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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI T. S. KAPOOR
आदेश/O R D E R
PER T. S. KAPOOR - AM:
This is an appeal filed by the Revenue against the order of learned CIT(A)-8, Ahmedabad, dated 20/03/2017 relating to assessment year 2010-11.
The Revenue has taken the following grounds of appeal:
“1) "Whether the Id. C1T(A) is right in law and on facts in deleting the disallowance of Rs. 74,50,738/- made by the A.O. out of
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 2 - deduction claimed by the assessee u/s. 35(2AB) of the I. T. Act in respect of research arid development expenditure." 2) "Whether the Ld. C1T(A) is right in law and on facts in deleting the disallowance of Rs. 5,03,066/- made by the A.O. on account of depreciation on electric installation." 3) "Whether the Ld. CIT(A) is right in law and on facts in deleting the disallowance of Rs. 3,72,824/- made by the A.O. on account of prior period expenses." 4) "Whether the Ld. O1T(A) is right in law and on facts in deleting the disallowance of Rs. 40,01,829/- made by the A.O. on account of foreign commission expenses." 5) "Whether the Ld. CIT(A) is right in law and on facts in allowing the product registration fee of Rs. 34,42,638/- and professional fee on patent of Rs. 11,48,325/-."
The assessee has also filed Cross Objection to the appeal filed by the Revenue, however, from the grounds of cross objection, it is observed that CO is merely supportive of learned CIT(A)’s order.
The learned DR, at the outset, relied upon the order of AO.
The learned AR, on the other hand, invited our attention to a chart wherein the groundwise arguments of the assessee were reproduced and learned AR submitted that the learned CIT(A) has rightly allowed Ground No.1 in respect of expenses incurred outside the approved in-house R&D center following the judgment of Hon’ble Gujarat High Court in the case of CIT vs. Cadila Healthcare Ltd. [2013] 31 taxmann.com 300 (Guj).
As regards ground no.2 regarding disallowance on account of depreciation on electric installations, the learned AR submitted that the learned CIT(A) has rightly allowed relief to the assessee by following his own order for AY 2005-06 & 2009-10.
As regards the third ground relating to prior period expenses, the learned AR submitted that the learned CIT(A) has rightly allowed
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 3 - relief to the assessee by following the case of CIT vs. Mahanagar Gas Ltd. [2014] 42 taxmann.com 40 (Bom.). The learned AR further submitted that the expenses though were classified under the head ‘prior period expenses’ but such expenditures had crystalized during the year and therefore, following the ratio of judgment in case of Mahanagar Gas Ltd. (supra). The learned CIT(A) has rightly allowed relief to the assessee.
As regards the disallowance on account of foreign commission expenses, learned AR submitted that learned CIT(A) has followed his own order for AY 2009-10 and the said order of learned CIT(A) has been confirmed by the Hon’ble Tribunal vide order dated 16th August, 2016 and therefore, the learned CIT(A) has rightly deleted the same.
Coming to last ground of appeal relating to disallowance of registration fee and professional fee, the learned AR again submitted that similar issue was decided by Hon’ble Tribunal in its own case in ITA No.2028/Ahd/2013 order dated 16.08.2016 where the Hon’ble Tribunal relying on the judgment of Hon’ble Gujarat High Court in the case of CIT vs. Torrent Pharmaceuticals Ltd. [2013] 29 taxmann.com 405 (Guj) had held that registration fee and professional fee were revenue expenditure.
We have heard the rival parties and have gone through the material placed on record.
We find that the first issue raised by Revenue is regarding the deduction under s.35(2AB) of the Act which the AO had disallowed as the assessee had carried out certain expenditures outside the in-house R&D center. The learned CIT(A) has however allowed relief to the assessee keeping in view the judgment of Hon’ble Gujarat High Court in the case of Cadila Healthcare Ltd. (supra) where the Hon’ble Court had held that clinical trials conducted outside approved facility were
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 4 -
eligible for exemption under s.35(2AB) of the Act. The judgment of Hon’ble Gujarat High Court as reproduced by the CIT(A) along with his finding is reproduced below:
“5.3 As the facts and circumstances of the present caase of the appellant are covered by the judgment of Hon’ble High Court of Gujarat in the case of Cadila healthcare Ltd. (supra), the relevant portion of the order of Hon’ble High Court is quoted as under:
" HELD -Section 35(2AB) provides for deduction to a company engaged in business of biotechnology or in the business of manufacture or production of any article or thing notified by the Board towards expenditure of scientific research development facility approved by the prescribed authority. [Para 14] -The Explanation to section 35(2AB)(1) provides that for the purpose of said clause, i.e. clause (I) of section 35(2AD), expenditure on scientific research in relation to drugs and pharmaceutical shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under the Central State or Provincial Act and filing an application for a patent under the Patents Act, 1970. [Para 15] -The whole idea appears to be to give encouragement to scientific research. By the very nature of things, clinical trials may not always be possible to be conducted in closed laboratory or in similar in-house facility provided by the assessee and approved by the prescribed authority. Before a pharmaceutical drug could he put in the market, the regulatory authorities would insist on strict tests and research on all possible aspects, such as possible reactions, effect of the drug and so on. -Extensive clinical trials, therefore, would be an intrinsic part of development of any such new pharmaceutical drug. It cannot be imagined that such clinical trial can be carried out only in the laboratory of the pharmaceutical company. If one gives such restricted meaning to the term expenditure incurred on in house research and development facility, one would on one hand be completely diluting the deduction envisaged under sub-section (2AB) of section 35 and on the other, making the Explanation quite meaningless. -As noticed earlier that for the purpose of the said clause in relation to drug and pharmaceutical, the expenditure on scientific research has lo include the expenditure incurred on clinical trials in obtaining approvals from any regulatory authority or in filing an application for grant of patent. The activities of obtaining approval of the authority and filing of an application for patent necessarily shall have to be outside the in- house research facility. Thus the restricted meaning suggested by
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 5 - the revenue would completely make the Explanation quite meaningless. For the scientific research in relation to drugs and pharmaceutical made for its own peculiar requirements, the Legislature appears to have added such an Explanation. [Para 16] -Therefore, the Tribunal committed no error. Merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the in-house facility and those were incurred outside, by itself would not be, sufficient lo deny the benefit to the assessee under section 35(2AB). It is not as if that the said authority was addressing the issue for deduction under section 35(2AB) in relation to the question on hand. The certificate issued was only for the purpose of listing the total expenditure under the Rules. Therefore, no question of law arises. " 5.4 In view of the above discussion and the ratio laid down by the Hon’ble High Court of Gujarat, the AO is directed to allow the weighted deduction of Rs.74,50,738/- incurred by the appellant outside the approved facility. Accordingly, Ground No.1 of the appeal is allowed.”
The Revenue was not able to controvert the findings of learned CIT(A) who had relied on the judgment of Gujarat High Court and allowed relief to the assessee. Therefore, finding no infirmity in the order of learned CIT(A), ground no.1 of Revenue’s appeal is dismissed.
Now coming to ground no.2 regarding depreciation on electrical items, we find that AO had restricted the depreciation to 15% instead of 25% by holding that electrical fittings are eligible for depreciation at a particular rate prescribed under the Rules. However, before the learned CIT(A), the assessee demonstrated that electrical installations were connected to plant and machinery and were parts of plant and machinery itself. It was also submitted to learned CIT(A) that similar disallowance was made in the case of assessee in AY 2009-10 which the learned CIT(A) had deleted. The learned CIT(A) has also allowed relief to the assessee by following the order of Hon’ble ITAT in the case of assessee itself for AYs. 2005-06 & 2009-10. For the sake of completeness, the findings of learned CIT(A) are reproduced below:
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 6 -
“6.2 During the appellate proceedings, the AR of the appellant filed a written submission on this issue as under:
"II. Disallowance of depreciation claimed on electric installation - Rs.5,03,066/- Here, it is important to take note of the findings given by the Hon’ble ITAT in its Order for Asst. Year 2005-06 on page No. 3 in Para 5 us under:
"We find that the lower authorities have decided the issue by merely looking at the nomenclature given to the asset without verifying the actual details of the asset and the nature of the assets. In our considered opinion the electrical fittings which forms integral part of the plant A machinery and those electrical fittings which are used along with the plant & machinery and cannot be used separately as such are part of plant A machinery and depreciation @ 25% is allowable in respect of the same. However, in case of those electrical fittings which are independently used a electrical fittings in respect of those Assets depreciation @ 15% is only allowable ".
It is submitted that the electric installations are used along with the Plant & Machinery and are not capable of being used separately as such. It is part and parcel of Plant & Machinery. The depreciation on electric installation is allowable @ 15% Further, it is important to take note that for the Asst. Year 2005-06, the appellant company has shown the "electric fittings" separately on which the appellant company has claimed the depreciation @ 15% (for the Asst. Year 2010-11 it is @ 10%).
Further, the appellant company would like to state that the disallowance on account of excess deprecation claimed on electric installation for A. Y. 2009-10 was made by the L.d. A O. while rendering the order u/s. 143(3) of the Act. 1961 dated 20. 12.2011. The appellant company has filed as appeal with the Ld CIT (A) for A- Y 2009-10 and while rendering the order the Ld. CIT (A) has allowed the claim of the appellant company. The relevant Para -1.3 of the order are reproduced hereunder for your honour 's ready reference: 4.3 Decision: I have carefully considered the assessment order and the submission filed by the appellant It is brought to mv notice that ITAT, Ahmedabad for A.Y. 2005-06 in the assessee's own case has ruled that "We find that the lower authorities have decided She issue by merely looking at the nomenclature given to the asset without verifying the actual details of the asset and the nature of the assets. In our considered opinion the electrical fittings which form integral part of the plant & machinery and those electrical fittings which are used along with the plant & machinery and cannot he used separately as such are part of plant & machinery and depreciation @ 25% is allowable in respect of the some. However, in case of those electrical fittings which are independently used a electrical fittings in raspect of those assets depreciation @ 15% is only allowable. The facts of the case in this year are similar to those for A. Y. 2005-06. Therefore, the depreciation rate applicable for A. Y. 2009-10 @ 15% is allowed (the
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 7 -
same was 25% as per I. T. Rules for A. Y. 2005-06). In view of findings by the jurisdictional ITAT, Ahmedabad, the ground of appeal is accordingly allowed.” 6.3 The observation of the AO and the submission of the appellant is considered carefully. As pointed out by the AR the issue is covered by the decision of Hon'ble ITAT in appellant's own case for A.Y. 2005-06 and also the A.Y.2009-10. Hence, respectfully following the decision of Hon'ble ITAT the AO is directed to allow depreciation claimed on electric installation being part of plant and machinery. Accordingly, appeal on this ground is allowed.”
The Revenue was not able to controvert the findings of learned CIT(A), therefore, finding no infirmity in the order of learned CIT(A), ground no.2 of Revenue’s appeal is also dismissed.
As regards third ground, regarding disallowance on account of prior period expenses, the learned CIT(A) has discussed this issue from para 7.2 onwards and after noting down the break up of expenses which were classified by the assessee as per prior period expenses and the year of their crystallization rightly deleted the addition by holding as under:
“7.3 The submission and the case taw quoted by the appellant arc considered. It is noticed that the liability is crystallized in previous years. Hence, the claim of prior period expenses is allowable. Hon'ble I TAT Mumbai also decided in similar lines in line case of Maharastra State Electricity vs Department Of Income Tax on 30 September, 2015 Income Tax Appellate Tribunal, Mumbai "B" Bench, 1TA No. 3813 / Mum / 2009 Assessment Year-2001-02, ITA No.1647 / Mum / 2010 Assessment Year-2002-03, ITA No.l648/Mum/2010Assessment Year- 2003-04, where it is concluded that when the assessee is following the mercantile system of accounting, it is supposed to file an explanation that the expenses were not booked in earlier years due to some reasonable cause. The relevant concluding para of the order of Hon'ble 1TAT is quoted here as under: "3. We are aware that it is one of the well recognised principle of taxation that earlier years' expenses can be allowed, in the mercantile method of accounting, in the year in which the liability is accepted and paid. But, at the same time it is also accepted principle of taxation that even when tin' Masses is following the mercantile system of accounting, it is supposed to file an explanation that the expenses were not booked in earlier years due to some reasonable cause like lo non-receipt of details, pending litigation, decision regarding unliquidated damage, an agreement entered in to for making payment for earlier period etc and that such expenses go/crystallised during subsequent assessment year. "
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 8 - It is clear from the details given by the appellant that the appellant had proper explanation with supporting evidence to prove that the liability is crystallized only in the previous year. Therefore, following the ratio laid down by Hon'ble ITAT Mumbai in above mentioned case and the decision of Hon'ble Bombay High Court quoted by the appellant, the AO is directed to allow prior period expenses of Rs.3,72,824/- claimed by the appellant. Accordingly, appeal on this ground is allowed.”
Therefore, finding no infirmity in the order of learned CIT(A), ground no.3 of Revenue’s appeal is also dismissed.
Now coming to ground no.4 regarding disallowance on account of foreign commission expenses, we find that this issue is also covered in favour of the assessee vide order of Hon’ble ITAT for AY 2009-10 in the case of assessee itself where the Hon’ble Tribunal after discussing the entire fact and after noting down the provisions of Section 9(1)(vii) and Section 195 of the Act has held that the provisions of Section 195 and Section 9 were not applicable to the assessee and therefore has held that assessee was not liable to deduct TDS and therefore no disallowance was warranted under s.40(a)(ia) of the Act. For the sake of completeness, relevant finding of the Tribunal are reproduced below:
“11. In the instant case, it is seen, admittedly that the nonresident agents were only procuring orders abroad and following up payments with buyers. No other services are rendered other than the above. Sourcing orders abroad, for which payments have been made directly to the non-residents abroad, does not involve any technical knowledge or assistance in technical operations or other support in respect of any other technical matters. It also does not require any contribution of technical knowledge, experience, expertise, skill or technical know-how of the processes involved or consist in the development and transfer of a technical plan or design. The parties merely source the prospective buyers for effecting sales by the assessee, and is analogous to a land or a house/real estate agent/broker, who will be involved in merely identifying the right property for the prospective buyer/seller and once he completes the deal, he gets the commission. Thus, by no stretch of imagination, it cannot be said that the transaction partakes the character of "fees for technical services" as explained in the context of Section 9(1)(vii) of the Act. 12. As the non-residents were not providing any technical services to the assessee, as held above and as held by the Commissioner of Income Tax (Appeals), the commission payment made to them does not fall into
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 9 - the category of "fees of technical services" and therefore, explanation (2) to Section 9(1) (vii) of the Act, as invoked by the Assessing Officer, has no application to the facts of the assessee's case. 13. In this case, the commission payments to the non resident agents are not taxable in India, as the agents are remaining outside, services are rendered abroad and payments are also made abroad. 14. The contention of the learned counsel for the Revenue is that the Tribunal ought not to have relied upon the decision G.E.India Technology's case, cited supra, in view of insertion of Explanation 4 to Section 9(1)(i) of the Act with corresponding introduction of Explanation 2 to Section 195(1) of the Act, both by the Finance Act, 2012, with retrospective effect from 01-04-1962. 15. The issue raised in this case has been the subject matter of the decision, in the recent case, CIT v. Kikani Exports (P.) Ltd. [2014] 369 ITR 96/[2015] 232 Taxman 255/49 taxmann.com 601 (Mad.) wherein the contention of the Revenue has been rejected and assessee has been upheld and the relevant observation reads as under:— '... the services rendered by the non-resident agent could at best be called as a service for completion of the export commitment and would not fall within the definition of "fees for technical services" and, therefore, section 9 was not applicable and, consequently, section 195 did not come into play. Therefore, the disallowance made by the Assessing Officer towards export commission paid by the assessee to the non-resident was rightly deleted.' 16. When the transaction does not attract the provisions of Section 9 of the Act, then there is no question of applying Explanation 4 to Section 9 of the Act. Therefore, the Revenue has no case and the Tax Case Appeal is liable to be dismissed.”
In view of the above, We do not find any infirmity in the order of learned CIT(A), ground no.4 of Revenue’s appeal is also dismissed.
As regards last ground of appeal, regarding disallowance of product registration fee, we find that this is also covered in favour of the assessee by the order of Tribunal in the case of assessee itself for AY 2009-10, where the Hon’ble Tribunal in para nos. 8 to 10 has dismissed the appeal of Revenue by upholding the order of learned CIT(A) wherein he had allowed relief to the assessee under similar facts and circumstances. For the sake of completeness, para 8 to 10 of Hon’ble Tribunal in the case of assessee is reproduced below:
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 10 - “8. In ground no. 2, the Assessing Officer is aggrieved of learned CIT(A)'s "deleting the disallowance of Rs.30,86,537 made on account of product registration fees". 9. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has incurred an expenditure of Rs.38,78,253 in registration of patents of assessee company's products with various government authorities in the respective countries, and required the assessee to show cause as to why this expenditure, which results in substantial and enduring benefits to the assessee, not be treated as capital expenditure. It was explained by the assessee that the expenditure is routine marketing expenses as it is mandatory to obtain registration of products in the countries in which these products are sold, and that, even after paying this registration fees-which is valid for a limited time period, the fees is required to be paid on recurring basis. The Assessing Officer, however, rejected this explanation, proceeded to treat this as an asset as the registration of product "entitles the assessee for a benefit of enduring nature in the form of marketing right (intangible asset) in that country", grant depreciation in respect of the same, and disallow the balance amount which worked out to Rs.30,86,537. Aggrieved, assessee carried the matter in appeal before the CIT(A) who deleted this disallowance. The Assessing Officer is aggrieved and is in appeal before us. 10. Having heard the rival contentions and having perused the material on record, we find that this issue is now covered, in favour of the assessee, by Hon'ble jurisdictional High Court's judgments in the cases of CIT v. Torrent Pharmaceutical Ltd. [2013] 29 taxmann.com 405 (Guj) and CIT v. Cadila Healthcare Ltd. [2013] 31. taxmann.com 300/214 Taxman 672 (Guj.) wherein Their Lordships have, inter alia, held that the product registration expenses is eligible for deduction as revenue expenditure. Respectfully following esteemed views of Hon'ble jurisdictional High Court, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.”
Respectfully following the judicial precedent in the case of assessee itself the ground is also dismissed.
As regards the professional fee on patents, the learned CIT(A) has allowed relief to the assessee by relying on the judgment of Hon’ble Gujarat High Court in the case of Cadila Healthcare Ltd. (supra) and has further relied on the judgment of Hon’ble Supreme Court in the case of CIT vs. Finely Mills Ltd. (supra). The findings of the learned CIT(A) are reproduced below:
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 11 -
“10.3 On the issue of disallowance of the professional fees on patent of Rs.11,48,325/-, the AR of the appellant submitted as under;
"The appellant company has paid professional fees to the consultants for patent related services like:
(i) Preparing and filing application for grant of patent (ii) Reviewing and preparing relevant document (iii) Fees for defending patents including preparation of responses to the pregrant opposition etc. (iv) Official filing fees for filing of requisite statutory forms (v) Time spent In follow-up matter periodically, reviewing and reporting the same. (vi) Extracting and reviewing registration certificate.
