M/s. Bioplus Life Sciences Pvt. Ltd, Bangalore V. Deputy Commissioner of Income Tax, Circle-1(1)(2), Bangalore

ITTPA 3150/BANG/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5143 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 22-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 25-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Notional interest; Commercial expediency; Revenue expenditure; Capital expenditure; Rule 8D
• Section: 32; 37; 143(3); 92; 14A; 37(1); 144C; 143(2); 113; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE Before Shri George George K, JM & Ms.Padmavathy S, AM ITA No.3150/Bang/2018 : Asst.Year 2014-2015 M/s.Bioplus Life Sciences Pvt.Ltd. S.No.10-A, Hoodi Village Krishnarajapuram Hobli Bangalore – 560 048. PAN : AACCB3621R. v. The Deputy Commissioner of Income-tax, Circle 1(1)(2) Bengaluru. (Appellant) (Respondent) Appellant by : Sri.T.Suryanarayana, Advocate Respondent by : Sri.Pradeep Kumar, CIT-DR Date of Hearing : 21.02.2022 Date of Pronouncement : 23.02.2022 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against the final assessment order dated 20.09.2018 passed u/s 143(3) r.w.s. 144C of the I.T.Act. The relevant assessment year is 2014-2015. 2. The brief facts of the case are as follows: The assessee is a company engaged in manufacture of healthcare products. The products manufactured by the assessee are either sold directly to the customers or to its Associate Enterprises (AEs) in different countries. During the relevant assessment year, the assessee sold the products manufactured by it to its AE, Abba Pharma Limited and recognized net cost plus margin of 7.54% from its operation. For the assessment year 2014-2015, the return of income was filed on 29.11.2014 declaring total income of Rs.4,29,48,320 ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 2 and book profits was shown at Rs.3,18,72,671. The return was selected for scrutiny by issuance of notice u/s 143(2) of the I.T.Act. During the course of assessment proceedings, the Assessing Officer made a reference to the TPO for determination of Arm’s Length Price (ALP) of the international transactions undertaken by the assessee with its AEs. The TPO passed an order dated 31.10.2017 u/s 92CA of the I.T.Act determining the TP adjustment of Rs.3,40,85,922 in respect of international transaction of sale of goods and Rs.16,99,773 being notional interest on outstanding receivables (total TP addition aggregated to Rs.3,57,85,695). Thereafter, the TPO passed an order dated 13.03.2018 u/s 154 of the I.T.Act recomputing the aggregate adjustment at Rs.3,79,68,090. Pursuant to the TPO’s order u/s 92CA of the I.T.Act, draft assessment order was passed on 27.11.2017 inter alia incorporating the aforesaid TP adjustments. Further, the A.O. also proposed to make addition u/s 14A of the I.T.Act and disallowance u/s 37 of the I.T.Act for expenses incurred towards registration of products. 3. Aggrieved by the draft assessment order, the assessee filed an objection before the Dispute Resolution Panel (DRP). The DRP vide its directions dated 27.08.2008 granted marginal relief to the assessee. Pursuant to the directions of the DRP, the Assessing Officer passed final assessment order dated 29.09.2018 in which the TP adjustment was reworked to RS.2,36,80,332 and disallowance of expenditure incurred towards registration of products was restricted to Rs.1,03,06,348. ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 3 4. Aggrieved by the final assessment order dated 29.09.2018, the assessee has filed this appeal before the Tribunal. Though the assessee has raised thirteen grounds, during the course of argument, the assessee had only pressed ground 6(d), 7, 10, 11 and 12. The grounds that are pressed / argued namely, 6(d), 7, 10, 11 and 12 reads as follows:- “6.(d) The Ld.AO / Ld.TPO erred in applying the LIBOR rate and in thereby determining the rate of interest to be 4.3836%. The Ld.DRP erred in confirming the same. 7. The ld.AO / Ld.TPO erred in not restricting the adjustment ot the value of international transactions and completely ignoring the appellant’s submission that the transfer pricing adjustment, if any, should be made only to the extent of international transactions with associated enterprises i.e. INR 202,814,351. The ld.DRP further erred in confirming the same. 10. Disallowance under section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962. The ld.AO erred in making a further disallowance of INR 4,769,154 under section 14A of the Act. 11. Erroneous treatment of Product Registration cost as capital in nature. (i) The ld.AO erred in considering the product registration cost amounting to INR 10,306,348 as capital in nature. (ii) Without prejudice to above, the ld.AO having considered the product registration cost as capital in nature, has erred in not allowing with consequential depreciation on such payments under section 32 of the Act. 12. The ld.AO has erred in not granting appropriate MAT credit available to the assessee under section 115JAA of the Act for set off.” 5. Since the learned AR has raised limited issues as regards the TP adjustment, the assessee’s profile, the TP ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 4 study undertaken by the assessee, TP adjustment made by the TPO etc. are not discussed in detail. We shall adjudicate the grounds / issues as under: A. TRANSFER PRICING ADJUSMTNET INTEREST ON DELAYED RECEIVABLE [GROUND 6(d)] 6. The TPO in the order passed u/s 92CA of the I.T.Act, determined the TP adjustment of Rs.16,99,773 (notional interest) in respect of delayed receivable from its AEs. The DRP rejected the contention of the assessee that the adjustment is not required in this regard, since it is not an international transaction. However, the DRP directed the TPO to recompute the interest by taking into consideration the credit period granted by the assessee in the invoices. Pursuant to the DRP’s directions, the interest was reworked to Rs.8,91,560. The TPO determined the notional interest by adopting the rate of LIBOR + 300 / 400 basis points. 6.1 The limited submission of the learned AR before the Tribunal is that the rate of interest adopted by the TPO is erroneous and interest paid ought to be adopted at LIBOR + 2%. In this context, the learned AR relied on the Hon’ble Bombay High Court judgment in the case of CIT v. Aurionpro Solutions Limited (judgment dated 09.06.2017 in ITA No.1869/2014) and the order of the Bangalore Bench of the Tribunal in the case of Swiss Re Global Business Solutions India Pvt. Ltd. v. Addl./Jt./Dy./Asst.Commissioner of Income-tax/Income Tax Officer (order dated 21.01.2022 in IT(TP)A No.397/Bang/2021). ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 5 6.2 The learned Departmental Representative supported the orders of the Income Tax Authorities. 6.3 We have heard rival submissions and perused the material on record. The Bangalore Bench of the Tribunal in the case of Swiss Re Global Business Solutions India Pvt. Ltd. (supra) by following the judgment of the Hon’ble jurisdictional High Court in the case of PCIT v. AMD (India) Pvt.Ltd. in ITA No.274/2018 (judgment dated 31.08.2018) held that deferred revenue from AE would constitute independent international transaction and the same needs to be benchmarked independently. Further, it was held by the Tribunal that the rate of interest to be adopted is at LIBOR + 2%. The relevant finding of the co-ordinate bench of the Tribunal in the case of Swiss Re Global Business Solutions India Pvt. Ltd. (supra), reads as follows:- “37. Once we have held tht the transaction between the assessee and AE was in foreign currency with regard to receivables and transaction was international transaction, then transaction would have to be looked upon by applying the commercial principles with regard to international transactions and accordingly proceeded to take into account interest rate in terms of London Inter Bank Offer Rate (LIBOR) and it would be appropriate to take the LIBOR rate + 2%. For this purpose, we place reliance on the judgment of the Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd. 99 CCH 0070 (mum HC). It is ordered accordingly.” 6.4 In view of the above co-ordinate bench order of the Tribunal in the case of Swiss Re Global Business Solutions India Pvt. Ltd. (supra), we direct the A.O. to calculate the interest rate on outstanding receivable from AE by adopting LIBOR + 2%. It is ordered accordingly. ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 6 6.5 In the result, ground No.6(d) is allowed. TP ADJUSTMENT TO BE CONFINED TO INTERNATIONAL TRANSACTION (GROUND 7) 7. The learned AR stated that the revenues from the international transaction constitute only 29.85% of the total revenue. Therefore, it was submitted that the TP adjustment if at all ought to be restricted to that extent. In this context, the learned AR relied on the judgment of the Hon’ble Bombay High Court in the case of CIT v. Phoenix Mecano (India) Pvt. Ltd. (judgment dated 07.06.2017 in ITA No.1182/2014). The learned AR further placed reliance on the following orders of the Tribunal:- (a) IKA India (P.) Ltd. v. DCIT reported in (2018) 98 taxmann.com 312 (Bangalore Tribunal) (b) IL Jin Electronics (I) Pvt. Ltd. v. ACIT reported in (2010) 36 SOT 227 (Delhi) (c) CIT v. Petro Araldite Pvt. Ltd. reported in (2018) 93 taxmann.com 438 (Bombay) (d) DCIT v. Starlite reported in 113 TTJ 425 (Mum.) 7.1 The learned DR was duly heard. 7.2 We have heard rival submissions and perused the material on record. The action of the TPO is wholly erroneous and contrary to the provisions of the Act and the Rules made there under. The A.O. has to refer the matter to the TPO for computation of ALP only in relation to the international transactions and the TPO is empowered to compute ALP only in respect of the said international transactions. The Bangalore Bench of the Tribunal in the case of IKA India (P.) ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 7 Limited v. DCIT (supra) had decided an identical issue and held that the transfer pricing adjustment is to be limited only to the international transactions entered by the assessee with its AEs. The relevant findings of the co-ordinate Bench of the Tribunal reads as follows:- “54. We have heard the rival submissions. The ld. counsel for the assessee reiterated submissions made before the CIT(A) that transaction with non- AE cannot be subject matter of determination of ALP because section 92 clearly speaks of determination of ALP only in respect of transactions with AE. He also referred to certain decisions of the Tribunal for the proposition that section 92 of the Act is not applicable to non-AE transactions. These decisions have already been extracted in the earlier paragraphs. The ld. DR relied on the order of the CIT(Appeals). 