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2013 (9) TMI 643 - AT - Income TaxProduct Development expenditure - Development of new product - AO observed that said expenditure had resulted in growth in the turnover of the assessee in the subsequent years was sufficient to show that the same was of enduring benefit to the assessee. - capital expenditure or revenue - deduction u/s 35 or section 37 or none - Held that:- assessee-company is engaged in the business of manufacturing of automobile parts and casting and as par the quantitative details furnished in the notes forming parts of the account, the products so manufactured also included liners. The said expenditure thus was incurred by the assessee on development of existing products being manufactured by it although from a different material i.e. Stainless Steel and merely because the new liners being developed by the assessee in Stainless Steel had application in industries other than automobile industry, we are of the view that the manufacturing of Stainless Steel liners cannot be considered as a new line of business. It was a case of expansion of existing business of the assessee of manufacturing liners by diversifying the existing products using different materials for making the same suitable for even other applications. The expenditure incurred by the assessee on development of Stainless Steel liners thus was relating to its existing business and the same, cannot be treated as capital expenditure merely on the basis of accounting treatment given by the assessee. Moreover a perusal of the details of the development expenditure in question incurred by the assessee clearly shows that the entire expenditure incurred by the assessee was basically of revenue in nature and it cannot be said by any stretch of imagination that same resulted in any enduring benefited to the assessee and that too in the capital filed - expenditure in question incurred by the assessee on product development is revenue expenditure allowable u/s- 37(1) - Decided in favour of assessee.
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