TMI Blog2014 (5) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... on scientific research - Whether the firm had not laid out any funds for acquisition of the capital asset – Held that:- Relying upon Commissioner of Income-Tax Versus Gujarat Aluminium Extrusions Pvt. Ltd. [2003 (7) TMI 65 - GUJARAT High Court] CIT(A) rightly was of the view that the expenditure has to be incurred in a relevant previous year - In the Remand Report, the AO reiterated that the major capital expenditure at Baroda was incurred on 30.03.2005 for purchasing building for R&D - it cannot be established by the assessee by way of evidences that the above premises were used for R & D purpose at this place acquired on 30.03.2005 – the capital expenditure cannot be considered as actually used for the above research and development activity - CIT(A) while upholding the disallowance of Rs 15 lacs has noted that property of 1700 sq ft owned by Shri Jayesh Sanghani was introduced as his contribution to the firm - introduction of capital contribution in the firm by the partner does not constitute expenditure – assessee has not placed any material on record to controvert the findings of CIT(A) – thus, there was no reason to interfere with the order of ClT(A) – Decided against Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the expenses as he was of the view that Assessee has not been able to prove that any services were rendered by Shri Vinodkant Sanghani, Mr Vinodkant Sanghani was not an expert in the field of account, finance and investment advisory services and though the Assessee had made investments of Rs 1.22 crore in established mutual funds of Prudential ICICI and HDFC but had earned a paltry dividend of only Rs 92,619/-. He accordingly held that Assessee had failed to establish the services and the payment was a colourable devise to reduce the burden of tax. He accordingly disallowed the expenses. Aggrieved by the order of AO, Assessee carried the matter before CIT(A). CIT(A) upheld the disallowance by holding as under:- 2.3.1 have considered the submissions of the Authorized Representative and the order of the Assessing Officer. The appellant has filed the professional qualification of Shri Sanghani. He is a B.Sc(Hons), B.Sc (Tech), MACS from USA. Shri V.A. Sanghani has industrial experience of 43 years in fertilizer and petrochemicals. He has -worked in Fertilizer Corporation of India Ltd., in GSFC and other companies wherein he has contributed vastly to the field of Fertilizer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of Rs 3 lacs. Before us, the Ld A.R. has not placed any material on record to controvert the findings of AO and CIT(A). Further, during the course of hearing, the Ld A.R. was asked to file evidence showing involvement of Shri Shangani in various activities to which, the Assessee vide letter dated 28th March 2014, submitted that it could not lay hand on any evidence as the matter was more than 10 years old. Considering the totality of the aforesaid facts and when Assessee has not substantiated the claim for expenses, we find no reason to interfere with the order of CIT(A) and thus this ground of the Assessee is dismissed. 2nd ground is with respect to confirmation of disallowance of Rs 15 lacs claimed u/s 35 of the Act: 7. AO noticed that Assesses has claimed expenditure of Rs 43,43,505/- (comprising of Revenue expenses of Rs 6,44,828/- and capital expenditure of Rs 36,98,877/-) on account of Research Development (R D) expenditure. From the details of expenditure, AO noticed that Assessee had purchased a flat for Rs 17 lacs from Shri Vinodkant Sanghani, the father of one of the partner, on 30.3.2003. The aforesaid flat was already in use of Assessee and it was also pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition made by the Assessing Officer was not justified. It was also submitted thatthe revenue expenses incurred at Baroda include expenses on testing the appellant's products at various Government approved technology centers amounting to Rs.3,88,546/-, the balance amount ofRs.9,220/- includes minor expenditure incurred on purchase of tools and spares for the R D Centre. It was further contended that the Assessing Officer has disallowed the expenses on the ground that the capital expenditure at Baroda was incurred on 30,03.2005. It is submitted that even if the asset is purchased of the last day of the accounting year the assessee is entitled to claim the deduction. In the case of Gujarat Aluminum Extrusion Pvt Ltd. 263 ITR 453, the Gujarat High Court held that the expenditure has to be incurred in a relevant previous year. In the instant case despite the fact that the expenditure was incurred on 30.03.2005 the assessee is entitled to claim the deduction. In the Remand Report, the Assessing Officer reiterated that the major capital expenditure at Baroda amounting to Rs.33,74,936/-was incurred on 30.03.2005 for purchasing building for R D. Therefore it cannot be establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the appellant has introduced this building as his capital contribution and has treated the transfer value under the head capital gain. However, there was no response to the question of how capital introduction should be considered as an expense. Reliance was placed by the appellant on the decision of the CIT Vs. Sundaram Finance Ltd. 223 ITR 455 (Mad) wherein the assessee company transferred certain plant and machinery purchased by it to its scientific research cell. The Madras High Court held that expenditure incurred for the purchase of machinery sent on'transfer to the scientific research cell is eligible for deduction u/s. 35. In the present case no expenditure has been incurred by the appellant. In the case ofBelpahar Refractories Ltd. Vs. CIT 207 ITR 144 (Orissa), it was held that: The words 'incurred in any previous year' in clause (ia) of section 35(2) categorically lay down that the entire capital expenditure incurred in any previous year can be deducted for that previous year only, These words exclude the possibility of any confusion as to whether the capital expenditure incurred in any preceding year can be deducted in the previous year or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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