TMI Blog2015 (8) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... diture not relatable to the relevant assessment year. It is also not the case of the assessee that the expenditure is relatable to the year under consideration. Therefore, in our firm view, the authorities below were justified in disallowing such a claim made by the assessee. Accordingly, the first question of law is answered against the assessee and in favour of the Revenue. Main plank of the argument of assessee is based on the decision of the Supreme Court in Madras Industrial Investment Corporation Ltd. v. CIT [1997 (4) TMI 5 - SUPREME Court]. However, we find that the said decision relates to the issue of discount on debentures and the said decision does not apply to the facts of the present case. - Decided against assessee. - T.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment in telecommunication products, software development and support services. The assessee filed return of income admitting total loss of ₹ 5,26,38,410. The return was processed under section 143(1) of the Act and, subsequently, the case was selected for scrutiny and notice under section 143(2) of the Act was issued. In response to the said notice, the assessee's representative appeared in person and furnished various details as sought for during the course of scrutiny : 2.2. It is not in dispute that the business of the assessee commenced even prior to the financial year 1999-2000. The claim of the assessee under the head deferred research and development expenses is set out in the assessment order as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve details that the assessee has incurred expenses of ₹ 76,31,487 in the financial year 1999-2000. ₹ 1,35,56,259 in the financial year 2000-01 and ₹ 34,44,649 in the financial year 2001-02. In the lengthy submissions made by the asses see, the assessee has only stated as to how the product was developed and what is its utility and the market potentiality. However, there is no explanation as to why the expenses were written off in one year and as to why the research and development expenses which fall under the purview of section 35 have been deferred. In the formal discussion it was, however, stated that since new technologies are being developed in their field the product technology has become obsolete and, therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business. Explanation.-Where any such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973) on payment of any salary [as defined in Explanation 2 below sub-section (5) of section 40A] to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority to have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be allowed only in the year in which it was incurred. 2.5. Aggrieved by the said order, the assessee appealed to the Tribunal. The Tribunal observed that since the business of the assessee had already commenced, the assessee cannot come within the purview of the Explanation to section 35 of the Act. It was also observed that the expenses relatable to the year under consideration were duly allowed by the Assessing Officer and only the expenditure not relatable to the relevant year of assessment was disallowed. The Tribunal held that the assessee failed to produce any evidence to demonstrate that the expenditure claimed is relatable to the year under consideration. Thus, the Tribunal upheld the orders passed by the authorities below. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year in which the business is commenced. (emphasis supplied) 5. With regard to the second question of law, namely, whether the Tribunal was right in holding that the deferred revenue expenditure claimed by the assessee is not allowable in terms of the Explanation to section 35 of the Act, the learned counsel for the assessee fairly states that the business of the assessee has commenced long prior to the relevant assessment year and, therefore, he is not canvassing the said question of law. In view of the fair submission made by the learned counsel for the assessee, we do not propose to answer the same in this appeal. 6. Apropos the first question of law, on a plain reading of section 35 of the Act, we are unable to accept the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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