However, the Ld. A.O. has not considered the same and has made the disallowance which is bad in the eye of law. Considering the nature of business of the appellant company and the expenditure incurred in this connection, the Ld. A,O. ought to have allowed the same. There is no enduring benefit or advantage has been received by the appellant company, winch can be considered as capital asset (intangible) as alleged by the Ld. A.O. Considering the above facts, the disallowance of Rs.11,48,325/- as professional fees on patent made by the Ld. A.O. is required to be deleted. As a consequence, the depreciation u/s.32(i)(iii) of the Act of Rs. 2,62,081/- allowed by the A. O. on this expenses treating the same as capital in nature is required to be deleted/rejected. "
The AR has again relied on the decision of Hon'ble High Court of Gujarat in the case of Cadila Healthcare Ltd. Tax appeal No.752 of 2012 order dated 20.03.2013 (2013) 31 taxi7iann.com 300 (Guj,). On the perusal of the decision of Hon’ble High Court it is noticed that the court as decided that the expenditure incurred by company in defending/protecting the patent arc of not in the nature of enduring benefit and by relying on the decision of Hon'ble Supreme court in the case of CIT v. Finley Mills Ltd. (1951) 20 ITR 475 decided as under:
" With respect to the expenditure for trademark and patent, learned counsel for the respondent-assessee rightly pointed out that such issue was examined by the Supreme Court in the case of CIT v. Finley Mills Ltd. [1951] 20 ITR 475, wherein it was held and observed as under:
"In our opinion, the contention urged on behalf of the appellant must fail. It is not contended that by the Trade Marks Act a new asset has come into existence. It was contended that an advantage of an enduring nature had come into existence. It was argued that just as machinery may attain a higher value by an implementation causing greater productive capacity, in the present case the trade mark which existed before the Trade Marks Act acquired an advantage of an enduring nature by reason of the Trade Marks Act and the fees paid for registration thereunder were in the nature of capital expenditure. In our opinion, this analogy is fallacious. The machinery which
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 12 - acquires u greater productive capacity by reason of its improvement by the inclusion of some new invention naturally becomes a new and altered asset by that process. So long as the machinery lasts, the improvement continues to the advantage of the owner of the machinery. The replacement of a dilapidated roof by a more substantial roof stands on the same fooling. The result however of the Trade Marks Act is only two-fold. By registration, the owner absolved from the obligation to prove his ownership of the trade mark. It is treated as prima facie proved on production of the registration certificate. It thus merely saves him the trouble of leading evidence, in the event of a suit, in a Court of law, to prove his title to the trade mark. It has been said that registration is in the nature of collateral security furnishing the trader with a cheaper and more direct remedy against infringers. Cancel the registration and he has still his right enforceable fit Common Law lo restrain the piracy of his trade mark. In our opinion, this is neither such an asset nor an advantage so as to make payment for its registration a capital expenditure. In this connection it may be useful lo notice that expenditure incurred by a company in defending title to properly is not considered expense of a capital nature. In Southern (H M Inspector of Tuxes) v. Borax Consolidated Ltd. 10 1. T R. Sup. 1, it is there stated that where a sum of money is laid out for the acquisition or the improvement of a fixed capital asset it is attributable to capital but of no alteration is made in the fixed capital asset by the payment, then it is properly attributable to revenue, being in substance a matter of maintenance, the maintenance of the capital structure or the capital asset of the company. In our opinion, the advantage derived by the owner of the trade mark by registration falls within this class of expenditure The fact that a trade mark after registration could be separately assigned, and not as a part of the good will of the business only, does not also make the expenditure for registration a capital expenditure. That is only an additional and incidental facility given to the owner of the trade mark. It adds nothing to the trade mark itself. " 10.4 The observation of the AO and the submission of the appellant is considered carefully. As the facts of the case on this point are similar to the facts dealt with by the Hon'ble High Court of Gujarat in case of Cadila Healthcare Ltd. (supra), respectfully following the decision, the AO is directed to allow the professional fees of Rs.11,48,325/- and consequently to ignore the allowance of depreciation Accordingly, appeal on ground no.7 is also allowed.
The Revenue was not able to controvert the findings of the learned CIT(A), therefore finding no infirmity in the order of learned CIT(A), ground no.5 of appeal is also dismissed.
In view of the above, Revenue’s appeal is dismissed.
ITA No. 1325/Ahd/17 with CO No.31/Ahd/18 [M/s. Troikaa Pharmaceuticals Ltd.] A.Y. 2010-11 - 13 -
The cross objection are merely supportive of learned CIT(A)’s order. Therefore, the same are dismissed.
In the combined result, Revenue’s appeal and assessee’s CO both are dismissed.
This Order pronounced in Open Court 04/03/2020
Sd/- Sd/- (RAJPAL YADAV) (T. S. KAPOOR) VICE PRESIDENT ACCOUNTANT MEMBER Ahmedabad: Dated 04/03/2020 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।