55. We have considered the rival submissions. The reasoning of the CIT(A) for considering the entire sales in manufactured finished goods segment for determination of ALP is that certain components and raw materials used in manufacture of finished goods are also sourced from AE and there is a possibility of the cost of such component having been bargained at a price which is not at arm’s length. This presumption of the CIT(Appeals) is without any basis. He has not demonstrated with actual figures as to how there would be impact on profit margin on sale of finished products to AE because of purchases of some components from AE. He has given examples which are imaginary figures. Apart from this, the TPO has accepted that purchase of raw material and components by the assessee from its AE is at arm’s length. Therefore, the basis on which the CIT(A) proceeded to apply the ALP test for transactions with non-AE is neither correct on facts nor permissible in law. As rightly contended by the assessee, section 92 of the Act can be applied only in respect of international transactions i.e., transactions with AE.” 7.3 The Hon’ble Bombay High Court in the case of CIT v. Phoenix Mecano (India) Pvt. Ltd. (supra) has also held that the transfer pricing adjustment is to be limited to the international transaction undertaken by the assessee with its AEs. The judgment of the Hon’ble Bombay High Court was challenged by the Revenue by filing an SLP before the Hon’ble Apex Court and the Hon’ble Apex Court vide judgment dated 05.02.2018 in SLP No.4205/2018 dismissed the SLP. In the ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 8 instant case, the assessee claims that the revenue from the international transactions constitute only 29.84% of the total revenue. The TPO is directed to rework the TP adjustment only in respect of the international transaction undertaken by the assessee with its AEs. It is ordered accordingly. 7.4 In the result, ground 7 is allowed for statistical purposes. B. CORPORATE TAX ISSUES DISALLOWANCE U/S 14A OF THE I.T.ACT (GROUND 10) 8. In the return of income filed, the assessee had made sou moto disallowance of Rs.15,48,462 for expenditure attributable to earning of exempted income. The Assessing Officer by invoking the provisions of section 14A r.w. Rule 8D(2)(ii) and Rule 8D(2)(iii) made an additional disallowance of Rs.47,69,154. 8.1 The objections raised by the assessee before the DRP was rejected. 8.2 Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR submitted that the Assessing Officer has not recorded his dissatisfaction as regards the correctness of the claim made by the assessee. Therefore, the addition made by the A.O. u/s 14A of the I.T.Act ought to be deleted. In this context, the learned AR relied on the judgment of the Hon’ble Apex Court in the case of Maxopp Investments Ltd. v. CIT reported in (2018) 91 taxmann.com 154 (SC). ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 9 Further, reliance in this regard was placed on the following judicial pronouncements:- (a) Eicher Motors Ltd. v. CIT (2017) 86 taxmann./com 49 (Delhi) (b) Godrej & Boyce Manufacturing Company Ltd. v. DCIT (2017) 81 taxmann.com 111 (SC) (c) Hindustan Aeronautics Ltd. v. ACIT (order dated 09.12.2020 passed by the Hon’ble High Court of Karnataka in ITA No.404/2016). 8.3 It was further contended that in any event the disallowance under Rule 8D(2)(ii) of the I.T.Rules is not warranted, as the assessee has sufficient own funds and borrowed funds were not used for making investment. In this context, the learned AR relied on the judgment of the Hon’ble Apex Court in the case of CIT v. Reliance Industries Ltd. reported in (2019) 102 taxmann.com 52 (SC) and the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Microlabs Ltd. reported in (2017) 79 taxmann.com 365 (Karnataka). 8.4 The learned DR supported the orders of the Income Tax Authorities. 8.5 We have heard rival submissions and perused the material on record. The Hon’ble Supreme Court in the case of Maxopp Investments Ltd. v. CIT (supra) had held as follows:- “Having regard to the language of section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 10 the said apportionment. In that eventuality, it will have to record its satisfaction to this effect.” 8.6 In view of the above Hon’ble Apex Court judgment, it is clear that no disallowance can be made u/s 14A of the Act read with Rule 8D of the IT Rules, where the A.O. failed to record dissatisfaction of correctness of the claim of the assessee. A similar view has also been taken by the Hon’ble jurisdictional High Court in the case of Essilor India Pvt. Ltd. in ITA No.1001 of 2017 (judgment dated 28.01.2022). 