Gujarat High Court
Principal Commissioner Of Income Tax vs A. Menarini India Pvt. ... on 31 July, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
O/TAXAP/547/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 547 of 2017
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PRINCIPAL COMMISSIONER OF INCOME TAX-1....Appellant(s)
Versus
A. MENARINI INDIA PVT. LTD.....Opponent(s)
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Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 31/07/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 20.06.2016 raising the following questions for our consideration:
"[A] Whether the Appellate Tribunal has erred in law and on facts in deleting the addition made by the Assessing Officer on account of payment of Royalty of Rs.70,48,105/- for A.Y. 2008-09 and thereby upholding the decision of the CIT(A)?
[B] Whether the Appellate Tribunal has erred in law and on facts in deleting the addition made by the Assessing Officer on account of expenditure on training and seminar expenses of Rs.35,29,028/- for A.Y. 2008-09 treating the same as capital expenditure without appreciating facts that expenditure in question is enduring in nature?
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O/TAXAP/547/2017 ORDER
2. In a separate tax appeal - Tax Appeal No. 546 of 2017 concerning the same assessee, we had dealt with these very questions in the following manner:
"1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 20.06.2016 raising the following questions for our consideration:
"[A] Whether the Appellate Tribunal has erred in law and on facts in deleting the addition made by the Assessing Officer on account of payment of Royalty of Rs.71,75,900/- for A.Y. 2009-10 and thereby upholding the decision of the CIT(A)?
[B] Whether the Appellate Tribunal has erred in law and on facts in deleting the addition made by the Assessing Officer on account of expenditure on training and seminar expenses of Rs.5,92,546/- for A.Y. 2009-10 treating the same as capital expenditure without appreciating facts that expenditure in question is enduring in nature?
[C] Whether the Appellate Tribunal has erred in law and on facts in deleting the addition made by the Assessing Officer on account of non achievement of targets of Rs.93,45,801/- incurred due to penal provisions is not allowable since it is due to breach of contracts between the customers and assessee which is due to carelessness of the assessee?"
2. The first question pertains to sum of Rs.71.75 lakhs of royalty payment. The Assessing Officer had held that the expenditure was a capital expenditure. The CIT(Appeals) in a detailed discussion, following various decisions of this court and examining the facts of the case, ruled in favour of the assessee. He came to factual findings that Page 2 of 3 HC-NIC Page 2 of 3 Created On Mon Aug 21 06:07:33 IST 2017 O/TAXAP/547/2017 ORDER the payment of royalty for use of trademark enabled the assessee to market the product more easily. It was thus a profit earning apparatus. He held that the expenditure did not result into any enduring benefit. This view was confirmed by the Tribunal.
3. On the second issue of seminar expenditure of Rs.5.92 lakhs, the CIT(Appeals) noticed that such expenditure was incurred for training and seminar. The company was in the business of providing marketing to various pharma companies. The assessee had conducted a seminar to impart training to its employees for such purpose. The CIT(A) accepted such contentions which came to be confirmed by the Tribunal.
4. In view of the facts referred above, we do not find any question of law arising. When it is found that the expenditures were for the purpose of augmenting the business of the assessee and did not result into any enduring benefit such expenditures were correctly allowed as revenue expenditures. We are not unmindful of the decision of the Supreme Court in case of Honda Siel Cars (I) Ltd. vs. Commissioner of Income - Tax reported in [2017] 395 ITR 713 in which on facts it was held that the royalty payment for obtaining technical knowhow for the entire period of agreement was a capital expenditure. The Supreme Court confirmed the view of the High Court that such acquisition resulted into an enduring benefit to the assessee."
3. In the result, tax appeal is dismissed.
(AKIL KURESHI, J.) (BIREN VAISHNAV, J.) divya Page 3 of 3 HC-NIC Page 3 of 3 Created On Mon Aug 21 06:07:33 IST 2017