORMELRY KNOWN AS M/S. MONSANTO HOLDINGS P. LTD), MUMBAI

ITA 5146/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62438 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2003-2004
• Appeal Filed On: 04-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJWANI
• Assessee Lawyers: KIRIT KAMDAR SHRI VIPUL SONI
• Keywords: Business expenditure

Judgement Text

I.T.A. NO. 5146/MUM/2011 M/S. SEMINIS SEEDS INDIA LTD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI R. S. SYAL, ACCOUNTATN MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 5146/MUM/2011 ASSESSMENT YEAR : 2003-04 DY. CIT-8(2), R.NO.216-A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 VS. M/S. SEMINIS SEEDS INDIA LTD. (FORMERLY KNOWN AS M/S. MONSANTO HOLDINGS PVT. LTD.) AHURA CENTRE, 5 TH FLOOR, 96, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI-93 PAN NO: AAACN 9499 F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A. C. TEJWANI RESPONDENT BY : SHRI KIRIT KAMDAR / SHRI VIPUL SONI DATE OF HEARING : 16.05.2012 DATE OF PRONOUNCEMENT : ORDER PER VIVEK VARMA (J.M.) : THE APPEAL IS FILED BY THE DEPARTMENT AGAINST THE O RDER OF CIT(A) 17, MUMBAI, DATED 17/03/2011, WHEREIN THE CIT(A) HA S DELETED THE DISALLOWANCE OF EXPENSES CLAIMED AT RS. 52,66,260 O N ACCOUNT OF R & D. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING DISALLOWANCE OF EX PENSES CLAIMED BY THE ASSESSEE ON RESEARCH AMOUNTING TO RS. 52,66, 260 WITHOUT APPRECIATING THE FACTS OF THE CASE. I.T.A. NO. 5146/MUM/2011 M/S. SEMINIS SEEDS INDIA LTD. PAGE 2 OF 4 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN HOLDING RESEARCH EXPENDITURE AS REVENUE IN NATURE, WITHOUT APPRECIATING THE FACT THAT THE EXPE NDITURE ON R & D WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF OBT AINING ENDURING BENEFIT AND HENCE THE A.O. RIGHTLY TREATED THE SAME AS CAPITAL IN NATURE. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORE D. 3. FROM THE GROUNDS AND THE FACTS EMERGING FROM THE ASSESSMENT ORDER, THE AO HAD TREATED THE EXPENSES AS CAPITAL I N NATURE, BECAUSE EXPENDITURE ON R&D WILL GIVE THE BENEFIT TO THE AS SESSEE NOT ONLY FOR ONE YEAR BUT ALSO FOR YEARS TO COME. 4. AGGRIEVED THE ASSESSEE APPROACHED THE CIT(A), WH O HELD THAT EXPENSES INCURRED ON R&D ARE ROUTINE BUSINESS EXPEN SES AND, HE THEREFORE, ALLOWED THE EXPENSES TO BE REVENUE IN NA TURE. 5. AGAINST THIS ORDER, THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 6. BEFORE US THE DR RELIED ON THE ORDER OF THE AO A ND ALSO PLACED RELIANCE ON THE DECISIONS OF HONBLE GUJRAT HIGH CO URT, IN THE CASES OF CIT VS SHRI DIGVIJAY CEMENT CO. LTD, REPORTED IN 15 9 ITR 253 AND VIKRAM MILLS LTD. CIT, REPORTED IN 151 CTR 701. 7. WE HAVE GONE THROUGH THE FACTS AS CULLED OUT FRO M THE ORDERS OF THE REVENUE AUTHORITIES AND WE FIND THAT THE DETAIL S OF EXPENSES WERE PRODUCED BEFORE THE CIT(A) AND THE EXPENSES WERE IN CURRED TO SHOWCASE ITS PRODUCT AND PROMOTION THROUGH VARIOUS TRIAL AND TESTING OF ITS PRODUCTS IN DIFFERENT LOCATIONS IN INDIA, BESIDES H AVING ITS OWN IN HOUSE R&D UNIT. THE CIT(A), ON FACTUAL FINDINGS, HAD HELD THAT NORMAL BUSINESS EXPENSES LIKE SALARIES, WAGES, ADVERTISEME NT, COMMISSION ETC. WERE BEING PAID/EXPENDED, THESE, BY NO MEANS COULD BE TERMED TO BE EXPENSES WHICH SHALL RESULT IN ENDURING BENEFIT BUT ARE NORMAL ALLOWABLE BUSINESS EXPENSES. WE FIND THAT TWO JUDGM ENTS CITED BY THE DR ARE ALSO OF NO HELP, BECAUSE IN SHRI DIGVIJAY CE MENT, EXPENSES WERE I.T.A. NO. 5146/MUM/2011 M/S. SEMINIS SEEDS INDIA LTD. PAGE 3 OF 4 INCURRED IN OBTAINING FEASIBILITY REPORT FOR SETTIN G UP SHIPYARD. OBJECTS OF EXPENDITURE TO BRING INTO EXISTENCE ASSET OR ADV ANTAGE OF ENDURING NATURE. EXPENSE WAS HELD TO BE CAPITAL IN NATURE AN D DEDUCTIBLE. AND IN VIKRAM MILLS CASE, THE DISPUTE WAS ON ACCOUNT OF BE TTERMENT CHARGES, HELD TO BE CAPITAL IN NATURE. WE FIND THAT BOTH THE SE CASES HAVE DISTINGUISHING FACTS WITH THAT OF THE ASSESSEE. AS SEEN FROM THE ORDER OF THE CIT(A), THE EXPENSES WERE BASICALLY FOR SALARIE S, WAGES, ADVERTISEMENT, WHICH CANNOT BE SAID TO BRING ANYTHI NG OF ENDURING NATURE. 8. WE THEREFORE, HOLD THAT THE ASSESSEE RIGHTLY CLA IMED THE EXPENSES AND WE UPHOLD THE DECISION OF THE CIT(A). 9. APPEAL FILED BY THE DEPARTMENT IS, THUS DISMISSE D. ORDER PRONOUNCED ON THIS 23 RD DAY OF MAY, 2012. SD/- - SD/- ( R. S. SYAL ) ( VIVEK VARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 23.05.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI