Kee Pharma Ltd., New Delhi V. ITO, New Delhi

ITA 6092/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8027 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 12-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH GOEL; HIMANSHU AGGARWAL CAS
• Keywords: Capital asset; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure; Set aside
• Section: 143(3); 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6092/DEL/2015 ASSESSMENT YEAR: 2011-12 KEE PHARMA LTD., 3 RD FLOOR, A-8, NARAINA INDUSTRIAL AREA PHASE-II, NEW DELHI. PAN: AAACK0120C VS ITO, WARD-14(3), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHISH GOEL & SHRI HIMANSHU AGGARWAL, CAS REVENUE BY : MS RINKU SINGH, SR. DR DATE OF HEARING : 04.04.2019 DATE OF PRONOUNCEMENT : 16.04.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 2 ND SEPTEMBER, 2015 OF THE CIT(A)-5, DELHI RELATING TO ASSESSMENT YEAR 2011-12. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE LD. A.O. TREATING THE AMOUNT INCURRED ON ACCOUNT OF RESEARCH &DEVELOPMENT EXPENS ES OF RS.47,15,000/- AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE. ITA NO.6092/DEL/2015 2 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF PHARMACEUT ICALS. IT FILED ITS RETURN OF INCOME ON 22 ND SEPTEMBER, 2011 DECLARING TOTAL INCOME OF RS.1,42, 670/-. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.46,93,531/- UNDER THE HEAD RESEARCH & DEVELOPMENT CHARGES. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE A NOTE ON RESEARCH & DEVELOPMENT EXPENSES TO WHICH THE ASSESSEE REPLIED AS UNDER:- KEE PHARMA LTD. HAD ENTERED INTO ON AN AGREEMENT F OR SALE OF DESIGN FOR THE PROCESS TO MANUFACTURE THE DRUG ATORVASTATIN, WITH CBZ CHEMICALS LTD., A UK BASED COMPANY, IN MAY 2009. UNDER THE AGREEMENT, A TOTAL CONSIDERATION OF US $ 5,50,000/- WOULD BE PAYABLE BY KEE PHARMA LTD, TO C BZ CHEMICALS LTD., IN SEVERAL STAGES, THE PAYMENTS BEING MILESTONE LINKED. KEE PH ARMA LTD. WOULD DO RESEARCH AND DEVELOPMENT ACTIVITIES ON THE DESIGN TO DEVELOP A UNIQUE PATENTABLE PROCESS WHICH WOULD ULTIMATELY LEAD TO THE PRODUCTION OF TH E DRUG ATORVASTATIN. THE PATENT FOR THE PROCESS SO DEVELOPED WOULD ALSO BE FILED BY KEE PHARMA LTD. IN ITS OWN NAME. UNDER THE SCHEDULE OF PAYMENTS; AS DETAILED I N THE AGREEMENT; VIDE CLAUSE 4.D.I, AN AMOUNT OF US $ 1,00,000/- WAS PAYABLE TO CBZ BY KEE PHARMA LTD. 4. FROM THE REPLY FURNISHED BY THE ASSESSEE, THE AS SESSING OFFICER INFERRED THAT THE DESIGN FOR THE PROCESS TO MANUFACTURE THE DRUG ULTI MATELY MAKE THE COMPANY ABLE TO PRODUCE THE DRUG IN THE FORTHCOMING YEARS AND THE B ENEFIT OF THE SAME WILL GO ON BEYOND THE PRESENT FINANCIAL YEAR. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PURCHASE OF DESIGN SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE. THE ASSESSEE REITERATED THAT THE EXPENSES SHOULD BE ALLOWED AS R EVENUE EXPENDITURE. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLAN ATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM, THE ASSESSEE COMPANY HAS PAID FOR THE PROCUREMENT OF DESIGN FOR THE PROCESS OF MANUFACTURING OF THE DRUG AND THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF DRUG. THEREFORE, THE D ESIGN SO PROCURED WOULD BE ITA NO.6092/DEL/2015 3 BENEFICIAL FOR MORE THAN ONE YEAR. HE, THEREFORE, TREATED THE EXPENDITURE AS CAPITAL IN NATURE AND ALLOWED DEPRECIATION @ 25% AS APPLICABLE TO INTANGIBLE ASSETS. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.3 5,36,250/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE THE CIT(A), IT WAS ARGUED THAT RESEARCH A ND DEVELOPMENT IS AN ONGOING PROCESS IN A PHARMACEUTICAL COMPANY AND IT DOES NOT BRING INTO EXISTENCE ANY NEW ASSETS, BUT, ONLY HELPS THE ASSESSEE TO CARRY OUT B USINESS OPERATIONS IN A MORE EFFICIENT MANNER. THE ASSESSEE FURNISHED COPIES OF DRUG AGRE EMENT FOR SALE OF DESIGN FOR THE PROCESS TO MANUFACTURE THE DRUG ATORVASTATIN DATED 18 TH MAY, 2009. 6. HOWEVER, THE LD.CIT(A) WAS NOT SATISFIED WITH TH E ARGUMENTS ADVANCED BY THE ASSESSEE. RELYING ON THE DECISION OF THE HON'BLE D ELHI HIGH COURT IN THE CASE OF CIT VS. J.K. SYNTHETICS LTD. REPORTED IN 309 ITR 371 (D EL), HE HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING THE R&D EXPENDITU RE AS CAPITAL IN NATURE. WHILE HOLDING SO, HE FURTHER NOTED THAT IN VIEW OF THE A BSOLUTE TRANSFER OF ALL TECHNICAL KNOWLEDGE TO THE ASSESSEE, THE RIGHT OF THE ASSESSE E TO SELL/RESELL/LICENCE THE DESIGN OR THE PROCESS TO A THIRD PARTY AS WELL AS THE EXCLUSI VE RIGHT CONFERRED ON THE ASSESSEE BY THE SAID AGREEMENTS THE IMPUGNED PAYMENTS ARE TO B E HELD IN THE NATURE OF CAPITAL EXPENDITURE. THE ARGUMENT OF THE ASSESSEE THAT SIM ILAR EXPENDITURE OF RS.20,59,826/- INCURRED IN THE F.Y. 2008-09 RELEVANT TO ASSESSMENT YEAR 2009-10 WAS ACCEPTED BY THE ASSESSING OFFICER AND NO DISALLOWANCE WAS MADE IN T HE ORDER PASSED U/S 143(3), WAS ITA NO.6092/DEL/2015 4 REJECTED BY THE CIT(A) ON THE GROUND THAT THE PRINC IPLE OF RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS AND EVERY YEAR IS INDEPEN DENT. 7. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOSE D THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE DECISION RELIED ON BY THE LD. CI T(A) IN THE CASE OF J.K. SYNTHETICS LTD. (SUPRA) IN FACT SUPPORTS THE CASE OF THE ASSES SEE. THE LD. COUNSEL DREW THE ATTENTION OF THE BENCH TO CLAUSE (1) PARA 38 OF THE ORDER WHICH HAS BEEN REPRODUCED BY THE CIT(A) AND WHICH READS AS UNDER:- (I) THE EXPENDITURE INCURRED TOWARDS INITIAL OUTL AY OF BUSINESS WOULD BE IN THE NATURE OF CAPITAL EXPENDITURE, HOWEVER, IF THE EXPENDITURE IS INCURRED WHILE THE