2004 (11) TMI 304 - AT - Income Tax

ITAT Upholds Assessee's Claims: R&D Expenses Deemed Genuine, Business Expenses Valid

The ITAT dismissed all appeals by the Department, upholding CIT(A)'s decisions in favor of the assessee. The disallowed claims under section 35(1)(iv) ... - Issues involved:1. Disallowance of claim under section 35(1)(iv) of the Income Tax Act, 1961.2. Disallowance of bank guarantee commission claim.3. Disallowance of claim on account of shortage and delays.4. Disallowance of claim for 100% depreciation on wooden structure.5. Allowance of depreciation on office equipment.6. Disallowance of travelling expenses claim.Analysis:Issue 1: Disallowance under section 35(1)(iv)- The AO disallowed the claim of Rs. 7,92,763 under section 35(1)(iv) as not genuine.- The CIT(A) allowed the claim, stating the expenditure was of capital nature for Research and Development.- ITAT upheld CIT(A)'s decision, noting the assessee fulfilled conditions for the deduction.- Cited precedents from Orissa and Karnataka High Courts to support the decision.- Concluded that the claim was genuine, dismissing the Department's appeal.Issue 2: Disallowance of bank guarantee commission claim- AO disallowed the claim of Rs. 2,18,447, considering it a colorable device to reduce tax liability.- CIT(A) allowed the claim, stating it was wholly and exclusively for business purposes.- ITAT upheld CIT(A)'s decision, considering the payment an allowable deduction.- Dismissed the Department's appeal on this ground.Issue 3: Disallowance on account of shortage and delays- AO disallowed Rs. 39,514 out of a total claim of Rs. 90,014 for shortage and delays.- CIT(A) allowed the expenditure, stating it was incurred wholly and exclusively for business.- ITAT agreed with CIT(A)'s findings, dismissing the Department's appeal on this ground.Issue 4: Disallowance of 100% depreciation on wooden structure- Claim of 100% depreciation on wooden structure was disputed by the Department.- ITAT noted the issue was previously decided in favor of the assessee for the assessment year 1994-95.- Consequently, the appeal by the Department was dismissed.Issue 5: Allowance of depreciation on office equipment- ITAT noted that the issue was previously decided in favor of the assessee for earlier assessment years.- Following the precedent, ITAT dismissed the Department's appeal on this ground.Issue 6: Disallowance of travelling expenses claim- AO disallowed Rs. 53,291 on the grounds of lack of evidence for business purpose.- CIT(A) allowed the claim, stating the expenses were normal business expenditure.- ITAT upheld CIT(A)'s decision, dismissing the Department's appeal on this ground.In conclusion, all three appeals filed by the Department were dismissed by the ITAT, upholding the decisions of the CIT(A) in favor of the assessee on various grounds.