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TMI Blog2021 (8) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Thus, the assessee has not availed the benefit of the impugned expenses in entirety and therefore the entire expenses cannot be allowed as deduction while computing the income of the assessee. Accordingly, the learned CIT (A) has allowed the relief to the assessee to the tune of 50% of the total expenses incurred under the head research and development activities. The provisions of section 37(1) of the Act mandates that the assessee can claim the deduction if the expenses have been incurred wholly and exclusively for the purpose of the business. In the event the conditions stipulated under the provisions of section 37(1) of the Act are not complied with, then the assessee cannot claim the deduction under the section. The finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 made by the AO instead of giving 100% relief. 4. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of trading in intermediate drugs, chemicals and pharmaceuticals. It was contended by the assessee during the assessment proceedings that it receives orders from the overseas customers to supply the goods with certain specifications such as purity of the goods, moisture contents, yields weight etc. To match the specifications of the customers, the assessee has to conduct a lot of research in the laboratories on the products to be supplied to such customers. The specifications provided by the customer are not settled in one attempt, rather the technical staff of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee found that the assessee is not carrying out any activity which can be called as research and development activity. It is because there was the spot verification at the premises of the assessee and the report of such verification pertaining to the assessment year 2004-05 suggest that the activities of the assessee are related to testing and sampling of the products to be supplied to the customers. 4.4 The AO, on the basis of the assessment for the AY 2004-05 has also observed that the research and development activities has been carried out by the sister concern namely Snehal Pharma Chem which is also engaged in manufacturing activity. Similar, the expenses were also disallowed by the AO in the assessment proceedings 2004-05 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Therefore, all the expenditures claimed by the assessee under research and development activities cannot be allowed to it for deduction under section 37 of the Act. Thus the learned CIT (A) restricted the disallowance to the tune of 50% i.e. amounting to ₹ 14,24,354.00 only. Hence the learned CIT (A) allowed the appeal of the assessee in part. 6. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 7. The learned AR before us submitted that there is no mandate under the provisions of section 37 of the Act that there should be any benefit out of the expenses incurred by the assessee. The expenses were incurred exclusively for the business purpose, so the same should be allowed. 8. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the learned CIT (A) has allowed the relief to the assessee to the tune of 50% of the total expenses incurred under the head research and development activities. 9.2 The provisions of section 37(1) of the Act mandates that the assessee can claim the deduction if the expenses have been incurred wholly and exclusively for the purpose of the business. In the event the conditions stipulated under the provisions of section 37(1) of the Act are not complied with, then the assessee cannot claim the deduction under the section. 9.3 The finding of the learned CIT (A) has not been controverted by the learned AR at the time of hearing and therefore the genuineness of the expenses cannot be a criteria for allowing the deduction under section 37( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration. The relevant finding of the learned CIT (A) for the assessment year 2004-05 reads as under: The correspondence submitted in the paper book also suggest that the R D activities are perhaps carried out by the sister concern Snehal Pharma Chem which is also the manufacturing concern and the most logical entity to house R D Centre. 9.7 The above facts have not been controverted by the learned AR for the assessee at the time of hearing. Thus it is transpired that R D facility was not exclusively used by the assessee for its own activities. Thus, we do not find any merit in the argument advanced by the learned AR for the assessee. Hence we concur with the finding of the authorities below. Thus the ground of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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