TMI Blog2015 (11) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed reasoning given by the Ld.CIT(A), we find no infirmity in the order of the CIT(A) on this issue - Decided against revenue Expenditure incurred towards shifting of its manufacturing operations - revenue v/s capital expenditure - CIT(A) treated as revenue - Held that:- Shifting expenditure incurred by the assessee is for carrying on its business operation and the same is incurred wholly and exclusively for the purpose of business and has to be treated as revenue expenditure. In this view of the matter we uphold the order of the CIT(A) on this issue and the ground raised by the revenue is dismissed.- Decided against revenue Disallowance made on the issue of provision for warranty - CIT(A) allowed the claim - Held that:- No infirmity in the order of the CIT(A) deleting such addition. Admittedly, the AO following his order for earlier years in assessee’s own case, disallowed warranty provision made during the year. We find the Tribunal in assessee’s own case for A.Y. 2006-07 has deleted such disallowance. Since the issue has already been decided by the Tribunal in favour of the assessee, therefore, in absence of any contrary material brought to our notice against the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the said expenditure have been incurred on regular and on-going basis and in the ordinary course of business and therefore it is revenue in nature. It was further submitted that the decision of the DRP in the case of Behr India Ltd. has been set aside by the Tribunal to the file of the AO for fresh adjudication. 5. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition by observing as under : 6.1 The appellant is engaged in the business of manufacture sale of off highway axles for tractors, earthmoving equipment, etc. The appellant has incurred the Product development expenses on testing and processing of tools owned by the customer and kept with the appellant for the purpose of processing in the ordinary course of conduct of appellant's business. The expenses have been incurred on regular and an ongoing basis and in the ordinary course of conduct of company's business. The charges consist of performance tests of re-imbursement of proto type development of components/sub parts and testing expenses. Such expenses have not resulted into creation or acquisition of any asset, right or property or interest in any property in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision has held that expenditure incurred after the manufacturing of a product but before marketing it in order to test its quality and suitability for market is a revenue expenditure. He also relied on the following decisions : 1. Rediffmail India Ltd. reported in (2011) 141 TTJ 679 2. Alembic Chemical Works Co. Ltd. Vs. CIT reported in (1989) 177 ITR 377 3. Tejas Networks India Pvt. Ltd. reported in 229 Taxmann 40 9. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO treated the product development expenditure incurred by the assessee as capital expenditure in nature as against revenue in nature treated by the assessee. After allowing depreciation of ₹ 67,806/- out of the total expenditure of ₹ 2,71,223/- the AO made addition of ₹ 2,03,417/- to the total income of the assessee. We find the Ld.CIT(A) following the decision of the Hon ble Gujarat High Court in the case of Gujarat Small scale Industries Corporation (Supra) held that the product development expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred for shifting and installation of machines. Relying on the decision of Hon ble Supreme Court in the case of Sitalpur Sugar Works Ltd. reported in 49 ITR 160 the AO held that the expenditure of ₹ 6,70,000/- on account of shifting expenses is capital in nature. He accordingly disallowed the same and added to the total income of the assessee. 12. In appeal the Ld.CIT(A) deleted the addition by observing as under : 6.3 Ground No.3 is regarding disallowance of ₹ 6,70,000/- incurred by the appellant towards shifting of its manufacturing operations from former rented location at Chakan to Hinjewadi. The said shifting expenditure was incurred as the rented location at Chakan had to be vacated by the appellant in order to enable Spicer India Ltd to utilize and shift to Hinjewadi. The appellant had to vacate the premise and shift the rented premise at Hinjewadi which was far off from its vendor suppliers and customers. The shifting expenditure was incurred merely for carrying on business operations. The expenditure incurred is wholly and exclusively for the purpose of business and is a revenue expenditure. In support of its contention, the appellant has placed rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a convenient locality had necessarily to shift to a much distant place like Deonar only because Tata Oil Mills ltd. wanted the premises for its own use. The factory was shifted to a less convenient place not because of any intended expansion programme nor for any greater advantage but only because the assessee could not stick to its old place. By shifting the factory, therefore, the assessee did not secure any benefit of any enduring nature, and the expenditure cannot, therefore, be regarded Assistant capital in nature.s.37(1) authorises the assessee to claim Assistant allowable any expenditure not in the nature of capital or personal expenses, which is laid out or expended wholly and exclusively for the purpose of business. The expenditure in question is surely laid out wholly and exclusively for the purpose of business and was not in the nature of capital expenditure. We, therefore, hold that the authorities below were wrong in not allowing the expenditure, and we direct the Income-tax Officer to allow the same. 15. Respectfully following the decision of the Tribunal cited (Supra) we hold that the shifting expenditure incurred by the assessee is for carrying on its business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue is squarely covered in favour of the assessee by the decision of the Tribunal in I.T.A. No.1805/PN/2012 dated 22/10/2013 in assessee's own case for A.Y. 2006-07 wherein the issue has been decided as under:- We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find the Ld. CIT(A) while deciding the issue has distinguished the facts vis-a-vis A.Y. 2004-05 and 2005-06 by giving a finding that an amount of ₹ 18.87 lakhs has been actually spent in the succeeding year and therefore the provision for warranty liability at ₹ 12,70,996/- provided by the assessee in the books is justified. The Ld. Departmental Representative could not bring any material to deviate from the findings given by the Ld. CIT(A). Since the Ld. CIT(A) while deciding the issue has given a finding that the amount of ₹ 12,70,996/- provided on account of warranty liability during the year was reversed back in next year and actual expenses were shown at ₹ 18.87 lakhs, therefore, in view of the decision of Hon'ble Supreme Court in the case of Rotork Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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