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TMI Blog2015 (2) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... ey,JJ. For the Petitioner : Rohit Jain & Deepashre Rao, Adv For the Respondent : Vikram Sahay, Sr. DR ORDER Per A. T. Varkey, Judicial Member This is an appeal preferred by the assessee against the order of the ld CIT(A)-2, Faridabad dated 21.07.2014 for Assessment Year 2009-10. 2. Grounds of appeal are as follows:- " 1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in affirming the action of the assessing officer in treating expenditure of ₹ 1,01,54,665/-incurred towards obtaining research report as 'capital' in nature as against revenue expenditure claimed by the appellant. 2. That the Commissioner of Income Tax (Appeals) failed to appreciate that the expenditure incurred by the appellant was towards obtaining research report in order to facilitate business operations and not for acquisition of any capital asset, much less an intangible asset. 3. That the Commissioner of Income-tax (Appeals) erred on facts and in law in affirming the net disallowance of expenditure amounting to ₹ 88,85,332/- (net of depreciation on ₹ 1,01,54,665/-, on the alleged ground that incurrence of such expenditure had resulted in benefit of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ports provided by Zensar so as to add value to them. The reports obtained from Zensar were customized by the various executives on the payroll of the assessee company by putting in various man hours.The assessee company during the course of its business had incurred expenditure of ₹ 101,54,665/- on such acquisition of research reports and claimed the same as an expense as per the provisions enunciated u/s 37(1) of the act. However, Assessing officer has made addition of ₹ 88,85,332/- by treating the said expenditure as capital expenditure. It was further submitted that the assessing officer had made such addition without any material on record to prove that expenditure if of capital nature. According to the ld AR, the basis adopted by the Assessing Officer is unwarranted, unjustified and bad in law. 7. The ld AR brought our attention to Page 1 of the PB in which the detailed break-up of invoices raised by M/s Zensar Technologies Ltd in the Assessment Year 2009-10 are given below:- Date of receipts report Invoice No. Invoice date Cost Service tax Total invoice Amount Oct 08 1891121 12/01/2009 666,470 82,376 748,846 November 08 1891122 12/01/2009 927,304 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Year under consideration. Overall 81 reports were purchased from Zensar during the FY 2008-09 out of which 13 reports were used purely for marketing purposes by the Research Division. These reports were sent to various potential clients including AICazar Capital Limited, Doha Bank, Qatar Islamic Bank, Commercial Bank Tatweer, Shuaa Capital First Gulf Bank, Emirate NBD etc. And the remaining 68 reports were used by Business Advisory Division as a base for billing the existing clients. The Business Advisory Division team worked further on the reports so as to develop and bring them into marketable form for existing clients. Different levels of executives had to put in various hours so as to convert Zensar reports. The revenue generated as mentioned against each report also includes the revenue generated because of the efforts put in by Business Advisory Division team. It was pointed out by the ld AR that In some cases report were prepared for a specific purpose with no subsequent value like when report comprises of providing background study on the sector or specific segments /companies that were seen as growing at a fast pace. Reports obtained by Zensar cannot be taken as stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pati, soap, paints and varnish, torch and lantern, started manufacturing a new commodity viz, special alloy wire and billets. Debentures were issued for raising funds for this new steel unit and the assessee incurred expenditure for issuing of debentures. The question was whether the expenditure incurred by the assessee in the year in which the unit had not started working was allowable as business expenditure. The Appellate Tribunal found that the management of the new unit and the earlier business were the same and there was unity of control and a common fund, and held that the manufacture of special alloy and billets was an expansion of the assessee's business and not a new business and allowed deductions of expenditure. The decision of the Tribunal was affirmed by the High Court holding that all the assessee's bid was to start manufacturing a new commodity. In the larger sense, the business of the assessee remained the same, viz. the business of manufacture. The assessee was already manufacturing diverse items and a new item was added to this business. The Tribunal had found that there was complete unity of control and that there was a common fund which was most materia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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