TaxTMI 
TaxTMI 
2019 (2) TMI 631
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....t capital expenditure of Rs. 1,26,100/- on the ground that no documentary evidence of any real R&D activity by the assessee, was furnished. 3. Briefly stated, the facts of the case are that the assessee company is manufacturing electronic products since 1989. It claimed deduction of R&D capital expenditure of Rs. 1,26,100/- and revenue expenditure of Rs. 1,01,455/-. The Assessing Officer allowed deduction in respect of the revenue expenditure. As regards the capital expenses of Rs. 1,26,100/-, the AO held that the claim made u/s.35(2) of the Income-tax Act, 1961 (hereinafter also called 'the Act') was not sustainable as the assessee was not approved by any Central Government Agency. Treating such amount of Rs. 1,26,100/- as capital expendi....
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....the assessee to claim depreciation at the eligible rate. 5. Adverting to the facts of the instant case, we find that the assessee claimed to have incurred capital expenditure of Rs. 1,26,100/-. Despite the AOs' requirement, the assessee could not produce any evidence to show that it was really engaged in doing some research activity. Similar position prevailed before the ld. CIT(A). It has been recorded in para 3.3 of the impugned order that no documentary evidence on real Research & Development activities was furnished. The position is no better before us as well. On a specific requisition, the ld. AR could not draw our attention towards any cogent material or evidence to demonstrate that it was engaged in carrying out any real research a....
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....t. Ltd. Vs. CIT (2009) 314 ITR 62 (SC) has held that a provision made by an assessee for warranty claim on the basis of its expenditure is allowable as deduction u/s.37 of the Act. While allowing deduction on account of warranty provision, the Hon'ble Apex Court added a caveat by observing in Para No.44 of its judgment that : "it would depend on the nature of business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting being adopted by the assessee. It will also depend on the historical trend". It is clear from the ratio decidendi in Rotork Controls India (P) Ltd. (supra) that though warranty provision is a permissible deduction but the provision must be made on a scientific basis.....
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....ncurred by the assessee on repairs on year to year basis would qualify for deduction. With these observations, we set aside the impugned order to this extent and remit the matter to the file of AO for deciding the issue in accordance with our above directions. 10. In the result, the appeal is partly allowed for statistical purposes. A.Y. 2008-09 : 11. Both the grounds raised by the assessee for this year are mutatis mutandis similar to those for the A.Y. 2007-08. Following the view taken hereinabove, we decide the first ground against the assessee by holding that Research & Development capital expenditure cannot be granted 100% deduction, but the same should be allowed depreciation at the eligible rates. Second ground of warranty expens....