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2021 (1) TMI 1030 - AT - Income TaxNature of expenditure - expenditure incurred for development of a new product including knowhow - assessee manufacturing auto electrical parts incurred expenditure for setting up separate cell for developing import substitute parts - revenue or capital expenditure - HELD THAT:- In this case, the facts are identical to the facts considered in the case of CIT Vs Denso India Ltd [2009 (7) TMI 144 - DELHI HIGH COURT] where the assessee is engaged in the business of manufacturing LED lights, was purchasing certain raw materials till assessment year 2010-11, but from the assessment year 2013-14, it started manufacturing substitute of purchases for which certain expenditure have been incurred for development of the product which are purely revenue in nature. Although, the assessee has considered said expenditure as deferred revenue expenditure, pending amortization in the financial statement, but because of nature of expenditure the same has been claimed as deduction u/s.37(1) in the statement of total income. Thus expenditure incurred by the assessee being technical consultancy charges, purchase of raw materials, advertisement charges and electricity charges are in the nature of revenue expenditure, which does not give any enduring benefit to the assessee and hence, same cannot be treated as capital expenditure. Hence we, direct the Assessing Officer to allow deduction towards expenditure as claimed by the assessee in the statement of total income. - Decided in favour of assessee.
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