BUSINESS IS ON GOING, IT WOULD HAVE TO BE ASCER TAINED IF THE EXPENDITURE IS MADE FOR ACQUIRING OR BRINGING INTO EXISTENCE AN AS SET OR AN ADVANTAGE OF AN ENDURING BENEFIT FOR THE BUSINESS, IF THAT BE SO, I T WILL BE IN THE NATURE OF CAPITAL EXPENDITURE. IF THE EXPENDITURE, ON THE OTHER HAND, IS FOR RUNNING THE BUSINESS OR WORKING IT, WITH A VIEW TO PRODUCE PROFITS, IT WOUL D BE IN THE NATURE OF REVENUE EXPENDITURE. 9. HE SUBMITTED THAT THE HON'BLE HIGH COURT HAS LAI D DOWN THE TEST FOR CERTAIN EXPENDITURE TO BE CLASSIFIED AS CAPITAL IN NATURE O NLY WHEN THE EXPENDITURE INCURRED TOWARDS INITIAL OUTLAY OF BUSINESS. FURTHER, IF TH E EXPENDITURE IS INCURRED WHILE THE BUSINESS IS ONGOING, IT WOULD HAVE TO BE ASCERTAINE D IF THE EXPENDITURE IS MADE FOR ACQUIRING OR BRINGING INTO EXISTENCE AN ASSET OR AN ADVANTAGE OF AN ENDURING NATURE FOR THE BUSINESS. IF THE EXPENDITURE IS FOR RUNNING TH E BUSINESS OR WORKING IT WITH A VIEW TO PRODUCE PROFITS, IT WOULD BE IN THE NATURE OF RE VENUE EXPENDITURE. REFERRING TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS. PRIYA VILLAGE ITA NO.6092/DEL/2015 5 ROADSHOWS LTD., REPORTED IN 332 ITR 594 (DEL) , HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION, FOLLOWING VARIOUS DECIS IONS HAS HELD THAT WHEN EXPENDITURE INCURRED FOR PREPARATION OF FEASIBILITY REPORT OF A NEW PROJECT IS IN RESPECT OF THE SAME BUSINESS WHICH IS ALSO CARRIED ON BY THE ASSESSEE E VEN IF IT IS FOR EXPANSION OF BUSINESS, NAMELY, TO START A NEW UNIT WHICH IS SAME AS EARLIER BUSINESS AND THERE IS A UNITY OF CONTROL AND A COMMON FUND, THEN, SUCH EXPE NDITURE IS TO BE TREATED AS REVENUE EXPENDITURE. HE ACCORDINGLY SUBMITTED THAT SINCE T HE ASSESSEE IN THE INSTANT CASE IS ALREADY IN THE BUSINESS OF MANUFACTURING AND TRADIN G OF PHARMACEUTICALS AND SIMILAR EXPENDITURE WAS ALLOWED IN THE PAST BY THE ASSESSIN G OFFICER IN THE ORDER PASSED U/S 143(3) AND 143(1), THEREFORE, IN VIEW OF THE DECISI ON OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRIYA VILLAGE ROADSHOWS LTD. (SUPRA), THE EXPENDITURE HAS TO BE ALLOWED AS REVENUE EXPENDITURE. HE ACCORDINGLY SUB MITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THE GROUND RAISED BY THE AS SESSEE BE ALLOWED. 10. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED O N THE ORDER OF THE CIT(A). SHE SUBMITTED THAT BY INCURRING HUGE EXPENDITURE ON R&D , THE ASSESSEE HAS CREATED A CAPITAL ASSET OF ENDURING BENEFIT, THEREFORE, THE C IT(A) WAS FULLY JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SAME AS CAPITAL EXPENDITURE AND ALLOWING DEPRECIATION ON THE SAME. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THE ASSES SING OFFICER TREATED THE EXPENDITURE OF RS.46,93,531/- INCURRED BY THE ASSESSEE AS RESEA RCH AND DEVELOPMENT CHARGES AS ITA NO.6092/DEL/2015 6 CAPITAL IN NATURE AS AGAINST REVENUE IN NATURE TREA TED BY THE ASSESSEE ON THE GROUND THAT THE DESIGN PROCURED BY THE ASSESSEE COMPANY WILL BE BENEFICIAL TO THE ASSESSEE FOR MORE THAN ONE YEAR. WE FIND THE LD.CIT(A), RELYING UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF J.K. SYNTHETICS LTD . (SUPRA) UPHELD THE ACTION FO THE ASSESSING OFFICER. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS AN EXISTING COMPANY ENGAGED IN THE BUSI NESS OF MANUFACTURING AND TRADING OF PHARMACEUTICALS AND IT HAS NOT MADE ANY INVESTM ENT IN THE INITIAL OUTLAY OF BUSINESS AND HAS NOT MADE ANY PAYMENTS FOR PURCHASE OF ANY P LANT OR OTHER SIMILAR ASSETS. IT IS ALSO THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESS EE THAT IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF PRIYA VILLA GE ROADSHOWS LTD. (SUPRA), THE EXPENDITURE INCURRED FOR PREPARATION OF FEASIBILITY REPORT OF A NEW PROJECT WHICH IS IN RESPECT OF SAME BUSINESS ALREADY CARRIED ON BY THE ASSESSEE, EVEN IF IT IS FOR EXPANSION OF BUSINESS, NAMELY, TO START A NEW UNIT WHICH IS S AME AS EARLIER BUSINESS AND THERE IS UNITY OF CONTROL AND COMMON FUND, THEN, SUCH EXPEND ITURE HAS TO BE TREATED AS A REVENUE EXPENDITURE. 12. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE ASSESSEE WAS ALREADY IN THE BUSINESS OF MANUFACTURING AND TRADING OF PHARMACEUTICALS. SIMILAR EXPENDITURE WA S INCURRED IN THE TWO PRECEDING ASSESSMENT YEARS ALSO. FROM THE COPY OF THE ASSESS MENT ORDER FOR ASSESSMENT YEAR 2009-10 PASSED U/S 143(3) ON 5 TH DECEMBER, 2011, A COPY OF WHICH IS PLACED AT PAGE 69-75 OF THE PAPER BOOK, WE FIND THE ASSESSING OFFI CER HAS NOT MADE ANY ADDITION BY ITA NO.6092/DEL/2015 7 TREATING THE EXPENDITURE OF RS.20,59,826/- AS CAPIT AL IN NATURE. SIMILARLY, IN THE ASSESSMENT YEAR 2010-11, ALTHOUGH THE ASSESSEE HAS CLAIMED SIMILAR EXPENDITURE, NO ADDITION HAS BEEN MADE EVEN THOUGH THE ORDER IS PAS SED U/S 143(1). THERE IS NOTHING ON THE RECORD TO SUGGEST THAT ACTION U/S 147 OR 263 HAVE BEEN INITIATED FOR THE TWO PRECEDING ASSESSMENT YEARS. THE EXPENDITURE INCURR ED IS ALSO NOT DOUBTED BY THE REVENUE AND THE SAME HAS BEEN INCURRED IN THE REGUL AR COURSE OF BUSINESS I.E., FOR THE PURPOSE OF MANUFACTURING PHARMACEUTICALS. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF PRIYA VILLAGE ROADSHOWS LTD. (SUPRA). IN THAT CASE, THE ASSESSEE-COMPANY, WHICH WAS ALREADY INVOLVED IN THE BUSINESS OF RUNNING CINEMAS, WAS PURSUING OWNERS OF A CINEMA HALL FOR TAKING OVER THE CINEMA FOR CONVERSION INTO A MULTIPLEX AND OPERATIO N AND MANAGEMENT THEREOF. IN ORDER TO CARRY OUT TECHNICAL AND FINANCIAL FEASIBIL ITY, THE ASSESSEE AVAILED SERVICES OF AN ARCHITECT AND PAID HIM CERTAIN AMOUNT AS FEE IN THE PRECEDING YEAR. HOWEVER, THE PROJECT WAS NOT FOUND TO BE FINANCIALLY