TMI Blog2012 (11) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... h activity. As under Section 35 what is allowable is “expenditure incurred” which means actual spending/paying of money as decided in Multi Metals Limited Versus CIT [2002 (2) TMI 98 - RAJASTHAN HIGH COURT] - against assessee. - ITA No.65/Ahd/2010 - - - Dated:- 19-10-2012 - SHRI G.C. GUPTA, AND SHRI ANIL CHATURVEDI, JJ. Assessee by Shri J. P. Shah, AR Respondent by Shri B. L. Yadav, Sr. DR O R D E R PER ANIL CHATURVEDI: This appeal is filed by the assessee challenging the order of the learned CIT-(A)-IV, Baroda dated 19th October,2009 passed u/s 250 read with section 143(3) of the IT Act in appeal No. CAB/IV-A-256/08-09, for the assessment year 1997-98 confirming the disallowance of Rs.14,76,411/- made by the Assessing Officer against the claim of the assessee u/s 35(1) (iv) of the IT Act for transfer of machinery from production department to research development department. 2. The brief facts are that in this case against returned income of Rs.21,86,700/- order u/s 143(3) of the Act was passed on 31-03-2000 determining total income at Rs.80,43,735/- by making various additions including the addition on account of research and development capital expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not bring on record any evidence as to the manner in which the assessee could manage the production without the machines that were transferred. He thus upheld the earlier decision. Aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A). The learned CIT(A) vide order dated 19th October, 2009 dismissed the appeal of the assessee by holding as under: 4. I have carefully considered the facts of the case and appellant s submissions. The two machines in question, viz. Hot Setting Vaccum Plant and Plastic Injection Mounting Machine were purchased during F. Y. 1994-95 for the purpose of manufacturing activity of the appellant. Appellant has not been able to file any evidence, documentary or otherwise, to support its contention that these machines were actually transferred to the R D division and were used for the purpose of carrying out the stated research activity. As noted by the Assessing Officer in the original assessment order, appellant has not filed any evidence regarding expenditure on shifting or installation of the two machines in the R D Department. The onus was squarely of the appellant to show that the machines in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any expenditure of a capital nature on scientific research related to the business carried on by the assessee, as admissible under subsection 2. Sub section 2(ia) of section 35 allows such capital expenditure as incurred. Thus, section 35 envisages allowance of capital expenditure incurred during the previous year. The Supreme Court in the cases of Indian Molasses Co. (1959), 37 ITR 66 (SC) and Nainital Bank Ltd. (1966) 62 ITR 638 (SC) interpreted the meaning of Expenditure as equivalent to Expenses , which is money laid out. The Court had further held that Idea of spending in the sense of paying out of away money is the primary meaning of expenditure Expenditure, which is deductible for Income tax purposes is the one, which is towards an existing liability . Under section 35, what is allowable is Expenditure incurred , interpreted by the Supreme Court as spending / paying out of money towards an existing liability . Transfer of machines, which were acquired in earlier years to the R D Department in this year cannot be said to be Expenditure incurred envisaged u/s. 35 (2)(ia). Thus, besides the fact that appellant failed to adduce any evidence in support of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo machines namely Hot Setting Vaccum Plant and Plastic Injection Mounting Machine in the financial year 1994-95 for the purpose of manufacturing of its product. The machinery were installed and used for the purpose of production and the assessee claimed depreciation on it. In the year under appeal, assessee transferred the aforesaid machines from its production department to Research Development (R D) Department. On these machines transferred to R D Department, the assessee claimed 100% deprecation under the provisions of section 35 (1) (iv) of the Act. The claim of the assessee was turned down for the reason that the assessee could not furnish necessary evidence to support its contention that the machineries were actually transferred to the R D Department from the Production Department and whether the machines were actually used for the purpose of stated research activity. The learned AR before us also could not produce any concrete evidence in its support. The assessee could not satisfactorily explain as to how the assessee could continue manufacturing without replacing the two machines. The learned AR pointed out to the 31st Annual Report for 1996-97 under the Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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