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TMI Blog2012 (10) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. Commissioner of Income-tax(Appeals) or even before the Tribunal - Order passed by CIT(A) set aside and matter remanded back to AO for fresh decision. - I.T.A. No. 53/Mds/2010 - - - Dated:- 9-7-2012 - DR. O.K. NARAYANAN AND SHRI V. DURGA RAO, JJ. Revenue by : Shri H.Burman, IRS, CIT Assessee by : Dr. Anita Sumanth , Advocate ORDER Per V. Durga Rao, JM : This appeal filed by the Revenue is directed against the order of the ld. CIT(A-IV, Chennai dated 12.11.2009 for Assessment Year 2006-07. 2. Facts, in brief, are that the assessee filed return of income declaring total income of Rs. 71,85,223/-. The assessee claimed Research and Development expenditure of Rs. 32,34,015/-. The Assessing Officer re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature expended on acquisition of the patent rights could be allowed u/s 35A of the Act. The assessee s activity cannot also be termed as activity of research and development so that the expenditure on such activity can be allowed u/s 35A subject to approval of such scientific research by competent authority. The machinery and devices imported thus cannot be called consumables as these machineries have not been used in the manufacture of its own products. As these devices had been broken into they are no longer in the same status as when they were imported and so these devices were not subject to depreciation. The expenditure incurred by the assessee can only be termed as fanciful through which the assessee gains knowledge but bits and pie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of Rs. 32,34,015/- as expenditure incurred towards research and development. During the year, the assessee effected a sale of Rs. 62 lakhs and job work charges of Rs. 12.34 crores. The main argument of the assessee is that the pumps and motors are imported for analyzing the quality of the components used in those pumps so as to enable them to attain better standards. The ld. Commissioner of Income-tax(Appeals) further observed that the expenditure incurred by the assessee has nexus with regard to the business of the appellant which is wholly and exclusively expended for the purpose of business. Moreover, the expenditure cannot be considered as capital expenditure as there was no enduring benefit derived by the assessee as these pump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products were analyzed for design, structure and material composition and the same was used to improve the components in the products manufactured by the company. The products imported were unique in nature and not resalable and the products were completely stripped and broken for analysis and had no further resale value. Pumps imported were of different types in single units and were not of commercial nature. The ld. counsel for the assessee strongly supported the order of the ld. Commissioner of Income-tax(Appeals) and submitted that the expenditure incurred on pumps and motors was only for the purpose of business and allowable u/s 37 of the Act. 8. We have heard the rival submissions, the orders of the lower authorities and the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage of the pumps. Therefore, we find that the learned Commissioner of Income-tax(Appeals), without considering the issue properly, by simply following the decision of the Hon ble Kerala High Court in the case of CIT vs. Kerala State Industrial Development Corporation Ltd., 182 ITR 62, has held that the assessee has incurred these expenses for the purpose of the business. We find that the Commissioner of Income-tax(Appeals) has not examined the details with regard to the purchase of the pumps and also whether the assessee has purchased only the pumps without the motors. The Commissioner of Income-tax(Appeals) has allowed the claim of the assessee under section 37 of the Act, without examining the above facts. We find that the order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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