High Court overturns Tribunal decision on R&D capital expenditure & depreciation disallowance, remands for review &D

The High Court set aside the Tribunal's decision on capital expenditure for R&D and depreciation disallowance, remanding the matter for fresh consideration. The Tribunal's decision on revenue expenditure for R&D remained unchanged. Each party was directed to bear their own costs.

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Issues involved: Challenge to order of Tribunal denying benefit of capital expenditure on R&D and depreciation.

Capital Expenditure on R&D:
The assessee, engaged in manufacturing drugs, filed return declaring income for asst. year 2002-02. Assessing Officer disallowed capital expenditure on R&D and depreciation, making significant additions to total income. Commissioner (Appeals) found massive additions unjustified, allowing only disallowance of depreciation due to non-production of bills. Tribunal held R&D capital expenditure not justified, disallowing it. Tribunal directed verification of depreciation claim, ultimately finding assessee not entitled to it. Appellant challenged Tribunal's order.

Revenue Expenditure for R&D:
Commissioner (Appeals) found disallowance of revenue expenditure for R&D not justified, allowing it. Tribunal remanded this matter back to Assessing Officer, not subject of current appeal.

Depreciation Disallowance:
Assessing Officer disallowed depreciation due to non-production of bills and invoices, which was partly upheld by Commissioner (Appeals). Tribunal found depreciation claim infructuous, as bills and invoices for new assets were allowed. Tribunal set aside depreciation disallowance. Appellant challenged Tribunal's decision.

Judgment:
The High Court set aside Tribunal's decision on capital expenditure for R&D and depreciation disallowance, remanding the matter back for fresh consideration. The Tribunal's decision on revenue expenditure for R&D was left undisturbed. Each party was ordered to bear their own costs.

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