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TMI Blog2012 (7) TMI 697X X X X Extracts X X X X X X X X Extracts X X X X ..... ,670/- (Rs.7,50,869/- + Rs.4,83,801/-) made by AO on a/c of Research & Development expenses as well depreciation claimed on the assets engaged in carrying out this work. The disallowance by Ld. CIT(A) is wholly unsustainable on law and on facts especially when the appellant has established the genuineness of such expenses for the purpose of developing new products for the export market where the appellant trades the products. The disallowance of genuine business expenditure without any merits and justification requires to be quashed. 2.1, Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) of the I.T. Act, 1961 dated 30.11.2006 were that the assessee-company is engaged in trading of Intermediate drugs, and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affirmed in the following manner:- "4.3. I have carefully considered the contentions of the appellant, the remand report and the assessment order. It is not disputed that the R&D centre commenced operations from 1.1.2004. The majority of the expenses during January-March, 2004 relate to salary expenses, consumables and environment protection expenses. The appellant is mainly engaged in trading of basic pharmaceutical bulk drugs, drug intermediate and fine chemicals. It is also claimed that based on the requirement and specification of the buyers, the products are modified. It is an admitted fact that the R&D Centre would essentially require knowledge manpower and the necessary lb equipments. Further, the R&D activities may not result in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongly been disallowed on the pretext that the assessee has not carried out Research & Development activity. 5. From the side of the Revenue, the ld.DR Mr.B.L.Yadav appeared and supported the orders of the Assessing Officer & Learned CIT(Appeals). 6. Having heard the submissions of both the sides, prima-facie it appears that the genesis of this controversy is the assessee itself. The assessee has titled the claim as "Annexure-VI - Details of expense relating to R&D Centre Dr. to P&F A/c. along with other Exps. And Depreciation on Fix Assets relating to R&D Centre". Due to this reason, the Assessing Officer had proceeded to enquire whether any Research & Development Activity in fact was carried out by the assessee or not. Secondly, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure incurred towards day-to-day running of the business. According to ld.AR, since it was not a capital expenditure, so that the assessee could have thought of asking any benefit under the exceptions as prescribed in some of the sections from 30 to 36, therefore, there was no purpose of demarcating those Revenue Expenditure as Research & Development expenses. In ther words, on the face of examining the nature of expenditure plainly eligible on the face of them as Revenue Expenditure. This subtle change in the stand of the assessee cannot be entertained at this stage of second appeal unless and until duly verified as also investigated by the Revenue Authorities. We, therefore, consider it justifiable and fair to the Revenue Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was confronted about the difference of amount of Rs.1,70,952/-, in the absence of any submissions the Assessing Officer has disallowed the variation in the foreign exchange fluctuation account. 9. When the matter was carried before the first appellate authority, the action of the Assessing Officer was confirmed. 10. Now before us in the compilation, assessee has furnished the complete list of exchange rate variation and vehemently argued that there was no difference in the accounts, however, due to lack of proper opportunity the assessee was not confronted to the said difference due to which the impugned addition was made. Our attention has been drawn that the figure as noted by the Assessing Officer did not appear from the account of " ..... X X X X Extracts X X X X X X X X Extracts X X X X
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