TaxTMI 
TaxTMI 
2008 (2) TMI 655
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....ng the action of Assessing Officer in disallowing the research and development expenses of Rs. 25,42,620. The assessee has also raised an additional ground claiming allowability of the same under section 37 of the Act if it was not allowable under section 35(1) of the Income-tax Act. The learned counsel for the assessee requested for admission of additional ground as it was purely on legal issue. 4. The ld. D.R., objected the same. On due consideration of facts and circumstances and applicable legal position, we admit the additional ground of the assessee and the decision on both ground No. 1 and this additional ground would be given together. 5. The facts, in brief, are that the Assessing Officer noted that in the Balance Sheet under....
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....s books of account. The Assessing Officer also held that assessee also did not meet the conditions of section 35(1) of the Act as the assessee already had the expertise in the field and the product was being developed as per the requirement of the customer i.e. A.C.C. who was also willing to market such mixture-cum-dispenser developed, manufactured and supplied to them, hence, the expenditure was to be treated as incurred for creating an asset having income generation capacity in future, accordingly, he treated the entire expenditure as of the capital nature and added the same to the total income of the assessee. Aggrieved by this, the assessee carried the matter in appeal before the ld. CIT(A) wherein it was contended that R&D was a contin....
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....icer by holding that the assessee was not entitled for deduction under section 35(1) of the Income-tax Act for the reason that activities classified as R&D were not exempted when expertise was utilized to develop the product as per requirement of customer and also for the reason that assessee was also having technical know-how concerning manufacture of mixture dispenser. Aggrieved by this, the assessee is in appeal before us. 6. The ld. D.R., on the other hand, placed strong reliance on the order of ld. CIT(A) and also submitted that expenditure was falling within the ambit of sections 32 to 36, hence the same was not allowable under section 37 of the Act. 7. The learned counsel for the assessee firstly narrated the nature of business....
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....f capital nature was allowable under section 35(1)(iv) read with section 35(2)(ia) of the Act. In addition to these contentions, the ld. Counsel further placed reliance on the written submissions made before the ld. CIT(A). 8. We have considered the submissions made by both sides, material on record and orders of authorities below. It is noted that the assessee-company is engaged in the business of manufacturing of capital goods i.e. plant and machinery to be employed by cement & steel companies and other companies engaged in the infrastructure products. It is also noted that company is having technical collaboration for up-gradation and improvement and development of new products. It is also noted that the company also customizes it's e....
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....We would like to further state that R&D activities carried on by the assessee resulted into product development, process development, indigenization, product support and these activities have been carried on by the assessee in a continuous manner for years together and no material has been brought on record by the revenue to controvert these claims of the assessee, hence, merely for the reason that assessee is having a technical collaboration or is developing various prototypes, these activities cannot be termed as not of the nature of scientific research. In this view of the matter, we hold that the expenditure claimed by the assessee as revenue is allowable under section 35(1) of the Act and capital expenditure incurred by the assessee in....