DOMS INDUSTRIES LTD,VALSAD vs. PCIT, VALSAD

ITA 595/SRT/2025Status: DisposedITAT Surat14 October 2026AY 2020-217 pages
AI SummaryAllowed

What were the facts?

The assessee, DOMS INDUSTRIES LTD., filed an appeal against the order dated 29.03.2025 passed by the Principal Commissioner of Income Tax (PCIT), Valsad, under section 263 of the Income Tax Act, 1961. The assessment year in question is 2020-21. The original assessment order, passed under section 143(3) r.w.s. 144B, was dated 20.09.2022. The PCIT initiated proceedings under section 263, proposing to treat Trademark & Copyright expenses of Rs. 53,68,471/- as capital in nature, disallow them under section 37, and allow depreciation under section 32. The PCIT set aside the assessment order on this issue, directing a fresh assessment. The assessee is aggrieved by this revisionary order.

What did the Tribunal hold?

The Tribunal held that the PCIT erred in invoking revisionary powers under section 263. The Assessing Officer (AO) had made inquiries into the expenses, including Trademark & Copyright expenses, by issuing notices under section 142(1) and receiving replies with sample invoices. The AO applied his mind and passed the assessment order. The Tribunal noted that when there are two plausible views on an issue, section 263 cannot be invoked. It was observed that various decisions, including those of the Supreme Court and High Courts, have taken the view that such expenses are revenue expenditure. Therefore, the revisionary powers could not be invoked in these circumstances, and the order passed under section 263 was not correct. The Tribunal allowed the appeal of the assessee. The issue regarding the PCIT's power to revise an order passed by the National e-Assessment Centre was not explicitly decided but was implicitly addressed by allowing the assessee's appeal on the merits of the section 263 invocation.

What were the issues?

1. Whether the PCIT erred in initiating proceedings under section 263 of the Act, given that the assessment order was passed after necessary inquiries and due application of mind, and was neither erroneous nor prejudicial to the revenue? 2. Whether the PCIT had the power to revise an assessment order passed by the National e-Assessment Centre under section 143(3) r.w.s. 144B? Assessee's Contentions: - Revisional jurisdiction under section 263 can only be invoked if both conditions (erroneous order and prejudicial to revenue) are cumulatively satisfied, as per Malabar Industrial Co. Ltd. vs. CIT. The PCIT's own order defeats the revision as neither limb is met. - The AO made inquiries, and the assessee disclosed the nature of expenses. The AO applied his mind and adopted a plausible view that the expenditure is revenue. Mere non-discussion does not render the order erroneous (CIT vs. Nirma Chemical Works Ltd., Gujarat Power Corporation vs. ACIT, Rayon Silk Mills vs CIT, CIT vs. Gabriel India Ltd., CIT vs. Vikas Polymers). - Explanation 2(a) to section 263 is attracted only for a total absence of inquiry, not an inadequate one (CIT vs. Sunbeam Auto Ltd., CIT vs. Anil Kumar Sharma). - The issue of whether trademark registration yields revenue or capital advantage is debatable, and where two views are possible, section 263 cannot be invoked if the AO adopts a plausible view (Malabar Industrial Co. Ltd. vs. CIT, Kwality Steel Suppliers Complex vs. CIT, CIT vs. Arvind Jewellers). - Even if capitalized, depreciation under section 32 offsets the disallowance under section 37, resulting in a timing difference and no revenue loss. For a taxpayer under section 115BAA, this is tax-neutral (Hampi Expressways Pvt.Ltd. Vs. Pr. CIT, CIT vs. Excel Industries). - Registration of a trademark does not create a new asset or confer an enduring benefit. Such expenditure is revenue in nature (CIT vs. Finlay Mills Ltd., Reckitt Benckiser Healthcare India Ltd. vs. Addl. CIT, etc.). - The PCIT's reliance on the Trade Marks Act, 1999 and AS-26/ICDS establishes debatable characterization, reinforcing that section 263 is not maintainable. - The jurisdictional PCIT could not assume revisional jurisdiction over an order passed by the National Faceless Assessment Centre. Revenue's Contentions: - The PCIT rightly invoked section 263. - The AO did not make additions to the extent of details of expenses related to "Trademark & Copyright" which were debited by the assessee and were capital in nature, and should have been disallowed by the AO.

Which sections of the Income-tax Act were involved?

Section 37,Section 32,Section 263,Section 143(3),Section 144B,Section 142(1),Section 115BAA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI

For Respondent: Shri J.K. Chandnani, CIT(DR)
Pronounced: 14.10.2026

PER : SUCHITRA KAMBLE, J M:

The appeal filed by the assessee is against the order passed by the Principal Commissioner of Income Tax, Valsad [in short “PCIT”] dated 29.03.2025 for the Assessment Year (in short “AY”) 2020-21. 2. The assessee has raised the following grounds of appeal: “1.1 On the facts and in the circumstances of the case, and in law, the learned PCIT has erred in initiating proceedings under section 263 of the Act.

1.2.

On the fac

The order continues below.

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