8.7 In the instant case, the assessee had received dividend income of Rs.91,79,588, which is exempted from tax. The assessee while filing the return of income had suo moto worked out the disallowance u/s 14A of the Act amounting to Rs.15,48,462. On a careful reading of the assessment order, it is clear that the Assessing Officer has not recorded his dissatisfaction as regards the correctness of the claim made by the assessee. The working of suo moto disallowance of Rs.15,48,462 is on record. The A.O. has not pointed out any specific reasons having regard to the accounts of the assessee for rejecting the suo moto disallowance by the assessee. Moreover, the assessee has sufficient own funds and borrowed funds were not used for the purpose of making investment. In fact, as per the statutory Auditors report (clause No.16 and 17), all the borrowed funds have been utilized for the purpose for which it has been borrowed. Further, on perusal of the financials, it is clear that the assessee has sufficient own funds which exceeds the investments. Therefore, by placing reliance on the judgment ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 11 of the Hon’ble Apex Court in the case of CIT v. Reliance Industries Ltd. (supra) and the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Microlabs Ltd. (supra), we hold that disallowance u/s 14A r.w.Rule 8D(2)(ii) is not warranted in the facts of the instant given case. It is ordered accordingly. 8.8 In the result, disallowance made u/s 14A is deleted. EXPENDITURE INCURRED FOR TREATMENT OF PRODUCT REGISTRATION WHETHER IT IS CAPITAL IN NATURE (GROUND 11) 9. It is stated that the assessee was a bulk drug and private label manufacturer till the financial year 2009-2010 and because of heavy competition from other countries, the assessee decided to launch its own products in the foreign market. It was submitted that in order to launch the products in other countries, the assessee has been consistently incurring expenditure on a year on year basis. The DRP granted partial relief, however, upheld the action of the AO in disallowing the expenses claimed by treating them as capital in nature. The DRP also rejected the contention of the assessee that depreciation on the same ought to be granted. 9.1 Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR submitted that on identical facts, the expenditure incurred has been allowed as deduction by the Bangalore Bench of the Tribunal in assessee’s own case in ITA No.1373 and 1374/Bang/2019 & Ors. (order dated 30.12.2021). ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 12 9.2 The learned DR supported the orders of the Income Tax Authorities. 9.3 We have heard rival submissions and perused the material on record. The nature of the expenditure incurred by the assessee (which were disallowed in the final assessment order), are as under:- Sl. No. Particulars Amount (Rs.) 1. Patent expenses – R&D 3,27,678 2. Patent – Sustained release drug delivery system 11,42,885 3. Rates and Taxes : Product registration 3,95,580 4. Registration expenses : RA 5,83,753 5. Registration expenses : Dolenio-China 10,77,737 6. Registration expenses : Cynocobalamin 500 Mcg 28,74,273 7. Registration expenses : Calcium Carbonate 1500 Mg 28,83,784 8. Trademark expenses : Mktg. 10,20,658 Total 1,03,06,348 9.4 The above expenditure are incurred by the assessee on year on year basis. The details of the expenditure are placed in the additional paper book at pages 639 to 830. The Bangalore Bench of the Tribunal in assessee’s own case (supra) for assessment years 2012-2013 and 2013-2014 on identical facts had allowed the claim of the assessee. The relevant finding of the Bangalore Bench of the Tribunal in assessee’s own case, reads as follows:- “7. The admitted factual position is that the assessee is manufacturing pharmaceutical products. Those products have been branded with their distinctive trademarks. By the registration of the product the assessee has safeguard against infringement of its patent. By the registration of trademark and patent the assessee has exclusive right of use. By incurring the said expenditure the assessee has protection of its running business, It is argued that patent is a set of exclusive rights granted by a state to an ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 13 inventor for a limited period of time for a public disclosure of an invention. The exclusive right granted to a patentee in most countries is the right to prevent others from making or using the patented invention without permission. The expenses incurred by us for carrying out various patent registration formalities including statutory fees prescribed in different countries are duly reflected in the copy of accounts, as above. All that the registration of patents did was to enable the Assessee Company to obtain a speedy and less expensive remedy against the infringement of the patent rights. It gives benefit of exclusive right to use its patents. It is incurred for protection of the business of the company. It is thus, incurred wholly and exclusively for the purposes of the Assessee Company's business allowable u/s 37(1) of the Act. Reliance is placed on following decisions: Decision of Hon’ble Supreme Court in case of CIT v. Finlay Mills Ltd.reported in (1951) 20 ITR 475 Decision of Hon’ble Bombay High Court in case of CIT v. Century Spg., Wvg., & Mfg. Co. Ltd. reported in (1947) 15 ITR 105 8. It is stated that a pharmaceutical company can sell its product only after obtaining registration and that the expenditure was incurred for the running of the business therefore revenue in nature and is allowable under section 37(1) of the Act. Reliance is placed on following decisions:  Decision of Hon’ble Ahmedabad Tribunal in case of ACIT vs. CAdilla Healthcare Ltd., reported in (2012) 21 taxmann.com 483, which stands affirmed by Hon’ble Gujrat High Court in Tax appeal No. 752 of 2012 by order dated 20/03/2013.  