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2021 (2) TMI 324 - AT - Income TaxNature of expenditure - expenses towards R&D - revenue or capital expenditure - AR submitted that the R&D expenses incurred for modification/adaption of existing products was claimed as revenue expenditure even though the same was accounted as intangible asset under development in the books of accounts - HELD THAT:- The assessee has treated the R&D expenditure as capital expenditure by showing it as intangible assets in its balance sheet. However, it is not known whether the intangible assets shown by the assessee in its balance sheet includes revenue expenditure or not? In earlier assessment years, the CIT(Appeals) had made analysis of expenditure which are revenue or capital and the revenue expenditure was allowed as deduction. Being so, the Tribunal decided the issue in favour of the assessee in AYs 2007-08 & 2008-09 in assessee's own case. For assessment year under consideration, the R&D expenditure which was treated as revenue expenditure in its Profit & Loss account is not separately brought on record by the assessee before us. Hence, it is appropriate to remit the issue to the file of the CIT(Appeals) for proper classification of R&D expenditure which is in the nature of revenue expenditure or capital expenditure. Thereafter the portion of revenue expenditure on R&D to be allowed as business expenditure in these assessment years. On the other hand, the R&D expenditure which is in the nature of capital expenditure has to be disallowed and depreciation to be granted. With these observations, we remit the issue in dispute in all these assessment years to the file of the CIT(Appeals) for fresh consideration. Appeal allowed for statistical purposes.
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