TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 643
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....s forwarded to the Chartered Accountant, R.A. Jagtap & Co. The Chartered Accountant instructed to pay the Tribunal appeal fees which was paid on 25.07.2011. the appeal was prepared and forwarded back to us by the Chartered Accountant for signatures. The Appeal papers were signed by the Managing Director, Mr. Ambrish Vijay Shah on 27.07.2011 and was forwarded to the Chartered Accountant for filing the same to the Tribunal. However, one of the staff i.e. Mr. Mithilesh Kumar Rajdev singh, working at R.A. Jagtap & Co, had kept the appeal papers in the drawer, as they were busy in preparing and filing returns for 31st July 2011. Mr. Mithilesh Kumar R.Singh, forgot the work of filing the appeal. On 28th December 2011 while searching some other papers, Mr. Mithilesh Kumar found the bunch of appeal papers. He informed Mr. J.R. Jagtap. Thereafter, affidavit of the managing director Mr. Ambrish Vijay Shah and affidavit of Mr. MithileshKumar was prepared inscribing the facts. The appeal was thus filed on 03.01.2012, along with the affidavits. 3. We have considered the submissions made by the assessee in its application for....
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....278774.00 Salary factory staff 1232989.00 Admin provident fund 147959.00 Power & fuel 207242.00 Interest 1078767.00 Total 38058493.00 LrSS: Depreciation on development expenses @ 20% 7611698.60 Total 30446794.40 Balance as per balance-sheet 30446794.40 Difference ...... 5. On the basis of above details, it was contended on behalf of the assessee that the expenditure incurred on development is of revenue nature which could not be treated as capital merely on the basis of accounting treatment given in the books. It was contended that the expenditure on product development was incurred for the expansion of existing business and the same was allowable as deduction being revenue expenditure. 6. The AO did not find the stand of the assessee to be acceptable. According to him, the fact that assessee had capitalized the product development expenses in its books of account was sufficient to show that the same constituted capital expenditure. He held that the fact that the said expenditure had resulted in growth in the turnover of the assessee in the subsequent years was sufficient to show that the same was of enduring benefit to the assessee. He, therefore, treated the e....
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....uestion incurred by the assessee on products development as capital expenditure and confirmed the disallowance made by the AO on this issue. Aggrieved by the order dated ld. CIT(A), the assessee has preferred this appeal before the Tribunal. 9. Ld. counsel for the assessee at the outset invited our attention to the details of the product development expenditure given on page no. 6 of the assessment order and submitted that the said expenses incurred on raw-material, stores & spares staff's salary, interest etc where purely of revenue nature. He submitted that expenditure of similar nature was incurred in the case of assessee's holding company M/S. Perfect Engineering Pvt. Ltd. and the disallowance of the said expenditure made by the Assessing Officer and confirmed by the Ld. CIT(A) has been deleted by the Tribunal vide its order dated 16.04.2013 passed in ITA No. 5311/Mum/2011. He took us through a copy of the said order placed in his paper book at page nos. 59-74 to show that the issue involved in the present case as well as all the material facts relevant in thereto are similar to the case of M/s. Perfect Engineering Products Ltd.. He further submitted that the similar component....
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....d by the assessee out of casting material and the expenditure in question was incurred on development of the liners in stainless steel material. The said expenditure thus was incurred by the assessee on development of existing products being manufactured by it although from a different material i.e. Stainless Steel and merely because the new liners being developed by the assessee in Stainless Steel had application in industries other than automobile industry, we are of the view that the manufacturing of Stainless Steel liners cannot be considered as a new line of business. It was a case of expansion of existing business of the assessee of manufacturing liners by diversifying the existing products using different materials for making the same suitable for even other applications. The expenditure incurred by the assessee on development of Stainless Steel liners thus was relating to its existing business and the same, in our opinion, cannot be treated as capital expenditure merely on the basis of accounting treatment given by the assessee. Moreover a perusal of the details of the development expenditure in question incurred by the assessee clearly shows that the entire expenditure inc....
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....obsolete tomorrow. When the assessee company is already in the business and had incurred expenditure on development of new products relating to some business, the expenditure incurred has to be treated as revenue expenditure as no new capital asset is acquired by the company. Reference was made to several decisions. In para- 11 it was clearly submitted that expenditure incurred is in the existing line of business. In para-5 it was submitted that the photographs of products developed are also furnished and details regarding growth in the business of the assessee was also given. In the year 2005-06 assessee's turnover was to the tune of Rs.42.72 crores which rises to Rs.135.83 crores in 2008-09 and this was only due to the reason that assessee was continuously developing new products and thus it was claimed that expenditure incurred is allowed under section 35/37 of the Act. 6.2 Despite all these submissions Ld. CIT(A) has just simply relied upon the fact that in the audit report in the column described for expenditure to be incurred under section 35 the auditor had mentioned "NA", in the earlier years the assessee had capitalized similar expenditure on the ground that ....
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....urred on raw material, Sub-contracting charges, power and fuel, salary and wages, bonus, P.F, ESI, LWF, leave encashment, canteen, telephone expenses, printing and stationary, foreign travel expenses and interest. None of these expenditure can be said to have formed a new asset and A.O has admitted that these expenditure are relatable to the business of the assessee then simply for the reasons that these have given some enduring benefit to the assessee cannot be regarded as capital expenditure. The case law relied upon by the AR supports the case of the assessee and facts of the present case are very near to the facts of the case of M/s. Renu electronics Pvt. Ltd. (supra) where similar claim was made by the assessee initially on research and development and depreciation was claimed. In the computation these expenditure were claimed under section 37/ 35(1)(iv) of the Act and going into the nature of expenditure it was held that the expenditure did not reflect that any new capital asset had came into existence. The expenditure were held to be allowable under section 37(1) of the Act. 14. Keeping in view the decision of the coordinate bench of the Tribunal in the case of Renu Electro....