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3. Ground No.1: In this ground, the assessee has challenged the action of the lower authorities in holding that expenditure incurred on brand improvement was capital in nature.

During the course of assessment proceedings it was noted by the Assessing Officer that assessee was engaged in the business of manufacturing / processing / trading in industrial chemicals. It was noted by the Assessing Officer that assessee shared expenses with its other group companies on account of payment made to M/s Interbrand, a company engaged in creation and developments of brands and claimed the said expenditure as revenue expenditure. It was held by the Assessing Officer that the said expenditure was not revenue expenditure and it was capital expenditure for the reasons that change in the brand / logo symbolised Godrej's new corporate identity and the refurbishment of its master brand. The aim was to consolidate Godrej's presence in various business area. It was finally held by the Assessing Officer after going through the nature of expenses that these amounts were incurred in rebranding the Godrej brand and enhancing the Godrej brand and, therefore, these were capital expenditure as brand constituted an intangible asset. Accordingly, the Assessing Officer treated the same as capital asset and allowed depreciation @20% and balance amount was treated as capital expenditure and disallowed the same.

4. Being aggrieved, the assessee filed appeal before the ld.CIT(A) wherein assessee made detailed submissions to show that the impugned expenses were not capital expenditure and these are revenue expenses. But the ld.CIT(A) upheld the order of the Assessing Officer and treated these expenses as capital expenditure with the following observations:

"6.3 I have considered the facts of the case, submissions of appellant and paper book filed by the appellant and also perused the Godrej new brand design which was shown to me. "Godrej" brand is a trademark utilized by Godrej group of companies. This is an intangible asset as per sec.32. This intangible asset was modified by interbrand (Consultant) to give it a flavor of youth, vibrancy & modern look. In doing so except the name "Godrej" whole design and character was changed. This comes into a category of total renewal or renovation of brand. Appellant's contention that just only colours are modified. In doing so, consultant 8488+5Godrej & Boyce totally created the new intangible asset which is totally different from earlier one. Hence this process of renewal or renovation, created a new intangible asset. Hon'ble Supreme Court in the case of Baliwala Nand Kishore vs. CIT 224 ITR 414 held that renewal or renovation of asset is in capital nature. The appellant had relied on the decision of Empire Jute Co. Ltd. vs. CIT - 124 ITR 1 and Alembic-Chemical Works Ltd. vs. CIT - 177 ITR 377. Depreciation of the intangible asset in Income-tax Act was not in existence. This came into operation from the year 1998. Moreover those two decisions can be distinguished as no new asset was created.

For the aforesaid reasons, as the expenditure incurred and paid to interbrand (Consultant) is in the nature of capital expenditure. This expenditure is not allowed to deduct from P&L account. Hence, this ground of appeal is dismissed. A.O's order of allowing depreciation on the above expenditure is upheld."

5. While deciding this appeal, the ld.CIT(A) relied upon his earlier order passed in the case of other group companies of the assessee, viz. M/s Godrej & Boyce Mfg. Co Ltd for A.Y. 2009-10. It was brought to our notice that the appeal of the said company is still pending and this issue was open for adjudication by us.

6. During the course of hearing, ld.counsel of the assessee made vehement' arguments to contend that the impugned expenses are revenue expenses. It was submitted that Godrej is an old brand and may be more than 100 years'old. The expenses incurred during the year, through M/s. Interbrand are for renewal and improvement. Our attention was drawn on the copy of the agreement with M/s. Interbrand to show the scope of services for which the payment was made. It was submitted that perusal of the agreement clearly shows that it was mentioned therein that Godrej brand already existed and what was required was to make desired improvement in the name. It was submitted that no new asset had come into creation. Finally reliance was placed on the decision of Hon'ble ITAT in the case of Fine Jewellery (India) Ltd v ACIT 30 Taxman.com 323 and Fine Jewellery India Ltd vs ACIT 151 ITO 385 wherein it was held that expenditure incurred on brand building by the assessee, who was manufacturer and exporter of jewellery was to be allowed as business expenditure. Finally our attention was drawn on written submissions filed before the CIT(A) wherein facts were discussed in detail and reliance was placed in support of judgements in support of the claim of the assessee.