TaxTMI 
TaxTMI 
TaxTMI 
2014 (4) TMI 623
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....ffective manner. Ld. CIT(A) ought to have deleted such disallowance in absence of any enduring benefit resulting to the appellant. 2. Alternatively and without prejudice to the claim of development expenses being revenue in nature, depreciation be granted if it is held that product development expense is said to bestow enduring benefit to the appellant. 3. Ld. CIT(A) erred in law and on facts in confirming disallowance made by AO of 100% depreciation claimed on Particle Size Analyzer being Air Pollution Control Equipment. Both the lower authorities failed to appreciate working of the Particle Size Analyzer that eliminated air pollution making it eligible for 100% depreciation. Ld. IT(A) ought to have granted depreciation as claimed by the appellant. 4. Ld. CIT(A) erred in law and on facts in confirming action of AO in restricting depreciation of Rs.22,09,948/- claimed on opening balance of block of 100% depreciable assets to Rs.3,31,492/- allowingly only 15% depreciation thereon. Ld. CIT(A) erred in not appreciating the fact that the depreciation was already claimed on the basis of 100% ....
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....ers like paper, paint and plastic manufacturers. The A.O. found that assessee had capitalized expenses incurred on some process know-how of Rs.55,00,000/- in audited balance sheet. In the computation of income, the assessee reduced the income to the extent of Rs. 55 lacs claiming thereby the expenses as revenue expenses. The A.O. gave reasonable opportunity of being heard on this issue, which was afforded by the assessee vide letter dated 10.10.2011. The A.O. held that the assessee's contention is that the expenditure is incurred on the know-how for developing of product. At the same time the assessee pleads that it is meant for commercial purpose and shall be utilized by the assessee for manufacturing a particular product. The assessee itself admitted that the product shall be useful in efficiency and shall be cost effective. The know-how has enduring benefits. It is not mere data bank. The assessee itself had therefore rightly capitalized the expenses but has incorrectly claimed as revenue expenses while computing the income. The expenditure on the purchase of know-how for product development is capital in nature and the same was disallowed and added back to the total income ....
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....ses of methods of manufacturing new products and developing proto type of equipments required for such purposes. Hence, the appellants claim that this expenses are for the purposes of acquiring procedure for better manufacturing know-how for the manufacture of a particular product in more efficient cost effective manner is not correct. The appellant is acquiring an altogether new know-how for manufacture of new products which is giving enduring benefit to the appellant and it is not for the purposes of carrying out the existing business of the appellant in a more efficient way. Hence the AO has rightly held the expenses to be Capital Expenditure. For holding so, reliance is also placed upon following judicial pronouncements: i) 196 ITR 0237 (GUJ), Saurashtra Cement and Chemical Industries Ltd. - in this the Court has held that that the expenditure incurred in obtaining the feasibility report and the consultation fee paid for the soda ash plant was capital expenditure. ii) 232 ITR 639 (DEL), Triveni Engineering Works Ltd.- in this the Court has held that the amount spent on the ....
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..... The Product Development Report by Dispersive Minerals and Chemicals India Private Limited was dated 20th March, 2009, which is a detailed booklet which gives a complete formality carried out for the development of the product. The product development expenses were incurred for products which were used for commercial exploitation by the company. Since, the assessee company did not have necessary skill set to develop these products, it had been outsourced this function from a specialist. Expenses incurred for the development of new product for which exhaustive trials were carried out by use of material and various combinations and permutations were used. Largely it involves expenditure on material and manpower employed for development of a product. This product was largely process based and what comes into existence is the procedure for better manufacturing know-how for the manufacture of particular product in more efficient and cost effective manner. This does not bring into existence any patent or technology and hence, it is in nature of revenue expenditure. As far as accounting standard are concerned, it is required to be capitalized in the books of account. He further has drawn....
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....income as revenue expenditure. This has been outsourced as assessee did not have any skill/specialized personal. As per agreement, the expenditure incurred on research and development of mineral products such as, Wet Ground Calcium Carbonate, Wet Ground Talc. (High Aspect Ratio Talc.), Wet Ground ATH, Wet Ground Brucite, Sub Micron Silica, Delaminated Kaolin, High Aspect Ratio Mica, of which the priority has to be given to Wet Ground Calcium Carbonate, Talc, ATH and Brucite and subsequently, such other products which the client may feel fit. The developer had agreed to provide to the assessee services relating to carrying out of research and development of various minerals products as per Exhibit 'A' of the agreement. It is loan drawn proceeding which required equipment as well as scientific manpower to give the project report. These expenses claimed to be paid to the developer for the development of new project for which exhaustive trials are carried out by use of material and various combination and permutation. The final projects come into existence under the procedure for better manufacturing know-how for the manufacturing of particular product in more efficient and cos....
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....lected from air by dust collector. This indirectly helps in measuring air pollution and hence the same has been classified as Pollution Control Equipment. The said equipment which was purchased from Malvern Instruments Ltd. for Rs. 15,82,842/-. The A.O. further held that assessee was not sure whether this equipment is a device of Pollution Control Equipment or used in the laboratory. The assessee was asked to give certificate from the competent authority, particularly, GPCB who has been authorized by the Government for this purpose. But assessee did not furnish any report from GPCB. The assessee claimed that dust collector and Particle Size Analyzer are Pollution Control Equipments, which have been certified by the manufacturer. After considering the assessee's reply, the A.O. allowed depreciation @ 15% on Rs. 16,76,918/- at Rs. 2,51,537/- and @ 7.5% on Rs. 7,11,201/- at Rs. 53,340/-. After reducing the depreciation, the A.O. made addition of Rs. 17,27,641/- on account of dust collector and Particle Size Analyzer. Similarly, 15% depreciation was allowed on opening balance of depreciable assets at Rs. 3,31,992/-. Thus, total addition of Rs. 36,06,097/- (Rs. 17,27,641/- + Rs. 18,....
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....he A.O. accepted the assessee's claim that assets are depreciable @ 100%. During the year, assessee had purchased Air Pollution Equipment of Rs. 16,76,918/- as per page no. 93 of the paper book. The details of summary as well as bill annexed at serial no. 75, which was imported from UK by the assessee and also certified by them as Pollution Control Equipment (page no. 80 of paper book). Remaining payments related to transportation incurred on carrying goods up to production site of the assessee. Therefore, it is 100% depreciable as per depreciation schedule given in the IT Rule. At the outset, ld. Sr. D.R. partially supported the order of CIT(A), where 100% has not been allowed but also opposed that 100% depreciation allowed on Rs. 7,21,201/- is not admissible. 9. We have heard the rival submissions and perused the material on record. The A.O. already allowed the 100% depreciation on Rs. 22,09,948/- in preceding year. When the A.O. had accepted the assets are depreciable @ 100%, the Revenue cannot deny 100% depreciation on remaining amount for 180 days. Further, addition made during the year is also having similar nature. As per page no. 67, the details of addition made during....
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....fied incurred on administrative expenses such as salary, bank charges, office expenditure & ancillary expenses grouped under such administrative cost shall be quantified by way formula laid down under Rule 8D of I.T. Rules 1962. Thus, he calculated disallowance by applying Rule 8D at Rs. 7,28,905/-. 11. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who had partially allowed the appeal of the assessee by observing that dividend from the foreign company is taxable and hence, such investment cannot be considered for making disallowance u/s. 14A. Accordingly, disallowance is restricted to Rs. 6.31 lacs, as computed by the appellant. 12. Now the Revenue is before us. Ld. Sr. D.R. vehemently relied upon the order of the A.O. and ld. A.R. of the assessee supported the order of CIT(A). 13. We have heard the rival contentions and perused the material on record. When dividend from the foreign company is taxable then it could not be made part of disallowance u/s. 14A. Ld. CIT(A) is right in holding the disallowance of Rs. 6.31 lacs. Accordingly, we dismiss the appeal of the Revenue on this ground. 14. Ground no. 2 of Revenue's appeal is ag....