Decision of Hon’ble Gujrat High Court in case of PCIT vs. Zydus Wellness Ltd reported in (2017) 81 taxmann.com 159. We have noted that for pharmaceutical product the assessee is required to obtain a registration from government drug regulatory authority. We have been informed that the assessee company has obtained its various products registered in other countries. We have also been informed that the pharmaceutical products have also been registered by the local authorities as also the medical associations situated in India. About trademark and patent registration, the admitted factual position is that the assessee is manufacturing pharmaceutical products. Those products have been branded with their distinctive trademarks. By the registration of the product the assessee has safeguard against infringement of its patent. By the registration of trademark and patent the assessee has exclusive right of use. By incurring the said expenditure the assessee has protection of its running business. With this factual background we have examined the case laws cited by both the sides. It is submitted that the assessee has not obtained any new product or acquired any new trademark or acquired any new patent rights. The products were stated to be in existence and nothing new has been acquired or purchased by the assessee. In respect of this submission, the revenue has not placed any thing contrary. ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 14 It is an admitted fact that the assessee was already in the business of manufacturing of pharmaceutical products, and that the assessee also carries on scientific research work. For the protection of the result of the research the assessee has to get the patent registered. Enduring benefit is not the only criteria. An enduring benefit has to be coupled with the acquisition of an asset. There is nothing on record placed by the revenue to establish that there was a new product that was patented or in respect of which trade mark was registered by assessee during the years under consideration. 9. On perusal of ledger accounts placed at page 110 to 242 revels that payments have been made to statutory bodies either for approval or as statutory maintenance in foreign nations. Assessee has also made payments being annual fees to the Medical agencies in foreign nations. All these are recurring in nature. We are thus of the opinion that these payments are inextricably linked to the business of the assessee. Hon'ble Supreme Court in the case of Finlay Mills Ltd. (supra) opined as under: The contention of the revenue was fallacious. The machinery which acquires a greater productive capacity by reason of its improvement by inclusion of some new invention naturally becomes a new and altered asset by that process. So long as the machinery lasts, the improvement continues to the advantage of the owner of the machinery. The replacement of a dilapidated roof by a more substantial roof stands on the same footing. The result however of the Trade Marks Act is only two-fold. By registration, the owner is absolved from the obligation to prove his ownership of the trade mark. It is treated as prima facie proved on production of the registration certificate. It thus merely saves him the trouble of leading evidence, in the event of a suit, in a court of law, to prove his title to the trade mark. The registration is in the nature of collateral security furnishing the trader with a cheaper and more direct remedy against infringers. This is neither an asset nor an advantage so as to make payment for its registration a capital expenditure. The advantage derived by the owner of the trade mark by registration falls within class of revenue expenditure. The fact that a trade mark after registration could be separately assigned, and not as a part of the goodwill of the business only, does not also make the expenditure for registration a capital expenditure. That is only an additional and incidental facility given to the owner of the trade mark. It adds nothing to the trade mark itself. 