9911796707
TMI Blog2017 (11) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... tenure of the debentures. It can be spread over to the period of debenture holding. Whereas the nature of expenditure incurred in the given case is R&D. It is peculiar expenditure, it is not necessary that research should be successful all the time, the absorption of the cost depends upon the success rate of the project. It is prudent to absorb the revenue expenses in the year of expenditure incurred, when there is no benefit of enduring nature expected at the time of making such expenditure. It is not brought on record by the revenue authorities that assessee has expended this expenses and there is asset created by such expenditure. Since there is no asset created, which has enduring benefit to the business of the assessee, it is appropriate to allow these expenditure u/s 35(1). - ITA No. 792/Hyd/2016 And ITA No. 748/Hyd/2016 - - - Dated:- 27-10-2017 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For Th Assessee : Shri S. Rama Rao For The Revenue : Shri V. Sreekar ORDER PER S. RIFAUR RAHMAN, A.M.: These are cross appeals filed by assessee and revenue directed against the order of CIT(A)-1, Hyderabad dated 17/02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standards. 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). 4. The CIT(A) has allowed the claim of the assessee with regard to deduction u/s 35(1) relating research and development expenditure by observing as under: 3.4 First of all the assessee did not claim the deduction u/s 35(2AB)/35D. Secondly, it did not claim any weighted deduction. Further, I have gone through the provisions of section 35, Rule 6 and the prescribed forms for obtaining the permission from the competent authority. There is no form prescribed to claim deduction u/s 35(1). Further, even otherwise, the expenses mentioned at Para 3.2 are permissible u/s 37, therefore, the addition made by the AO is deleted. 4.1 With regard to unaccounted expenditure of R D, CIT(A) allowed the claim of the assessee by observing as under: 4.2 As a part of Notes to Accounts, Annexure I, Form No. B while giving the details of research and development, the assessee had mentioned that during the year an amount of ₹ 1,19,46,080/- was incurred. It was explained that this includes: a) Revenue expenditure : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed form is required to claim expenditure u/s.35(1), whereas it is clearly mentioned in the said section that a certificate from the prescribed authority is required. 2. In the facts and in the circumstances of the case, the learned Ld. CIT(A) erred in stating that the R D expenditure of ₹ 66,24,000/- was also allowable u/s.37(1) without appreciating the fact that the expenditure in order to be allowable u/s. 37(1) should be an expenditure not of the nature described in sections 30 to 36. 3. In the facts and in the circumstances of the case, the learned Ld. CIT(A) ought to have provided an opportunity to verify the claim of the assessee as per Rule 46A of the I.T. Rules. 4. Any other ground that may be urged at the time of hearing. 7. Ld. AR submitted that with regard to disallowance of R D Expenditure u/s 35(1) and unaccounted expenditure under the head R D, he relied on the findings of CIT(A). With regard to addition u/s 35(2AB), ld. AR submitted that assessee has accounted R D expenditure separately under the head deferred revenue expenditure and as per its accounting method, it has charged 20% of the expenditure to P L A/c in the current AY a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in which the business is commenced; Thus, it can be seen from the explanation above, that certificate from the prescribed authority is required in case; ( i) the expenditure is laid out or expended before the commencement of the business ( ii) on payment of any salary as defined in Explanation 2 below sub-section (5) of section 40A to an employee engaged in such scientific research or on the purchase of materials used in such scientific research ( iii) the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business. Further, it is seen from the assessment record and the paper book that there is no evidence to conclusively say that the expenditure of ₹ 66.24 lakhs has been expended during the F.Y. 2009-10. In the absence of relevant ledger accounts, it cannot be said whether the said expenditure falls under Explanation (1) of Section 35(I)(i) of the Act wherein a certificate from a prescribed authority is held to be mandatory. Therefore, the issue may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure relating to business which may be relating to current year or relating to previous expenditure incurred before commencement of the business and restricted to expenses expended within 3 years immediately proceeding the commencement of the business. As per explanation to this sub-clause, the assessee has to submit certificate from the prescribed authority to get the deduction under this head for the expenses incurred before commencement of the business. There is no restriction with regard to expenses expended during the current assessment year. Hence, there is no requirement on the part of the assessee to claim revenue expenditure incurred during the current assessment year. Accordingly, the assessee is eligible to claim deduction u/s 35(1) of the IT Act relating the current year expenditure on R D. We are in agreement with the findings of Ld. CIT(A). Therefore ground raised by department is dismissed. 9.1 With regard to deferred revenue expenditure, the assessee has incurred revenue expenditure during this year and classified the same as deferred revenue expenditure in order to defer the expenditure in the financial statement. For the purpose of determining taxable in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
