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2022 (5) TMI 1222 - AT - Income TaxNature of expenditure - Disallowing revenue expenditure on product testing prototyping and verification expenses - HELD THAT:- The true nature of the expenditure had not been doubted by the AO. Undisputedly, the appellant is in the business of manufacturing of automotive components since 1999. As result of this expenditure, no new asset has been created nor new product did actually materialize. The expenditure was only incurred for the purpose of facilitating the existing business of manufacturing of automotive components and enabling the management to conduct the business operations more efficiently and productively. The Hon'ble Supreme Court in the case of (i) Empire Jute Co. Ltd. [1980 (5) TMI 1 - SUPREME COURT] and (ii) Alembic Chemical Works Co. Ltd. [1980 (5) TMI 1 - SUPREME COURT] held that expenditure incurred on the existing business incurred in connection with the existing business. Updating existing products should be allowed as revenue expenditure. Expenditure was incurred only up-gradation of existing products, we are of the considered opinion that the expenditure is not in the nature of capital but revenue expenditure. Accordingly, we direct the Assessing Officer to allow the expenditure as revenue nature. Accordingly, this ground of appeal filed by the assessee stands allowed.
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