ACIT CIR. 8(2), MUMBAI v. M/s. LIVA PHARMA LTD., MUMBAI

ITA 4276/MUM/2005 | 2001-2002
Pronouncement Date: 30-03-2011 | Result: Dismissed

Appeal Details

RSA Number 427619914 RSA 2005
Assessee PAN AAACL0709Q
Bench Mumbai
Appeal Number ITA 4276/MUM/2005
Duration Of Justice 5 year(s) 9 month(s) 21 day(s)
Appellant ACIT CIR. 8(2), MUMBAI
Respondent M/s. LIVA PHARMA LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 30-03-2011
Date Of Final Hearing 22-02-2011
Next Hearing Date 22-02-2011
Assessment Year 2001-2002
Appeal Filed On 08-06-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 4276/MUM/2005 (ASSESSMENT YEAR: 2001-02) ACIT 8(2) M/S. LIVA HEALTH CARE LTD. ROOM NO. 209 2ND FLOOR ZYDEES TOWER OPP. ISKCON T EMPLE AAYAKAR BHAVAN M.K. ROAD VS. SATELLITE CROSS ROAD MUMBAI 400020 AHMEDABAD 380015 PAN - AAACL 0709 Q APPELLANT RESPONDENT ITA NO. 3904/MUM/2005 (ASSESSMENT YEAR: 2001-02) M/S. LIVA HEALTH CARE LTD. ACIT 8(2) ZYDEES TOWER OPP. ISKCON TEMPLE ROOM NO. 209 2ND FLOOR SATELLITE CROSS ROAD VS. AAYAKAR BHAVAN M.K. ROAD AHMEDABAD 380015 MUMBAI 400020 PAN - AAACL 0709 Q APPELLANT RESPONDENT REVENUE BY: SHRI SUMEET KUMAR ASSESSEE BY: SHRI D.P. BAPAT O R D E R PER B. RAMAKOTAIAH A.M. THESE ARE CROSS APPEALS BY THE REVENUE AND ASSESSEE ARISING OUT OF THE ORDER OF THE CIT(A) VIII MUMBAI DATED 24.03.2005. ASSESSEE HAS INTIMATED THE CHANGE OF NAME FROM LIVA PHARMA LTD. TO LIVA HE ALTH CARE LTD. AND FILED REVISED FORM 36 ON 24.05 .2005. THIS APPEAL WAS ORI GINALLY DISMISSED AS UNADMITTED VIDE ORDER DATED 08.01.2008 AND WAS RECA LLED ON THE BASIS OF THE MA VIDE ORDER DATED 18.11.2008. WE HAVE HEARD T HE RIVAL CONTENTIONS. THE ISSUES IN BOTH THE APPEALS ARE CONSIDERED AND D ECIDED AS UNDER. ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 2 ITA NO. 4276/MUM/2005 2. IN THIS APPEAL THE REVENUE HAS RAISED TWO GROUNDS. FIRST GROUND IS AS UNDER: - I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN HOLDING THAT THE RECEIPT OF RS.4 05 271/- FROM SALE OF LIQUID ORALS IS TO BE INCLUDED IN THE ELIGIBLE P ROFIT FOR DETERMINING THE DEDUCTION U/S. 80IA OF THE ACT ON THE GROUND TH AT THE ASSESSEE IS THE MANUFACTURING OF PHARMACEUTICAL PRODUCTS WIT HOUT APPRECIATING THE FACTS OF THE CASE. 3. THE ISSUE IN THE ABOVE GROUND ARISES OUT OF THE ACT ION OF THE A.O. IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUC TION UNDER SECTION 80IA IN RESPECT OF PROFIT DERIVED BY IT AMOUNTING TO ` 4 05 271/- ON SALE OF GOODS MANUFACTURED OUTSIDE ASSESSEES MANUFACTURING UNIT UNDER LOAN LICENCE AGREEMENT. ASSESSEE HAS ENTERED INTO AN AGREEMENT W ITH M/S. LABELLA PHARMACEUTICALS FOR PRODUCTION OF CERTAIN PHARMACEU TICAL PRODUCTS AND TREATED THE SAME AS ITS OWN MANUFACTURING AND THE C ORRESPONDING PROFIT WAS SHOWN IN THE BOOKS OF ACCOUNT. ASSESSEE HAS CLAIMED 80IA DEDUCTION. THE A.O. WAS OF THE OPINION THAT ASSESSEE COULD NOT HAV E SUPERVISED THE PRODUCTION ACTIVITY AS THE SAID COMPANY WAS FAR AWA Y IN DAHISAR AND THEREFORE THERE COULD NOT BE ANY DIRECT SUPERVISION OF THE PRODUCTS. THEREFORE THE ASSESSEE IS NOT ENTITLED FOR DEDUCTI ON UNDER SECTION 80IA IN TERMS OF THE DECISION OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS. PENWALT INDIA LTD. 196 ITR 813. HE ACCORDINGLY MADE THE DISALLOWANCE. ASSESSEE SUBMITTED THAT IN TERMS OF LOAN LICENCE AG REEMENT THE ASSESSEE HAD WITH M/S. LABELA PHARMACEUTICALS THE ENTIRE PRO DUCTION WAS AS PER ITS OWN STANDARD AND SPECIFICATIONS AND IN ACCORDANCE W ITH THE MANUFACTURING INSTRUCTIONS AND QUALITY CONTROL PROCEDURES LAID DO WN FROM TIME TO TIME. ON CONSIDERING THE LOAN LICENCE AND THE SUBMISSION THE CIT(A) HELD THAT THE ASSESSING OFFICERS OPINION THAT THE ASSESSEE COULD NOT HAVE SUPERVISED THE PRODUCTION IS RATHER ERRONEOUS. HE RELYING OF THE JUDGEMENT IN THE CASE OF CIT V. INDIA RAISON & POLYMERS 235 ITR 5 (KER) HEL D THAT ASSESSEE IS ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 3 ENTITLED FOR DEDUCTION IN TERMS OF SECTION 80IA OF THE ACT IN RESPECT OF THE PROFIT ARISING OUT OF THAT ACCOUNT. REVENUE IS AGGR IEVED. 4. AFTER CONSIDERING THE LOAN LICENCE AGREEMENT AND TH E ARGUMENTS OF THE RIVAL PARTIES WE ARE OF THE OPINION THAT THERE IS N O NEED TO DIFFER FROM THE FINDINGS OF THE CIT(A). ASSESSEE HAS SPECIFIED THE STANDARDS AND SPECIFICATIONS AND IN ACCORDANCE WITH THE MANUFACTU RING INSTRUCTIONS AND QUALITY CONTROL PROCEDURES M/S. LABELA PHARMACEUTIC ALS WAS MANUFACTURING AND PROVIDING THE GOODS TO THE ASSESSEE. THEREFORE IT CANNOT BE STATED THAT ASSESSEE HAS NO SUPERVISORY CONTROL. IN VIEW OF THI S ORDER OF THE CIT(A) IN ALLOWING THE DEDUCTION IN TERMS OF SECTION 80IA IS UPHELD. REVENUES GROUND IS REJECTED. 5. GROUND NO. 2 PERTAINS TO THE ISSUE OF DELETING THE DISALLOWANCE OF ` 13 24 710/- MADE AS AN ADDITION BY THE A.O. INVOKIN G THE PROVISIONS OF SECTION 145A. THE ASSESSING OFFICERS CONTENTION WA S THAT SINCE THE GOODS WERE AVAILABLE IN FINISHED STOCK AND EXCISE DUTY WA S NOT PAID THE AMOUNT TO THAT EXTENT WAS NOT ALLOWABLE AS DEDUCTION. IT WAS SUBMITTED THAT THE ENTIRE TAX LIABILITY WAS ` 14 08 744/- AND THE ASSESSEE HAS PAID AN AMOUNT OF ` 13 24 710/- AFTER CLOSURE OF THE YEAR BUT BEFORE TH E DUE DATE FOR FILING THE RETURN OF INCOME AND THE BALANCE AMOUNT OF ` 84 304/- WAS ALSO DISALLOWED IN THE COMPUTATION. ON THIS THE CIT(A) DELETED THE DISALLOWANCE HOLDING THAT THE AMOUNT IS ALLOWABLE IN TERMS OF SECTION 43 B(A) READ WITH FIRST PROVISO AS THE AMOUNT HAS BEEN PAID BEFORE FILING T HE RETURN. CONSIDERING THE ACCOUNTING PRINCIPLES OF THE ASSESSEE AND THE F ACTS ON RECORD WE ARE OF THE OPINION THAT ORDER OF THE CIT(A) DOES NOT REQUI RE ANY MODIFICATION. ASSESSEE HAS CORRECTLY ACCOUNTED FOR THE EXCISE DUT Y LIABILITY AND TO THE EXTENT IT HAS PAID THE SAME WAS ALLOWABLE UNDER SE CTION 43B(A) AND THE BALANCE AMOUNT NOT PAID WAS ALSO DISALLOWED BY THE ASSESSEE IN THE COMPUTATION OF INCOME ITSELF THE FACT OF WHICH WAS ALSO STATED BY THE A.O. IN PAGE NO. 6 OF THE ASSESSMENT ORDER. IN VIEW OF THIS THE GROUND IS REJECTED. 6. IN VIEW OF THIS REVENUES APPEAL IS DISMISSED. ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 4 ITA NO. 3904/MUM/2005 7. GROUND NO. 1 OF ASSESSEES APPEAL IS AS UNDER: - 1. THE LEARNED CIT (APPEAL) ERRED IN UPHOLDING DIS ALLOWANCE OF DEPRECIATION OF RS.11 24 140. 8. THE ISSUE IN THE ABOVE GROUND IS WITH REFERENCE TO CLAIM OF DEPRECIATION OF AN AMOUNT OF ` 11 24 140/-. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE A.O. HAS MADE DISALLOWANCE O N DEPRECIATION CLAIMED IN RESPECT OF NEW PORTION OF FACTORY BUILDING AND P LANT & MACHINERY CLAIMED TO HAVE BEEN INSTALLED THEREIN IN THE INDUSTRIAL UN DERTAKING LOCATED AT SINNAR DISTRICT NASIK MAHARASHTRA. ASSESSEE CLAIM ED THAT THE NEW PORTION OF THE PLANT & MACHINERY HAS COME TO PRODUCTION ON 22.03.2001 AND ACCORDINGLY CLAIMED DEPRECIATION AT 50% OF NORMAL R ATE AS THE SAID ASSETS WERE UTILISED FOR A PERIOD LESS THAN 180 DAYS. THE A.O. DID NOT ALLOW THE DEPRECIATION ON THE REASON THAT THE OCCUPATION CERT IFICATE IN REGARD TO THE CONSTRUCTION OF THE BUILDING AND ITS USE WAS GRANTE D BY THE COMPETENT AUTHORITY ON 17.05.2001 AND THE ELECTRICAL CONTRACT ORS COMPLETION AND TEST REPORT WAS DATED 30.04.2001. IN THE OPINION OF THE A.O. THE BUILDING CONSTRUCTION WAS COMPLETED ONLY IN THE NEXT ACCOUNT ING YEAR AND ACCORDINGLY THE DEPRECIATION IN RESPECT OF BUILDING AND PLANT & MACHINERY INSTALLED THEREIN ARE HELD NOT TO BE ENTITLED FOR D EPRECIATION. ASSESSEE SUBMITTED VARIOUS DETAILS OF PURCHASE OF MACHINERY AND THEIR INSTALLATION TEST CHECKS WITH REFERENCE TO THE PLANT & MACHINERY FURNITURE AND OTHER ASSETS INCLUDING ELECTRICAL INSTALLATIONS. WITH REF ERENCE TO THE BUILDING IT WAS THE SUBMISSION THAT THE ASSESSEE HAS WRITTEN TO THE COMPETENT AUTHORITY AS EARLY AS JANUARY 2001 BUT THEY GAVE THE CERTIFICATE IN MAY 2001 BUT THAT DOES NOT PREVENT THE ASSESSEE IN CLAIMING DEPRECIAT ION AS THE BUILDING WAS OCCUPIED BEFORE THE CLOSURE OF THE ACCOUNTING YEAR AND MACHINERY WAS INSTALLED AND THERE WAS ALSO UTILISATION. ON EXAMIN ING THE ISSUE BOTH ON FACTS AND ON LAW THE CIT(A) GAVE FINDING THAT THE D ETAILS ON RECORD NO DOUBT SHOW THAT DURING THE RELEVANT ACCOUNTING PERIOD ACT IVITIES IN REGARD TO ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 5 ACQUISITION OF ASSETS AND THEIR INSTALLATION IN THE RESPECTIVE PLACES TOOK PLACE. HOWEVER HE DID NOT ALLOW DEPRECIATION STATI NG THAT THERE IS NOTHING ON RECORD TO SHOW THAT THESE ASSETS WERE ACTUALLY U SED BY THE ASSESSEE COMPANY FOR THE PURPOSE OF ITS BUSINESS DURING THE YEAR. 9. CONTESTING THE ABOVE FINDING OF THE CIT(A) THE LEAR NED COUNSEL REFERRED TO VARIOUS DETAILS FILED BEFORE HIM AND HOW THE MAC HINERY WAS INSTALLED MUCH BEFORE 20.03.2001 AND REFERRED TO VARIOUS DOCU MENTS PLACED ON RECORD INCLUDING THE CERTIFICATES ISSUED BY VARIOUS SUPPLIERS OF MACHINERY. 10. THE LEARNED COUNSEL SUBMITTED THAT THE EVIDENCE DO INDICATE THAT THE MACHINERY WAS INSTALLED AND READY FOR USE AS PER TH E FINDINGS OF THE CIT(A) AND JUST BECAUSE THE OCCUPATION CERTIFICATE WAS ISS UED IN LATER YEAR DOES NOT MEAN THAT THE PLANT & MACHINERY AND BUILDING WERE N OT USED. HE RELIED ON THE DECISION OF THE HON'BLE KARANTAKA HIGH COURT IN THE CASE OF CIT VS. CHAMUNDESHWARI SUGAR LTD. 309 ITR 326 FOR THE PROPO SITION THAT MACHINERY WAS READY TO USE AND ASSESSEE WAS ENTITLE D FOR DEPRECIATION. IT WAS ALSO SUBMITTED THAT WITHIN THE BLOCK CONCEPT TH ERE IS NO NEED FOR USE OF INDIVIDUAL MACHINERY AND RELIED ON THE JUDGEMENT OF THE ITAT JABALPUR BENCH IN THE CASE OF PACKWELL PRINTERS 59 ITD 340. WITH REFERENCE TO THE DECISION IN THE CASE OF ACIT VS. JAGDISH C. SHETH 1 01 ITD 360 (MUM) IT WAS SUBMITTED THAT THE ISSUE THEREIN WAS CLAIM OF DEPRE CIATION ON TWO FOREIGN CARS WHICH WERE NOT OTHERWISE ENTITLED FOR DEPRECIA TION UNLESS THEY ARE USED IN THE BUSINESS OF HIRE. THE ORDER OF THE ITAT IN T HAT CASE DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE. IT WAS SUBMITTED THA T THE ASSESSEE HAS USED THE MACHINERY DURING THE YEAR AND REFERRED TO THE A NNUAL REPORT AND FURTHER EVEN IF THE MACHINERY WAS OTHERWISE HELD NOT USED I N THE YEAR ON PASSIVE USAGE BASIS DEPRECIATION CAN BE ALLOWED BASED ON TH E JUDGMENTS IN THE CASE OF CIT VS. VISWANATH BHASKAR SATHE 5 ITR 621 (BOM) AND WHITTLE ANDERSON LTD. VS. CIT 79 ITR 613 (BOM) WHEREIN EVEN PASSIVE USAGE IS ALSO CONSIDERED AS USE. ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 6 11. THE LEARNED D.R. HOWEVER RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A) TO SUBMIT THAT THERE WAS NO EVIDENCE THAT TH E MACHINERY WAS USED DURING THE YEAR. IT WAS HIS SUBMISSION THAT THE ASS ESSEE COULD NOT HAVE LEGALLY USED THE BUILDING AS THE CERTIFICATE WAS IS SUED IN MAY 2001 AND THE DOCUMENTS REGARDING TEST CHECK OF MACHINERY IS MOST LY WITH REFERENCE TO CHECKING OF MACHINERY BY THE SUPPLIERS BUT NOT WITH REFERENCE TO TRIAL RUN OR ACTUAL INSTALLATION OF THE MACHINERY. THE LEARNED D .R. SUBMITTED THAT FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF B. MALANI & CO. VS. CIT 214 ITR 192 DEPRECIATION CANNOT BE AL LOWED IF THE PLANT & MACHINERY INSTALLED WERE NOT PUT TO USE DURING THE YEAR. 12. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE PAPER BOOK PLACED ON RECORD. AS FAR AS INSTALLATION OF MACHINERY IN THE BUILDING IS CONCERNED THE CIT(A) HAS ALREADY GIVEN A FINDING THAT THE EVIDENC E DO INDICATE THAT THE PLANT & MACHINERY WERE INSTALLED DURING THE YEAR. T HE ISSUE IS WITH REFERENCE TO USE OF MACHINERY. AS SEEN FROM THESE D ETAILS THERE IS NO DOUBT THAT ASSESSEE HAS UTILIZED THE MACHINERY DURING THE YEAR. AS SUBMITTED AND AS PLACED ON RECORD ASSESSEE HAS WRITTEN FOR OCCUPA NCY CERTIFICATE AS EARLY AS JANUARY 2001. JUST BECAUSE THE CONCERNED AUTHORI TY HAS NOT GIVEN THE OCCUPANCY CERTIFICATE IT DOES NOT MEAN THAT THE BUI LDING WHICH WAS CONSTRUCTED COULD NOT BE USED BY THE ASSESSEE FOR T HE PURPOSE OF BUSINESS AND THIS NEWLY CONSTRUCTED BUILDING IS NOTHING BUT UPPER FLOORS OF THE EXISTING BUILDING WHERE SUCH FACILITIES WERE ALSO E ARLIER LOCATED. THE SUBMISSION IN THIS RESPECT MADE TO THE CIT(A) VIDE LETTER DATED 15.02.2005 ARE WORTH EXTRACTING HERE: - A) WHICH FACILITIES WERE CREATED ON THE NEWLY CONS TRUCTED 2 ND FLOOR AND WHERE WERE SUCH FACILITIES EARLIER LOCAT ED. 1. SPACE FOR LABORATORY OCCUPYING 134.04 SQ.MTRS THE EARLIER LAB WAS ON THE GROUND FLOOR WHICH HAD OCCUPIED A FLOOR SPACE OF 71.57 SQ.MTRS THE OLD SPACE WS CONVERTED IN CABIN FOR MANAGER TABLETS AND A PACKING HALL. ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 7 2. PACKING MATERIALS STORES OCCUPYING 230.51 SQ.MTR S. EXTRA PACKING MATERIALS SPACE FOR STORING THE PACKING MAT ERIAL OF LOAN LICENCES. 3. OVERPRINTING AREA OF 68.48 SQ.MTRS THIS FACILI TY WAS EARLIER ON THE GROUND FLOOR OCCUPYING 40.70 SQ.MTRS. THE OLD AREA IS KEPT VACANT FOR THE TIME BEING. 4. GENERAL CAPSULATION AREA OF 28.58 SQ.MTRS. SHI FTED FROM 1 ST FLOOR TO 2 ND FLOOR WHICH HAD EARLIER A SPACE AREA OF 30.74 SQ.M TRS. 5. WORKERS/STAFF LUNCH ROOK OCCUPYING 112.81 SQ.MTR S EARLIER SPACE WAS ON THE GROUND FLOOR OCCUPYING 40.70 SQ.MT RS THE VACATED AREA WAS USED FOR INSTALLATION OF BOILER AN D PROVIDING SPACE FOR RAW-MATERIALS SCRAP STORAGE BOILER INST ALLED ON 9/1/2001 AS PER EVIDENCE ENCLOSED AT PAGE (1) TO (2 ) AND USED THEREAFTER FROM 15/1/2001 AS PER THE EVIDENCE ALSO ENCLOSED AT PAGE (4) BEING THE COPY OF DAILY LOG BOOK. 6. MEDIA PREPARATION ROOM OCCUPYING SPACE OF 14.8 3 SQ.MTRS. EARLIER THIS FUNCTION WAS PERFORMED ON THE GROUND FLOOR OCCUPYING AN AREA OF 11.20 SQ.MTRS WHICH IS CONVERT ED INTO BLISTER PACKING ROOM OCCUPYING AND EXTENDED AREA OF 16.37 SQ.MTRS. 7. CABIN & CONFERENCE ROOM WAS NEWLY CONSTRUCTED OC CUPYING AN AREA OF 27.70 SQ.MTRS. EVIDENCE HAS BEEN FILED TO INDICATE THAT THE PROCES S OF ELECTRIFICATION AND SHIFTING WAS STARTED FROM 16/11 /2000 ITSELF. PLEASE SEE PAGES 75 TO 77 87 TO 95 BEING THE DAILY WORK RECORD OF THE CONTRACTORS EMPLOYEES. FURTHER EVIDENCE IS AVAILABLE BY WAY THE CONTRACTORS BILLS AT PAGE 72 73 74 79 80 81 82 83 84 95 & 86. B. WHERE WERE THE NEW ACQUISITIONS OF PLANT & MACH INERY INSTALLED. 1. SR. NO. 2 OF PAPER BOOK-II BEING MULTI-COLUMN DI STILLATION PLANT _ THIS PLANT OCCUPIED AN AREA F 3.90 SQ.MTRS IT WAS EARLIER INSTALLED IN THE GROUND FLOOR AREA OF LABORATORY AN D SHIFTED ON THE 2 ND FLOOR LATER. 2. SR. NO. 4 OF PAPER BOOK II CARTON SEALING MA CHINE THIS EQUIPMENT OCCUPIED A FLOOR AREA OF 0.64 SQ.MTRS. AN D INSTALLED IN THE EXISTING TABLETING AREA ON THE GROUND FLOOR WHI CH WAS NOT SHIFTED TO 2 ND FLOOR. 3. SR. NO. 6 OF PAPER BOOK II COMMUNITING MILL THIS EQUIPMENT OCCUPIED A FLOOR SPACE OF 1.39 SQ. MTRS. THIS WAS I NSTALLED IN THE ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 8 EXISTING GRANULATION AREA OF 51.48 SQ.MTRS. ON THE GROUND FLOOR WHICH WAS NOT SHIFTED TO THE 2 ND FLOOR. 4. SR. NO. 8 OF PAPER BOOK II OINTMENT MANUFACT URING PLANT THIS WAS INSTALLED ON THE 1 ST FLOOR IN THE EXISTING OINTMENT MANUFACTURING AREA. 5. SR. NO. 10 OF PAPER BOOK II BOILER THIS WA S INSTALLED IN THE AREA VACATED BY THE SHIFTING OF WORKERS LUNCH ROOM EVIDENCE ALREADY DEALT WITH AT (A) ABOVE. 6. SR. NO. 16 OF PAPER BOOK II SUGAR SERUM PREP ARATION TANK. THIS EQUIPMENT OCCUPIED A FLOOR SPACE AREA OF 1 SQ. MTR. AND INSTALLED IN THE EXISTING TABLETING AREA ON THE GRO UND FLOOR WHICH WAS NOT SHIFTED. 7. SR. NO. 23 OF PAPER BOOK II DIESEL GENERATIN G SET THIS EQUIPMENT OCCUPIED AN AREA OF 41 SQ.MTRS. AND IT WA S INSTALLED IN THE EXISTING SCRAP YARD ON THE GROUND FLOOR WHIC H HAD A FLOOR SPACE AREA OF 50.68 SQ.MTRS. EVIDENCE OF USER OF TH E GENERATING SET IS BY WAY OF CONSUMPTION OF DIESEL FOR THE FIRS T TIME IN THE YEAR UNDER CONSIDERATION. THIS EVIDENCE IS CONTAINE D IN THE ANNEXURE TO THE REPORT OF THE DIRECTORS COPY OF WH ICH IS ENCLOSED AT PAGES (5) TO (10) [IN PARTICULAR PAGE NO. 8.] 13. ASSESSEE HAS INDICATED THAT SOME OF THE MACHINES WE RE INSTALLED IN THE OLD AREA AND SHIFTED TO THE SECOND FLOOR OR FIR ST FLOOR. IN FACT THE CARTON SEALING MACHINE ON WHICH DEPRECIATION WAS ALSO DIS ALLOWED HAS BEEN INSTALLED IN THE EXISTING TABLETING AREA IN THE GRO UND FLOOR WHICH WAS SHIFTED TO SECOND FLOOR A NEW BUILDING. THE ABOVE EVIDENCE PLACED ON RECORD AND THE EXPLANATION GIVEN BY THE ASSESSEE DO INDICATE THAT THE MACHINERY WAS NOT ONLY INSTALLED BUT ALSO USED DURING THE YEAR. 14. THE LEARNED COUNSEL WITHDREW THE CLAIM OF DEPRECIAT ION TO AN EXTENT OF ` 27 404/- PERTAINING TO MULTI COLUMN DISTILLATION PL ANT CAPACITY 50 LTRS. WITH LEDGER CODE 0101005 AND DID NOT PRESS THE DEPR ECIATION ON THE COST OF ` 2 19 232/- ON THAT ASSET. THEREFORE THE CLAIM IS RE STRICTED TO DISALLOWANCE OF ` 10 96 736/- OUT OF THE DEPRECIATION CLAIMED BEFORE THE A.O. IN VIEW OF THIS THE A.O. IS DIRECTED TO ALLOW THE DEPRECIATION TO THE EXTENT OF ` 10 96 736/-. ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 9 15. GROUND NO. 2 PERTAINS TO THE ISSUE OF PAYMENT TO FD A LICENCE OF ` 24 630/-. 16. THE A.O. NOTICED THAT THE ASSESSEE COMPANY PAID AN AMOUNT OF ` 35 320/- TO FOOD AND DRUG ADMINISTRATION AS LICENCE FEES. THIS INCLUDED AN AMOUNT OF ` 24 630/- PAID ON NEW PRODUCT AND THE BALANCE AMOUNT OF ` 10 600/- FOR RENEWAL OF LICENCE OF EXISTING PRODUCT S. THE A.O. WAS OF THE OPINION THAT THE EXPENDITURE INCURRED TOWARDS PAYME NT OF LICENCE FEES ON NEW PRODUCT IS CAPITAL IN NATURE AS THE COMPANY COU LD NOT HAVE LAUNCHED THE NEW PRODUCTS WITHOUT PAYMENT OF LICENCE FEES AN D THEREFORE THE EXPENDITURE INCURRED IS TREATED AS CAPITAL IN NATUR E. THE CIT(A) ON EXAMINATION OF THE SAME UPHELD THE CONTENTIONS OF THE A.O. THAT THE AMOUNT WAS PAID FOR NEW PRODUCTS. HOWEVER HE DIREC TED THE A.O. TO ALLOW DEPRECIATION ON THE ABOVE AMOUNT ADMISSIBLE TO INTA NGIBLE ASSETS. 17. IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT T HE AMOUNT WAS PAID FOR RENEWAL OF EXISTING LICENCE FOR ANOTHER PE RIOD OF 3 YEARS AND NEW PRODUCTS ARE NOT INVOLVED. WITH REFERENCE TO THE SU BMISSION MADE BEFORE THE CIT(A) IT WAS STATED THAT THE LICENCE IS REQUIRED T O BE RENEWED EVERY 3 YEARS AND THEREFORE THE NEW REGISTRATION DOES NOT HAVE AN Y ENDURING ADVANTAGE AND THE EXPENDITURE IS INCURRED FOR THE SAME PRODUC T LINE AND RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F EMPIRE JUTE CO. LTD. VS. CIT 124 ITR 1. 18. WE ARE OF THE OPINION THAT THE LICENCE FEES PAYABLE TO THE FOOD AND DRUG AUTHORITIES IS A SORT OF REVENUE PAYMENT WHICH IS PAID REGULARLY FOR EVERY 3 YEARS AND DOES NOT HAVE ANY ENDURING BENEFI T. JUST BECAUSE THE AMOUNT PAID PERMITS THE ASSESSEE TO MARKET PRODUCTS FOR A PERIOD OF 3 YEARS IN OUR VIEW THE EXPENDITURE DOES NOT BECOME CAPITAL IN NATURE. MOREOVER THE ASSESSEE COMPANY IS IN THE PHARMACEUTI CAL BUSINESS AND THE NEW PRODUCTS ARE LAUNCHED AS PART OF THE EXISTING B USINESS. THEREFORE THE LICENCE FEE PAID IS REVENUE IN NATURE. CONSIDERING THE FACTS OF THE CASE WE ALLOW THE GROUND AND DIRECT THE A.O. TO ALLOW THE E XPENDITURE AS REVENUE ITA NOS. 4276&3904/MUM/2005 M/S. LIVA HEALTH CARE LTD. 10 EXPENDITURE. IF ANY DEPRECIATION IS ALLOWED CONSEQU ENT TO THE ORDER OF THE CIT(A) THE SAME CAN BE WITHDRAWN. GROUND IS ALLOWED . 19. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED A ND APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 30 TH MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII MUMBAI 4. THE CIT VIII MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.