INCOME TAX ACT, 1961

--Capital or revenue expenditure--Product registration expenses, trademark registration fee and patent fee Enduring benefit--Assessee incurred expenditure towards product registration, registration of trademark and patent fee and claimed deduction under section 37. Assessing officer disallowed the expenditure holding that registration gives enduring benefit and therefore treated it as capital expenditure. Tribunal observed pharmaceutical products manufactured by the assessee was to be registered with the local authorities also medical association in India. Such products were in existence and nothing new was acquired by the assessee, therefore, the expenditure only enable the assessee to run the existing business smoothly and therefore, cannot be stated that assessee acquired any tangible or intangible assets and enduring benefit was not the only criteria. The same must be coupled with acquisition of asset. Held: Tribunal was justified that the assessee did not acquire any new asset As per the rules and regulations, it was essential that the product, before marketing, would be registered with the regulating authorities. Any expenditure in the process would not be stated to ensure procurement of a new asset to the assessee. We are informed that a Division Bench of this Court in the case of CIT v. Torrent Pharmaceuticals Ltd, [2013] 29 taxmann.com 405 (Gujarat). Also expenditure on trademark was incurred so that trademark could be separately assigned and not as a part of goodwill of business, therefore expenditure for registration cannot be said as capital expenditure but was revenue in nature.

INCOME TAX ACT, 1961 Section 37(1)

Income Tax Act, 1961

--Business deduction under section 35--Scientific research expenditure Expenditure incurred outside the approved R&D facility--Assessee incure expenditure on clinical trials conducted outside the approved laboratory facility for developing its pharmaceutical products and claimed weighted deduction under section 35(2AB). Assessing officer disallowed the deduction holding that expenditure not having been incurred in approved facility cannot form part of deduction. Tribunal observed that the term 'in-house' used in section 35(2AB) must be viewed in the context of which it has been used. If by utilizing the staff or resources of an organization, research was conducted within the organization rather than through utilization of external use of resources or staff, it can be stated to be an in-house research. Therefore, merely an expenditure which was not incurred in the in-house facility cannot be discarded for the weighted deduction under section 35(2AB) Held: Tribunal was justified as merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the in-house facility and those incurred outside, would not be sufficient to deny the benefit to the assessee under section 35(2AB) and no question of law arose