Shri Jogendra L. Bhati, Ahmedabad V. Dy. CIT, Circle-3(1)(1), Ahmedabad

MA 188/AHD/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5751 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 03-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: S N SOPARKAR
• Keywords: Revenue expenditure

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER MISC. APPLICATION NO.188/AHD/2019 IN ./ ITA NO. 2136/AHD/2017 / ASSESSMENT YEAR: 2013-14 JOGENDRA L. BHATI 315, NILKANTH PALACE B 100 FT. ROAD, ANANDNAGAR ROAD SATELITE, AHMEDABAD 380 015. VS DCIT, CIR.3(1)(1) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N.SOPARKAR, SR.ADV. REVENUE BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING : 02/08/2019 /DATE OF PRONOUNCEMENT : 7 / 08/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : PRESENT MISC. APPLICATION IS DIRECTED AT THE INSTANCE OF THE ASSE SSEE POINTING OUT APPARENT ERROR IN THE ORDER OF THE TRIBUNAL DATED 5 .04.2019 PASSED IN ITA NO.2136/AHD/2017. 2. IT IS PLEADED IN THE APPLICATION THAT FROM PARA- 16, THE TRIBUNAL HAS CONSIDERED THE ISSUE WHETHER EXPENDITURE INCURRED B Y THE ASSESSEE TOWARDS REGISTRATION FEES, EVALUATION AND ANALYSIS CHARGES ETC. REQUIRED TO BE ALLOWED TO THE ASSESSEE OR NOT. IT HAS BEEN CONTENDED THAT THE TRIBUNAL HAS HELD THAT THIS EXPENDITURE ARE ALLOWAB LE IN VIEW OF THE MA NO.188/AHD/2019 - 2 - DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. TORRENT PHARMACEUTICALS LTD., 29 TAXMANN.COM 405 (GUJ). TH E TRIBUNAL FURTHER OBSERVED THAT AS FAR AS MARKET RESEARCH FOR NEW PHA RMA-PRODUCTS ARE CONCERNED I.E. MARKET SURVEY CHARGES ETC. ARE REQUI RED TO BE DISALLOWED BECAUSE THAT WILL BE USED BY THE ASSESSEE FOR EXPLO RING NEW BUSINESS VENTURE AND ENHANCING ITS CAPACITY. ON THE BASIS O F THAT THE TRIBUNAL HAS UPHELD THE DISALLOWANCE. THE TRIBUNAL WHILE CO NSIDERING THE EXPENSES OF RS.7,63,200/- HAS HELD THAT IT IS PERTA INED TO MARKET RESEARCH OF NEW PHARMACEUTICAL IN VIETNAM. BASICALLY, THIS EXPENDITURE WAS FOR REGISTRATION OF THE PRODUCTS, AND TRIBUNAL HAS COMM ITTED AN APPARENT ERROR BY TREATING THIS EXPENDITURE TOWARDS MARKET R ESEARCH. THIS ERROR HAS BEEN CREPT ON THE BASIS OF THE FINDING OF THE C IT(A) WHERE THIS EXPENDITURE HAS BEEN SHOWN AS MARKET RESEARCH. THE LD.COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS PAGE NO.235 WHE REIN THIS INVOICE HAS BEEN SHOWN FOR THE PURPOSE OF REGISTRATION CHAR GES. THE LD.DR WAS UNABLE TO CONTROVERT THIS CONTENTION OF THE LD.COUN SEL FOR THE ASSESSEE. 3. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD. WE DEEM IT APPROPRIATE TO TAKE NOTE OF THE FINDING OF THE TRIBUNAL FROM PARA 16 OF THE ORDER, WHICH READS AS UNDER: 16. AS FAR AS OTHER COMPONENTS OF PAYMENTS ARE CONC ERNED, WE FIND THAT IT IS INTERCONNECTED WITH GROUND NO.5 WHEREIN THE ASSESSE E HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE O F RS.19,55,700/-. THE BIFURCATION OF THESE AMOUNTS NOTICED BY THE CIT(A) IN PARA-7 WHICH READS AS UNDER: 6. MARKET EXPENSES DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS AL SO DEBITED FOLLOWING EXPENSES UNDER THE HEAD MARKETING EXPENSES. PARTY NAME DATE NARRATION IN LEDGER AMOUNT ALLEGENS CO LTD. 03.09.2012 MARKET RESEARCH OF NEW 763200 MA NO.188/AHD/2019 - 3 - PHARMA PRODUCTS IN VIETNAM ALELGENS CO LD. 07.12.2012 MARKET RESEARCH OF NEW PHARMA PRODUCTS IN VIETNAM 1192500 CARLOS AVILA GUILEMO CELI 16.01.2013 MARKET SURVEY CHARGES FOR THREE MONTHS 556543 CARLOS AVILA GUILERMO CELI 20.02.2013 REGISTRATION FEES, EDISSEUR EVALUATION & ANALYSIS CHARGES, TRANSLATION & NOTARIZATION OF DOSSIERS, MARKET ANALYSIS & TENDER SURVEY 7242750 17. AT THE TIME OF HEARING, THE LD.COUNSEL FOR THE A SSESSEE SUBMITTED THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. T ORRENT PHARMACEUTICALS LTD., 29 TAXMANN.COM 405 (GUJ) HAS LAID DOWN THAT EX PENSES INCURRED BY THE ASSESSEE IN FOREIGN COUNTRY FOR REGISTRATION OF ITS PRODUCTS FOR MARKETING AND PROMOTING SALES IS TO BE ALLOWED AS REVENUE EXPENDI TURE. HE PLACED ON RECORD JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. TORRENT PHARMACEUTICALS (SUPRA). HONBLE HIGH COURT TOOK NO TE OF THE FINDING RECORDED BY THE TRIBUNAL, AND THEREAFTER LAID DOWN AS UNDER: 'FURTHER, THESE PAYMENTS ARE MADE TO DRUG REGULATOR Y AUTHORITIES IN VARIOUS COUNTRIES FOR THE PRODUCTS MARKET IN THE RESPECTIVE COUNTRIES. FURTHERMORE, THESE FEES ARE TO BE PAID O N RECURRING BASIS DEPENDING UPON THE VALIDITY OF THE VARIOUS RE GISTRATIONS. THE FEES HAVE BEEN PAID ON EXPIRY OF THE REGISTRATI ON AND OUT OF TOTAL PAYMENT OF RS. 8,03,706/- IS IN RESPECT OF PR ODUCT REGISTRATION IN POLAND. LIKEWISE PAYMENTS HAVE BEEN MADE IN VIETNAM, RUSSIA, GHANA AND CHINA ETC. WE FIND THAT THE EXPORTS OVER THE YEARS HAVE INCREASED FROM THE EXPORT SALE OF RS. 26 CRORES IN FINANCIAL YEAR 1998-1999 TO THE EXPORTS HAVE GRO WN TO RS. 160 CRORES IN FINANCIAL YEAR 2005-2006 AN INCREASE OF M ORE THAN 600%. ACCORDINGLY, THESE EXPENSES ARE RIGHTLY ALLOWE D BY CIT(A) AND WE CONFIRM THE SAME.' 5. THE FINDINGS OF THE TRIBUNAL ARE JUSTIFIED ON BO TH THE ISSUES. THE GARDEN EXPENDITURE WAS FOR THE PURPOSE OF MAINTAINI NG GARDEN TO CONTROL THE POLLUTION. THE COMPANY HAD PUT UP AN AF FLUENT TREATMENT PLANT AND POLLUTION USED TO GENERATE BECAUSE OF REL EASE OF POLLUTANTS. THE MAINTAINING A GARDEN HELPED IN CONTROLLING POLLUTIO N ARISING FROM THE POLLUTANTS. IT CANNOT BE GAINSAID THAT THE EXPENSES FOR GARDEN HAD NEXUS WITH BUSINESS ACTIVITY. IT CAN WELL BE TREATED FOR BUSINESS PURPOSE AND CAN BE CLAIMED AS REVENUE EXPENDITURE. SIMILARLY TH E EXPENSES FOR FOREIGN COUNTRY REGISTRATION WAS FOR BUSINESS PURPO SE ONLY, BECAUSE THE MA NO.188/AHD/2019 - 4 - SAME HELPED THE ASSESSEE IN MARKETING ITS PRODUCTS IN THE FOREIGN COUNTRIES AND PROMOTING THE SALES. 18. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF TH E HONBLE HIGH COURT, EXPENSES INCURRED BY THE ASSESSEE TOWARDS REGISTRAT ION FEES, EVALUATION AND ANALYSIS CHARGES, TRANSLATION & NOTARIZATION OF DOS SIERS REQUIRE TO BE ALLOWED TO THE ASSESSEE. 4. WHILE TAKING COGNIZANCE OF THE ORDER OF THE LD.C IT(A), WHICH HAS BEEN REPRODUCED IN PARA-16, WE HAVE NOTICED THAT EX PENDITURE INCURRED ON 3.9.2012 AMOUNTING TO RS.7,63,200/- IS RELATED T O MARKET RESEARCH OF NEW PHARMA-PRODUCTS IN VIETNAM. IN FACT IT IS FOR PRODUCT REGISTRATION. THE DETAILS ARE AVAILABLE ON PAGE NO.234. BY TAKIN G COGNIZANCE FROM THE FINDING OF THE LD.CIT(A) WITHOUT VERIFYING THE ACTU AL EXPENDITURE WHOSE DETAILS HAVE BEEN PLACED ON RECORD, THE TRIBUNAL HA S COMMITTED AN APPARENT ERROR. THEREFORE, WE ARE OF THE VIEW OF T HAT THIS ERROR DESERVES TO BE RECTIFIED, AND DIRECT THAT THIS AMOUNT IS TO BE ALLOWED TO THE ASSESSEE. IN PARA-19, IT IS TO BE READ THAT DISALL OWANCE OF RS.11,92,500/- AND RS.5,56,543/- IS CONFIRMED, WHEREAS DISALLOWANC E OF RS.7,63,200/- IS DELETED. WITH THE ABOVE MODIFICATION, THE LD.AO SH ALL GIVE EFFECT TO THE ORDER OF THE TRIBUNAL DATED 5.4.2019. 5. IN THE RESULT, MISC. APPLICATION OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2019. SD/- SD/- (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED, 07/08/2019