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TMI Blog2024 (6) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided in section 35AB, 35ABB etc. Considering the nature of expenditure incurred by the assessee towards product development we hold that the entire expenditure thereon are purely revenue in nature and accordingly would be eligible for deduction as revenue in nature and accordingly would be eligible for deduction as revenue expenditure in the year of incurrence. We find that similar list of expenditure incurred by the assessee for AY 2018- 19 were allowed by the ld AO himself u/s 143(3) - Ground raised by the assessee are allowed. Disallowance liquidated damages - CIT(A) observed that obtaining no object certificate (NOC) from pollution control board is prerequisite, Since, there was a delay in obtaining the same by the assessee the assessee could not fulfill the supply of goods are deliver this obligation in accordance with contract with its customers, thus effectively incurred by the assessee for violation of law in force - HELD THAT:- No penalty of any amount whatsoever has been levied by any regulatory board such as pollution control board or by MOEF on the assessee for not alleged violation. The present liquidated damages as tabulated above were incurred by the assessee as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by appellant, particularly the CIT (Appeal) has twisted the submission in his own manner to strengthen the dismissal of an appeal 3 In the circumstances and facts of the case the learned CIT(Appeal) was not Jusufied in treating the Product Development Expenses amounting to Rs.69.90,965/- as property of the appellant while in fact the expenses are related to equipment structure which was to be displayed at the customer s premises as a model, that in the same manner it will be installed at the demised premises within stipulated period lays down in agreement. 4. That the meaning of Product Development is a structure developed which was to be installed at the demised premises of the customer to be installed absolutely in the same manner and it will be remained the property of the customer who may destroy or keep it as model. 5. That in the light of paragraphs 3 and 4 an addition of Rs.69,90,965/- under the head Product Development Expenses confirmed by the CIT(Appeal) is not justified. 6. The claim of Liquidated Damages is confined to the written clauses of the contract that where the installation will be belated there would be fixed charge of penalty per day, however, where it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g documents were furnished by the assessee. The assessee submitted that the assessee company had incurred Rs. 69,90,965/- in developing the various products during the year, out of which Rs. 13,98,193/- was showing as return during the year in profit and loss account and remaining sum was shown under the head none current asset in the balance sheet. It was explained that for developing the products, the assessee company was using its material purchased for manufacturing; using its own employee and workers for doing work like designing and development of these products. Accordingly, the cost of material used and employees cost and other expenses like travelling etc were allocated for total expenses booked under the respective head and claimed as deduction under product development expenses. It was specifically pointed out that in the books of account said expenditure was treated as deferred revenue expenses but for the purpose of income tax act, the entire expenses amounting to Rs. 69,90,965/- were claimed as revenue expenditure. The assessee also furnished the details of materials used, details of employee cost, details of wages and salary and details of travelling cost of employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tabulated hereinabove together with the product development expenditure register enclosed in the PB in pages 184 to 238 thereon. We find none of the expenditure incurred thereon would give any enduring benefit to the assessee. All these expenditure are genuine regular revenue expenditure incurred by the assessee. As stated earlier the assessee has been using its own employees and the material regularly purchase for its manufacturing facilities on proportion basis for the purpose of development of new product. This are only in the nature of revenue expenditure for the assessee. We are in complete agreement with the ld AO that there is no concept of deferred revenue expenditure under the income tax Act as specifically provided in section 35AB, 35ABB etc. Considering the nature of expenditure incurred by the assessee towards product development we hold that the entire expenditure thereon are purely revenue in nature and accordingly would be eligible for deduction as revenue in nature and accordingly would be eligible for deduction as revenue expenditure in the year of incurrence. However, we find that similar list of expenditure incurred by the assessee for AY 2018- 19 were allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Note 26,74,980 14 OCL India Ltd Ledger Entry Pg. 448 13. The ld AO observed that primary liquidated damages were claimed by 2 parties viz Shree Cement Ltd and M/s. Ambuja Cement. These cement plants are bound to install pollution control system as a pre requisite for carrying out their operation anywhere in India in accordance with the environments Acts and regulation notified Ministry of Environment and Forest (MOEF) the ld CIT(A) observed that obtaining no object certificate (NOC) from pollution control board is prerequisite. Since, there was a delay in obtaining the same by the assessee the assessee could not fulfill the supply of goods are deliver this obligation in accordance with contract with its customers. Accordingly, these liquidated damages are effectively incurred by the assessee for violation of law in force and hence the provision of explanation 1 to section 37(1) of the Act would come into operation. With these observation the ld CIT(A) upheld the action of the ld AO. 14. At the outset, it is important to note that no penalty of any amount whatsoever has been levied by any regulatory board such as pollution control board or by MOEF on the assessee for not alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X
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