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2019 (9) TMI 623 - AT - Income TaxAdjustment u/s 145A - assessee company has claimed deduction on account of adjustment made to the value of the closing stock in the earlier years and has been allowed as deduction - HELD THAT:- Assessee is following the method of accounting consistently and even in AY 2007-08 and 2008-09 assessing officer accept the contentions of the assessee and no adjustment was made u/s 145 A while assessing the income under section 143(3) of the Act. Similarly, in AY 2009-10, the AO do not accept the contention of the assessee and adjustment was made u/s 144 while assessing the income under section 143(3) of the Act. Based on the working of assessment years 2007-09 and 2008-09, the income was reduced by a sum of ₹ 1,32,86,625/-. Adjustment carried out u/s 145A of the Act in assessing the income for AY 2009-10 is in according with the consistency followed by income tax department and not by the assessee. Hence, we are of the view that the direction of revision by CIT is without any basis on merits. The assessee has full proof case. On this issue, we allow the claim of the assessee. Allowability of capital expenditure - assets acquired but not put to use during the year ended 31.03.2009 claimed under section 35(1)(vi) read with section 35(2) - HELD THAT:- For the purpose of availing deduction of capital expenditure u/s. 35(1)(iv) of the Act, an assessee has to incur expenditure of capital in nature on scientific research relating to its business. The language employed in Section 35 of the Act, nowhere provides for the purpose of allowability of capital expenditure u/s. 35(1)(iv) of the Act that the assessee has to use the asset for research and development purposes during the relevant previous year in which such expenditure is incurred. The assessee becomes entitled to deduction even if the asset in question is not actually used, provided it has incurred capital expenditure during the previous year on scientific research. For the purpose of claiming deduction of capital expenditure u/s. 35(1)(iv) read with Section 35(2) of the Act, what is necessary is incurrence of expenditure, which the assessee company has incurred and not the user of the asset during the previous year in which such expenditure is incurred. Further, the eligible year of claiming deduction is the year of incurrence of such expenditure. It will be observed that as per Section 35(I)(iv) read with Section 35(2) of the Act, deduction for capital expenditure incurred is allowable. Central Board of Direct Taxes vide their Circular No. 5-P (LXXVI63) of 1967 also endorses the above proposition Even, the circular issued by the Central Board of Direct Taxes are legally binding on the Revenue authorities as held by the Hon. Supreme Court in the case of UCO Bank Vs. CIT [1999 (5) TMI 3 - SUPREME COURT] . Hence, we are of the view that this issue is allowable on merits and we accordingly, reverse the revision order of CIT on this issue. We reverse the revision order passed by CIT under section 263 of the Act but sustain the order on the issue of MAT Credit.
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