9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (8) TMI 1127 - AT - Income TaxEnhanced claim of the assessee on R D expenses u/s.35(2AB) - HELD THAT - We observe that assessee is in R D work for its business purposes as well as undertaking contract research. The income earned by the assessee may include income earned by the assessee for the mere services on contract research as well as certain products which is considered by the DSIR and excluded the same while approving the project and R D expenditure for the purpose of claiming deduction u/s. 35(2AB) of the Act. This may needs detailed verification on the income earned by the assessee and it has to be segregated based on the products made by the assessee and the products emanating out of R D services like Dossier etc., and accordingly, Assessing Officer is directed to exclude only those incomes which are in the category of dossier etc., not the product/assets and contract income. Accordingly, Ground No. 2 raised by the assessee is allowed for statistical purpose. Nature of expenditure - amount paid to Asean Patent Bureau - revenue or capital expenditure - HELD THAT - We observe from the record that the ITAT in assessee s own case in particular A.Y. 2011-12 2018 (2) TMI 2081 - ITAT MUMBAI has decided in favour of the assessee and against the revenue. Disallowance of Consultancy charges - Consultancy charges paid to the consultants for the purpose of business only, we direct the Assessing Officer to verify the genuineness of the claim and if it is within the category of other consultancy charges which this bench as allowed in Ground we direct him to allow the same
Issues Involved:
1. Disallowance of R&D expenditure under section 35(2AB). 2. Disallowance of professional fees as capital expenditure. Issue-wise Detailed Analysis: 1. Disallowance of R&D Expenditure under Section 35(2AB): The assessee filed its return of income declaring Rs. 4,20,890/-. During the scrutiny, the Assessing Officer (AO) observed that the assessee claimed R&D expenditure of Rs. 5,03,34,595/- under section 35(2AB) of the Income-tax Act, 1961, while the Department of Scientific and Industrial Research (DSIR) approved only Rs. 3,41,02,000/-. The AO disallowed the excess claim of Rs. 1,62,32,595/-. The assessee argued that the sale realization from R&D work should not be reduced from the revenue expenditure, citing the Karnataka High Court decision in CIT v. Micro Lab Ltd. and a similar ITAT Mumbai decision in ACIT v. Wochardt Ltd. The CIT(A) upheld the AO's disallowance, leading the assessee to appeal to the ITAT. The ITAT reviewed the Karnataka High Court's decision, which held that sales realization from products emanating from R&D work should not be offset against R&D expenditure, as such sales are reflected as business receipts. The ITAT directed the AO to exclude only those incomes which are in the category of dossier, not the product/assets and contract income, and allowed the ground for statistical purposes. 2. Disallowance of Professional Fees as Capital Expenditure: The AO disallowed professional fees totaling Rs. 67,40,685/- as capital expenditure. The assessee argued that similar disallowances in previous years were deleted by the CIT(A) and ITAT, particularly for payments to Dr. May Pharma and Ventures Corp Consultants, which were allowed by ITAT for A.Y. 2008-09 and A.Y. 2009-10. The CIT(A) partly allowed the appeal, sustaining the disallowance for payments to Asian Patent Bureau, John A. Mccrerie, and Dr. Dilip Snavordekar, considering them capital in nature as they conferred enduring benefits to the assessee. The ITAT reviewed the decisions in earlier assessment years and followed the precedent. It allowed the disallowance for Asian Patent Bureau and Dr. Dilip Snavordekar based on previous favorable ITAT decisions in assessee's own case. For John A. Mccrerie, the ITAT remitted the issue back to the AO to verify the genuineness of the claim and allow it if it falls within the category of other consultancy charges allowed in previous grounds. Conclusion: The ITAT partly allowed the appeal, directing the AO to re-evaluate the R&D expenditure claim and professional fees based on the provided guidelines and previous decisions. The order emphasized consistency with earlier favorable rulings in similar cases for the assessee.
|
