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2022 (9) TMI 1396 - AT - Income TaxExpenditure under the head ‘project expenses Biotechnology’ - allowable business expenditure - commencement of business - earning of income requirement before an expenditure - AO held that assessee did not have any income relatable to Bio-technology R&D and the unit was in fledgling stage and no business was carried out - HELD THAT:- It is undisputed fact that the assessee carries on an existing business and its business has already commenced. In this year, the assessee has sought to pursue a new product line and it is not a case that the assessee has not commenced the business. The assessee was registered long back in the year 1996 and its business had already commenced and it is not the case that the business had not commenced. The prescribed authority as defined in Rule 6(1) mean Director General (Income-tax Exemptions) in concurrence with Secretary, Department of Scientific and Industrial Research, Government of India. We have already held in para-9 that the assessee’s business had already commenced long back and it was in the process of new product line only. There may be several permutations and combinations that may arise for determining whether the expenditure is revenue or capital and each case must, of course, be dealt with on the broad principles that have been accepted by the Courts. Finally, Hon’ble Court in Jay Engineering Works Ltd.[2007 (10) TMI 286 - DELHI HIGH COURT] held that since the control over the two units is in the hands of the same management and administration and there was unity of control leading to an inter-connection, inter-dependence and inter-lacing of the two ventures such that it can be said that the fuel injection equipment project is only an extension of the existing business of the assessee and, therefore, the expenditure incurred by the assessee on this Project is a revenue expenditure. Considering this decision, the matching concept as invoked by Ld. AO would have no application. Further, the earning of income is not a requirement before an expenditure could be claimed by the assessee. Thus disallowance as made by Ld. AO and as confirmed by CIT(A) is not sustainable in law and the same is liable to be deleted. We order so. The Ld. AO is directed to re-compute the income of the assessee.
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