CENTAUR PHARMACEUTICALS P.LTD,MUMBAI vs. DCIT 10(1), MUMBAI

1. On the facts and circumstances of the case and in law, Ld. CIT(A) was not justified in confirming the order of the learned Assessing Officer of making a disallowance of Legal & Professional charges of Rs.18,70,718/- treating the same as Capital expenditure and not allowing it as revenue expenditure.

Facts leading to the same are that during assessment proceedings u/s 143(3), Ld. AO opined that certain legal & professional charges to the extent of Rs.69.17 Lacs incurred by the assessee were capital in nature and hence not allowable as revenue expenditure. This expenditure were primarily in the nature of product registration fees, patent registration & forging of license agreement etc. Aggrieved, the assessee contested the same with partial success before Ld. CIT(A) vide impugned order dated 03/03/2016.

The Ld. CIT(A) noted that the correct figures to be disallowed was Rs.47.73 Lacs and further, relying on the order of its predecessor for earlier AYs, provided partial relief to the extent of Rs.29.46 Lacs and confirmed balance disallowance of Rs.18.27 Lacs being amount paid to Dr. May Pharma Consult GmBH. Still aggrieved, the assessee is in further appeal before us. 4. The Ld. Authorized Representative for Assessee [AR], at the outset, drew attention to the fact that the assessee suffered similar disallowance in AYs 2008-09 & 2009-10 which was contested up-to the level of this Tribunal vide & ITA No.5782/Mum/2012 dated 27/04/2015 where the matter was restored ITA.No.3981/Mum/2016 Centaur Pharmaceuticals Private Limited Assessment Year 2011-12 back with certain directions and therefore, similar directions may be given in this year also. The Ld. DR raised no serious objections against the same. 5. Upon perusal of the cited order of the Tribunal for AY 2008-09 & 2009-10, we find that the issue has been restored back by the Tribunal with following directions:- 6.2 Now the question relates to payment made to Dr. May Pharma Consult GMBH. In this regard, we observed that this disallowance has been upheld by Ld. CIT(A) on the ground that this was not made for the purpose of business. Ld. CIT(A) has also observed that there was no material on record to hold that what services were provided by the said party to the assessee. Against these observations of Ld. CIT(A) it is the case of the Ld. AR that the payments are supported by the agreement as well as the work done by the said party which were supported by emails and other documentary evidence. However, it was submitted that this matter may be restored back to the file of AO for verification of the purpose of business as well for determining the services rendered by the said party to the assessee. Accordingly, after hearing both the parties, we restore the issue to the file of AO limited to the extent of making such verifications in respect of payments made to Dr. May Pharma Consult GMBH, which are claimed as expenditure incurred for the purpose of business. After conducting necessary verification, the AO is directed to decide this issue in accordance of law after giving the assessee a reasonable opportunity of hearing. We direct accordingly.