10. Hon’ble Supreme Court further observed as under: It was argued on behalf of the appellant that the question whether a certain disbursement was of a capital or revenue nature has to be decided according to the principle laid down in British Insulated and Helsby Cables Ltd. v. Atherton [1926] AC 205. In that case the company which carried on the business of manufacturers of ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 15 insulated cables established a pension found for its clerical and technical salaried staff. The fund was constituted by a trust deed which provided that members should contribute a percentage of their salaries to the fund and that the company should contribute an amount equal to half the contributions of the members; and further that the company should contribute a sum of £31,784 to form the nucleus of the fund and to provide the amount necessary in order that past years of service of the then existing staff should rank for pension. That sum was arrived at by an actuarial calculation on the basis that the sum would ultimately be exhausted when the object for which it was paid was attained. The House of Lords held that this payment was in the nature of capital expenditure and was therefore not an admissible deduction. Although in the opinions expressed by the different members of the House of Lords the line of approach is not completely the same, the principle stated by Lord Cave in his speech has been accepted as a safe test to distinguish capital expenditure from revenue expenditure. It was recognised that a sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency, and in order indirectly to facilitate the carrying on of business, may yet be expended wholly and exclusively for the purposes of the trade. The Lord Chancellor observed that the question appeared to be a question of fact which was proper to be decided by the Commissioners upon the evidence brought before them in each case. The test that capital expenditure is a thing that is going to be spent once and for all and income expenditure is a thing that is going to recur every year was considered an useful element in arriving at the decision but was not certainly the decisive fact. The Lord Chancellor observed as follows:—"But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason for treating such an expenditure as properly attributable not to revenue but to capital". In respect of Patent expenditure, it is submitted that assessee has to get the patent registered in various regions in order to safeguard its product from any infringement. Further nothing has been placed on record to establish that the patent expenditure has been incurred by assessee on a new product. One aspect cannot be ignored that assessee incurs these expenses every year. 11. Coming to the expensed incurred by assessee in respect of the drug called ‘Dolenio’, we note that it is sold by assessee in many countries. It is submitted that the original drug is of the same chemical composition which when manufactured for the first time was patented has been capitalized. It is submitted that any minute change from the original form of appearance needs to be approved by the Drug authorities of the foreign country where it is sold. The expenses incurred by assessee towards Mutual recognition process variation is necessary based on any change in ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 16 the packing of the drug like change in color etc., or shape of the drug, or even the change of supplier. In our opinion, the expenses incurred by assessee in respect of Dolenio during the years under consideration towards Mutual recognition process variation, Patent and Trade mark and other registration expenses, are be considered as revenue expenditure, allowable under section 37(1) of the Act. In respect of the Annual fee/license fees paid the ledger account revels that these are recurring in nature, and hence cannot be treated to be one time payment. These are in respect of renewal of licence with the drug authorities in respective countries to continue to hold the licence to export and sell the products developed by assessee. Accordingly we do not find any infirmity in the observation of Ld.CIT(A) to treat the payments to be revenue expenditure allowable under section 37(1) of the Act. Accordingly, we allow the grounds raised by assessee and dismiss the grounds raised by revenue for both the assessment years.” 9.5 In view of the co-ordinate Bench order of the Bangalore Tribunal, in assessee’s own case for assessment year 2012- 2013 and 2013-2014 (supra), which is identical to the issue in question, we allow the claim of the assessee. 9.6 In the result, ground 11 is allowed. NON-GRAND OF APPROPRIATE MAT CREIDT(GROUND 12) 10. The learned AR submitted that the A.O. in the final assessment order has not granted the entire credit of Minimum Alternate Tax paid by the assessee u/s 115JAA of the I.T.Act. 10.1 We have heard rival submissions and perused the material on record. The assessee is entitled to the entire credit available to it as per law. Therefore, the A.O. is directed to grant the appropriate credit available to the assessee. It is ordered accordingly. ITA No.3150/Bang/2018 M/s.Bioplus Life Sciences Private Limited. 17 10.2 Therefore, ground 12 is allowed for statistical purposes. 11. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on this 23 rd day of February, 2022. Sd/- (Padmavathy S) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 23 rd February, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The DRP-1, Bangalore. 4. The Pr.CIT-1, Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore