9911796707
TMI Blog2016 (11) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... me is reversed and AO is directed to allow the claim - Decided in favour of assessee. - ITA No.3784/Mum/2012 - - - Dated:- 9-9-2016 - Shri Amit Shukla, Judicial Member, and Shri Ashwani Taneja, Accountant Member For The Appellant : Shri Hiro Rai (AR) For The Revenue : Shri G.M. Doss (DR) ORDER Per Ashwani Taneja (Accountant Member): This appeal has been filed by the Assessee against order of Ld. Commissioner of Income Tax(Appeals), Mumbai-16, {(in short CIT(A) }, dated 15.03.2012 passed against order giving effect to the ITAT s order passed by the AO vide his order dated 07.12.2011. 2. During the course of hearing, arguments were made by Shri Hiro Rai, Authorised Representatives (AR) on behalf of the Assessee and by Shri G.M. Doss, Departmental Representative (DR) on behalf of the Revenue. 3. Brief background and the facts of the case are that in this case, scrutiny assessment for A.Y. 2001-02 was completed u/s. 143(3) on 19.03.2004 by way of making addition of ₹ 16,61,674/- on account of research development expense and ₹ 1,15,943/- on account of travelling and other expenses thereby assessing the total income at ₹ 29,90,287/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the aforesaid purposes of cultivation and payment was made against the actual work done and services rendered by GBPL. The assessee further submitted that ultimately no income was generated by GBPL in the process and that there was no carry forward of any loss, nor taxable profit for the year under appeal, and thus by debiting the expenditure in the books of account the assessee did not get any tax benefits. 3.2. Ld. CIT(A) considered the submissions of the assessee but did not agree with the same. It was observed by the him that from the balance sheet of GBPL, it was indicated that the said company did not have requisite infrastructure to carry out scientific research development and cultivate lemon grass for citronella oil. It was further observed that activity carried out by the said company was primarily of nature of agriculture operations and not related to any scientific research which does not have direct nexus with business of the assessee. It was also observed that the impugned expenses were in fact of the nature of loan to the sister concern. It was also observed that the said company was not a recognized institution u/s 35(1). 3.3. Being aggrieved, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two of the major players in the soap industry namely Wipro and Nirma which used Citronella oil derivatives as raw material. Encouraged by the response received from the soap companies the assessee company decided to produce on i ts own, ci tronel la oi l and i ts derivatives on which the perfumes used by Wipro and Nirma were based since Citronella Oil had to be imported, it proved costly . The company has been carrying out consistently some research with a view to develop new perfumery compounds to be util ized in soap industry. In that context, we are enclosing the extract of the copy of the book named Synthetic Perfumes detailing the process of making the citronella oil from the Citronella/lemon grass as required by you. 2. Infrastructure: With above in mind our client Company looked for appropriate lane to carry out the activity. Some agriculturists and biotechnologists suggested that the land at Baramati is the best suitable land for the cultivation of the lemon grass. Our client was introduced to one Shri Nanasaheb Bhosale, who is from Baramati and is an agricultural consultant. He was consulted and later given the assignment for which he was paid for developing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Citronella, a product required by our client company and consequently for completion of the set aside assessment of our above client for the A.Y. 2001-02. We trust this will fulfill your requirement to complete the assessment. 3.7. It is noted that after receiving this letter, nothing more was asked by the AO and he simply proceeded to disallow the expenses after making his own analysis. First of all, the AO referred to and analysed the provisions of section 35(1) (i) in his own manner, and whereby he concluded that the payee was required to be certified by the prescribed authority for this purpose. It is noted by us that AO has misunderstood the provisions of law in this regard. As per plain reading of section 35, the certification was required only if the expenditure was incurred before the commencement of business. For an expenditure to be allowable u/s 35(1)(i) of the Act, primary requirement of the law is that expenditure laid out or expended on scientific research should not be capital expenditure and should be related to the business of the assessee. It is nobody s case that it is a capital expense. It is not disputed that the assessee was engaged in the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
