TMI Blog2013 (9) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, the same is allowable expenditure and has to be deducted while computing the total income. Reliance has been placed upon the judgment in the case of Kedarnath Jute Mfg. Co. Ltd. Vs. The Commissioner of Income Tax ( Central) Calcutta [1971 (8) TMI 10 - SUPREME Court], wherein it has been held that Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter - Entire expenditure incurred by the assessee being revenue in nature was allowable and the assessee was entitled to claim the entire expenditure as deduction – Decided against the Revenue. - Income Tax Appeal No. - 144 of 2005 - - - Dated:- 19-8-2013 - Hon'ble Sunil Ambwani And Hon'ble Surya Prakash Kesarwani,JJ. For the Appellant : D. Awasthi ORDER (Delivered by Hon'ble Surya Prakash Kesarwani,J ) 1. This appeal has been filed by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'Act') relating to the assessment year 1992-93. The appeal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment division and other expenses. These employees, according to the assessee were instrumental in developing product for newer application in the same line of business. In the books of accounts the assessee treated 1/3rd of this expense as relating to the previous year relevant for the A.Y. 1992-93 and the remaining 2/3rd expense was written off at 1/3rd each in the succeeding two financial years. According to the assessee the benefit from the research and development was likely to flow for three years and therefore the expenditure on such research and development was also spread over for the period for which the assessee derived benefit. The assessee in the return of income however, claimed the entire expenditure as deductible since they were of revenue in nature and incurred during the previous year. The AO disallowed the claim for deduction by observing that the amount was paid only as salary to employees. The system which they developed, was not specified nor the details of research and development were given. According to the AO the expenditure on research and development or other expenditure which results in a benefit in the capital field, only deduction under Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orandum and articles of association of the company etc., before the commencement of his business or after the commencement of his business, in connection with the extension of his undertaking or in connection with his setting up a new unit. In our opinion, Section 35-D has no application on the facts of the present case. The assessing officer has not recorded any finding based on any material whatsoever in support of his observation as to applicability of Section 35D of the Act. The CIT (A)has also not found any relevance of Section 35D of the Act on the facts of the present case. The ITAT has observed in paragraph 35 of the impugned order that the assessing officer has made a vague reference to the provision of Section 35D of the Act, while the expenditure in question cannot be said to be one falling within the provision of Section 35D of the Act. Thus, the contention of the revenue that the expenditure in question amounting to Rs.31,77,716/- incurred by the assessee on product development shall be governed by provision of Section 35D of the Act is without substance and liable to be rejected. 9. Now coming to the issue of allowing merely 1/3rd expenses in the assessment year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be prima facie capital expenditure "so long as the benefit is not so transitory as to have no endurance at all." There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, none-the-less, be on revenue account and the test of enduring benefit may break down. lt is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assesse's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is therefore not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a g ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