AND TECHNIC ALLY VIABLE. THE ASSESSEE, THEREFORE, DECIDED TO DROP THE PROJECT AND AMOUNT SPENT WAS C LAIMED AS REVENUE EXPENDITURE. SIMILARLY, THERE WAS ANOTHER PROPOSAL BEFORE THE AS SESSEE TO TAKE OVER ONE SINGLE SCREEN CINEMA FOR THE PURPOSE OF CONVERSION INTO A FOUR-SCREEN CINEMA COMPLEX. DETAILED TECHNICAL FEASIBILITY WAS CARRIED OUT AND BUILDING PLANS WERE PREPARED WITH THE HELP OF ENGINEERS AND ARCHITECTS, WHO WERE PAID REMUNERATION. ON SUBSEQUENT MARKET RESEARCH, THE ASSESSEE PREFERRED TO RETAIN S INGLE-SCREEN CINEMA AND PROPOSAL OF CONVERSION OF THE SAID CINEMA INTO A MULTIPLEX WAS SHELVED. THAT EXPENDITURE WAS ALSO CLAIMED AS REVENUE EXPENDITURE BY THE ASSESSEE. THE REVENUE AUTHORITIES HELD SUCH ITA NO.6092/DEL/2015 8 EXPENDITURE TO BE CAPITAL EXPENDITURE ON THE GROUND THAT EXPENSES WERE INCURRED FOR CREATING NEW ASSETS. ON APPEAL, THE TRIBUNAL HELD T HAT THE EXPENSES ON NEW PROJECT DEVELOPMENT WERE ALLOWABLE AS BUSINESS EXPENDITURE UNDER SECTION 37. THE REVENUE FILED APPEAL BEFORE THE HON'BLE HIGH COURT AND THE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY O BSERVING AS UNDER:- 10. A HARMONIOUS READING OF THE AFORESAID TWO JUDG MENTS OF THIS COURT, NAMELY, TRIVENI ENGG. WORKS LTD. (SUPRA) ON THE ONE HAND AND MODI INDUSTRIES (SUPRA) ON THE OTHER, WOULD CLEARLY DEMONSTRATE THA T ONE HAS TO KEEP IN MIND THE ESSENTIAL PURPOSE FOR WHICH SUCH AN EXPENDITURE IS INCURRED. IF THE EXPENDITURE IS INCURRED FOR STARTING NEW BUSINESS WHICH WAS NOT CA RRIED OUT BY THE ASSESSEE EARLIER, THEN SUCH EXPENDITURE IS HELD TO BE OF CAP ITAL NATURE. IN THAT EVENT IT WOULD BE IRRELEVANT AS TO WHETHER PROJECT REALLY MA TERIALISED OR NOT. HOWEVER, IF THE EXPENDITURE INCURRED IS IN RESPECT OF THE SAME BUSINESS WHICH IS ALREADY CARRIED ON BY THE ASSESSEE, EVEN IF IT IS FOR THE E XPANSION OF THE BUSINESS, NAMELY, TO START NEW UNIT WHICH IS SAME AS EARLIER BUSINESS AND THERE IS UNITY OF CONTROL AND A COMMON FUND, THEN SUCH AN EXPENSE IS TO BE TR EATED AS BUSINESS EXPENDITURE. IN SUCH A CASE WHETHER NEW BUSINESS/AS SET COMES INTO EXISTENCE OR NOT WOULD BECOME A RELEVANT FACTOR. IF THERE IS NO CREATION OF NEW ASSET, THEN THE EXPENDITURE INCURRED WOULD BE OF REVENUE NATURE. HO WEVER, IF THE NEW ASSET COMES INTO EXISTENCE WHICH IS OF ENDURING BENEFIT, THEN SUCH EXPENDITURE WOULD BE OF CAPITAL NATURE. 11. WHEN WE KEEP IN MIND THE AFORESAID FINE DISTINC TION, THE CONCLUSION ON THE FACTS OF THIS CASE BECOMES OBVIOUS. THE EXPENDI TURE WAS INCURRED IN RESPECT OF SAME BUSINESS WHICH IS ALREADY CARRIED ON BY THE ASSESSEE. TWO PROJECTS WHICH WERE UNDERTAKEN WERE FOR THE EXPANSION OF SAME BUSI NESS, NAMELY, ONE FOR TAKING OVER SAVITRI CINEMA FOR CONVERSION INTO MULTIPLEX A ND OPERATION AND MANAGEMENT THEREOF AND OTHER FOR CONVERSION OF PRIY A CINEMA INTO FOUR-SCREEN MULTIPLEX. PAYMENTS WERE MADE TO THE CONSULTANTS FO R PREPARING FEASIBILITY REPORTS IN RESPECT OF BOTH THE PROJECTS. HOWEVER, U LTIMATELY PROJECTS WERE NOT FOUND TO BE FINANCIALLY AND TECHNICALLY VIABLE AND WERE SHELVED. THUS, WE FIND THAT NO NEW ASSET CAME INTO EXISTENCE, WHICH WAS TH E BASIS ADOPTED BY THE AO FOR TREATING THE EXPENDITURE AS CAPITAL EXPENDITURE BUT WRONGLY. 