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TMI Blog2022 (9) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) was right in deleting the addition of Rs. 2,41,98,983/- made on account of disallowance of R&D expenses being expenses of capital nature with enduring benefits. (ii) Whether on the facts and in the circumstances of the case, the ld. CIT(A) was right in deleting the addition of Rs. 5,38,36,475/- made on account of disallowance of bad debts claimed in respect of late delivery charges deducted by the Indian Railways which are penal in nature. (iii) Whether on the facts and in the circumstances of the case, the ld. CIT(A) was right in deleting amount of Rs. 4,60,762/- out of total addition of Rs. 12,35,000/- made on account of disallowance of expenses of personal nature without assigning any reason." 3. The assessee company is en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he technology for betterment of existing business, it was argued that the expenses should be considered as revenue in nature. 9. The assessee company has claimed an expenditure of Rs. 2,41,98,983/- on account R & D Expenditure under the head of manufacturing expenditure. We have perused the details which have been enclosed at page no. 80 of the paper book. The same was also before the revenue authorities. The assessee paid an amount ranging from Rs. 200/- to Rs. 27,963/-, in total Rs. 50,000/- (approx.) to Research Development and Standard Organization Lucknow (RDSO). The amounts have been paid for product drawing and regular assessment fee. The amounts have been paid from September 2010 to November 2010. An amount of Rs. 75 lacs (approx.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are calculated and paid on the basis of annual sales made by the assessee every year in accordance with the agreement entered between the parties cannot be treated as capital expenditure. The Assessing Officer misread the head "R&D expenditure" which in fact was a manufacturing expenditure. On this issue, we are guided by the judgment of the Hon'ble Supreme Court in the case of Travancore Sugar and Chemical Ltd. Vs 62 ITR 566 wherein it was held that whenever an amount is paid based on a percentage of turnover or profit, it would have no relation to the capital value of the assessee. The facts in the instant case reveal that the payments have made for utilization of services on annual basis taking the turnover as baseline for comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As could be deciphered from the complex order of the AO, it could be interpreted that the AO has made disallowance on the grounds that these amounts have not been reflected as provisions in the balance sheet and also that these amounts were penal in nature imposed by Indian Railways which is a Government authority and hence disallowable. 16. The ld. CIT(A) deleted the addition. 17. Aggrieved the revenue filed appeal before us. 18. Heard the arguments of both the parties and perused the material available on record. 19. The assessee has furnished complete details giving the invoice wise deduction made by the railways. From the perusal of the details, it can be found that deductions made by the railways are being made in the earlier year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deductions and nature of deduction. It is also fact on record that an amount of Rs. 3,37,16,672/- directly shown in the computation of income as transfer from provisions for doubtful debts as the amount has already been debited to the profit & loss of the earlier years which has been added back by the assessee while calculating the taxable income. The balance amount of Rs. 2,04,19,803/- pertain to the deduction made by the railways on the invoices raised for the year. Hence, it can be held that the amounts have been duly accounted under sales in the books of accounts, the due provisions have been made and when the recovery from the contractor/supplier have been made and liquidated damages are levied for late deliveries, they cannot be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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