Commissioner of Incometax v. Glenmark Pharmaceutical Ltd.

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The Tax PublishersIT Appeal No. 2170 of 2009 2013 TaxPub(DT) 0701 (Bom-HC) : (2013) 351 ITR 0359 : (2013) 213 TAXMAN 0315 : (2013) 085 DTR 0169 INCOME TAX ACT, 1961 --Depreciation-- Allowability Royalty--Assessee had claimed depreciation on royalty while acquiring brands/trademarks. Assessing officer disallowed the same while determining the income. *Held:* Was not justified as royalty paid by the assessee was a part of the cost of acquisition of the brand and the same would be entitled to depreciation under section 32 as a part of the brand. Income Tax Act, 1961, Section 32 INCOME TAX ACT, 1961 --Interest under sections 234B and 234CChargeability Book profit computed under section 115JBAssessing officer had determined book profits under section 115JB and also directed charging of interest under sections 234B/234C as section 115JB specifically states that all provisions of the Act should apply to the assessee being company mentioned in the said section and therefore, section 115J was no more available to assessee for delaying payment of advance tax in view of insertion of sections 115JA and 115JB in the Act. *Held:* Was justified as following the case of Jt. CIT v. Rolta India Ltd. (2011) 330 ITR 470 () wherein it was held that there was no exclusion of sections 115J/115JA in the levy of interest under section 234B. The expression 'assessed tax' is defined to mean the tax assessed on regular assessment which means the tax determined on the application of sections 115J/115JA in the regular assessment. Thus, interest under sections 234B/234C was payable on failure to pay advance tax in respect of tax payable under section 115JA. Income Tax Act, 1961, Section 234B, read with sections 115JA, 115JB & 234C INCOME TAX ACT, 1961 --Business expenditureAllowability Non-compete fees--Assessee-pharmaceutical company engaged in manufacturing and marketing of pharmaceutical products had claimed non-compete fees as revenue expenditure. Assessing officer disallowed the same. *Held:* The issue with regard to the nature of non-compete fees, whether revenue or capital, had to be remanded back to Tribunal so as to enable it to pass an order with reasons while determining whether non-compete fees was revenue or capital expenditure. Income Tax Act, 1961, Section 37(1) INCOME TAX ACT, 1961 --Business expenditureAllowability Marketing know-how expenses-- Marketing know-how agreement would lead to an improvement in assessee's existing business resulting in higher sales and consequently higher profitability. This is so as, the amounts spent on marketing know-how would result in improving the profits of the business on the acquired brands as this knowledge would assist in improving the marketing strategy. Therefore, the expenses incurred for acquiring marketing know-how would be revenue and merely because it was outsourced, it did not cease to be revenue expenditure. Income Tax Act, 1961, Section 37(1) IN THE Bombay High Court J. P. Devadhar & M. S. Sanklecha, JJ. CIT v. Glenmark Pharmaceutical Ltd. IT Appeal No. 2170 of 2009 8 January, 2013 Appellant by : Suresh Kumar Respondent by : Atul K. Jasani ORDER SUBSCRIBE FOR FULL CONTENT

The Tax PublishersIT Appeal No. 2170 of 2009
2013 TaxPub(DT) 0701 (Bom-HC) : (2013) 351 ITR 0359 : (2013) 213 TAXMAN 0315 : (2013) 085 DTR 0169

INCOME TAX ACT, 1961

--Depreciation-- Allowability Royalty--Assessee had claimed depreciation on royalty while acquiring brands/trademarks. Assessing officer disallowed the same while determining the income. Held: Was not justified as royalty paid by the assessee was a part of the cost of acquisition of the brand and the same would be entitled to depreciation under section 32 as a part of the brand.

Income Tax Act, 1961, Section 32

INCOME TAX ACT, 1961

--Interest under sections 234B and 234CChargeability Book profit computed under section 115JBAssessing officer had determined book profits under section 115JB and also directed charging of interest under sections 234B/234C as section 115JB specifically states that all provisions of the Act should apply to the assessee being company mentioned in the said section and therefore, section 115J was no more available to assessee for delaying payment of advance tax in view of insertion of sections 115JA and 115JB in the Act. Held: Was justified as following the case of Jt. CIT v. Rolta India Ltd. (2011) 330 ITR 470 () wherein it was held that there was no exclusion of sections 115J/115JA in the levy of interest under section 234B. The expression 'assessed tax' is defined to mean the tax assessed on regular assessment which means the tax determined on the application of sections 115J/115JA in the regular assessment. Thus, interest under sections 234B/234C was payable on failure to pay advance tax in respect of tax payable under section 115JA.

Income Tax Act, 1961, Section 234B, read with sections 115JA, 115JB & 234C

INCOME TAX ACT, 1961

--Business expenditureAllowability Non-compete fees--Assessee-pharmaceutical company engaged in manufacturing and marketing of pharmaceutical products had claimed non-compete fees as revenue expenditure. Assessing officer disallowed the same. Held: The issue with regard to the nature of non-compete fees, whether revenue or capital, had to be remanded back to Tribunal so as to enable it to pass an order with reasons while determining whether non-compete fees was revenue or capital expenditure.

Income Tax Act, 1961, Section 37(1)

INCOME TAX ACT, 1961

--Business expenditureAllowability Marketing know-how expenses-- Marketing know-how agreement would lead to an improvement in assessee's existing business resulting in higher sales and consequently higher profitability. This is so as, the amounts spent on marketing know-how would result in improving the profits of the business on the acquired brands as this knowledge would assist in improving the marketing strategy. Therefore, the expenses incurred for acquiring marketing know-how would be revenue and merely because it was outsourced, it did not cease to be revenue expenditure.

Income Tax Act, 1961, Section 37(1)

IN THE Bombay High Court

J. P. Devadhar & M. S. Sanklecha, JJ.

CIT v. Glenmark Pharmaceutical Ltd.

IT Appeal No. 2170 of 2009

8 January, 2013

Appellant by : Suresh Kumar

Respondent by : Atul K. Jasani

ORDER