12. IN THE PRESENT CASE BOTH THE INGREDIENTS ARE SA TISFIED, NAMELY : (I) THE FEASIBILITY STUDY CONDUCTED BY THE ASSESSEE WAS FOR THE SAME AND EXISTING BUSINESS WITH A COMMON ADMINISTRATION AND COMMON FUND, AND (II) THE STUDY WAS ABANDONED, WITHOUT CREATING ANY NEW A SSET. ITA NO.6092/DEL/2015 9 13. WE NOTE TWO JUDGMENTS OF OTHER HIGH COURTS TAKI NG THIS VIEW IN IDENTICAL CIRCUMSTANCES. ONE CASE IS DECIDED BY GAU HATI HIGH COURT WHICH IS REPORTED AS DY. CIT VS. ASSAM ASBESTOS LTD. (2003) 185 CTR (GAU) 223 : (2003) 263 ITR 357 (GAU). IN THAT CASE THE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURING ASBESTOS SHEETS. CONTEMPLATING TO SET UP A MINI CEMENT PLANT, WHICH WAS THE SAME LINE OF BUSINESS ACTIVITY OF THE ASSESSEE, A FEASIBILITY REPORT WAS PREPARED. HOWEVER, THE PROJECT COULD NOT BE UND ERTAKEN AS GOVERNMENT REFUSED TO GRANT REQUIRED PERMISSION. THE COURT OPI NED THAT NO NEW CAPITAL ASSET CAME INTO EXISTENCE AND THE EXPENSES INCURRED ON PR EPARATION OF THE FEASIBILITY REPORT, SAME LINE OF BUSINESS, WERE IN THE NATURE O F REVENUE EXPENDITURE. RAJASTHAN HIGH COURT HAD ALSO OCCASION TO DEAL WITH THIS ISSUE IN THE CASE OF MAHARAJA SHRI UMAID MILLS LTD. VS. CIT (1988) 68 CT R (RAJ) 187 : (1989) 175 ITR 72 (RAJ). THERE ALSO THE EXPENDITURE INCURRED I N OBTAINING SURVEY AND FEASIBILITY REPORT FOR SETTING UP POLYETHYLENE PLAN T FOR MANUFACTURING PACKING MATERIAL WAS TREATED AS REVENUE EXPENDITURE AS THE NEW VENTURE WAS INTERCONNECTED AND FORMED PART OF EXISTING BUSINESS . 14. IN THESE CIRCUMSTANCES, WE ANSWER THE QUESTION IN THE AFFIRMATIVE, I.E., AGAINST THE REVENUE. AS A CONSEQUENCE, THIS APPEAL IS DISMISSED. 13. SINCE THE ASSESSEE IN THE INSTANT CASE WAS ALRE ADY IN THE BUSINESS OF MANUFACTURING AND TRADING OF PHARMACEUTICALS AND TH E EXPENDITURE WAS INCURRED IN THE REGULAR COURSE OF BUSINESS I.E., FOR THE PURPOSE OF MANUFACTURING PHARMACEUTICALS, THEREFORE, NO NEW ASSET IS BEING DEVELOPED AND THE EXPENDITURE IN OUR OPINION HAS TO BE TREATED AS REVENUE IN NATURE. THE ORDER OF THE CIT (A) ON THIS ISSUE IS ACCORDINGLY SET ASIDE AND THE GROUND RAISED BY THE ASSESSEE IS ALLO WED. 14. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 6.04.2019. SD/- SD/- (KULDIP SINGH) (R.K. PANDA) JUDICIAL MEMBER ACCOUN TANT MEMFBER DATED: 16 TH APRIL, 2019 ITA NO.6092/DEL/2015 10 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI