2015 (3) TMI 233

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....he assessee. Briefly stated, the facts of the case are that the assessee is engaged in manufacturing of musical instruments. Deduction of Rs. 14,10,032/- was claimed on account of Research and development expenses. On being called upon to explain as to why these R&D expenses be not treated as capital, the assessee stated that the company was manufacturing brass musical instruments as per the samples/specifications given by the buyers. It was explained that on receiving the samples/specifications, the company develops the products in-house to the satisfaction of the buyer. During the year in question, the assessee company received samples from M/s W. Schreiber of Germany and Besson Musical Instruments Ltd. of Great Britain which were its maj....

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....ions and perused the relevant material on record. There is no dispute on the fact that the assessee is a company in existence for last more than twenty years doing the same business. During the year under consideration it incurred the above referred expenditure on R & D for developing prototypes of the products to be supplied to specific customers strictly as per the specifications and samples given by them. It is further a matter of record that if the prototype so developed does not conform to the samples supplied by the customer, no orders can be expected, in which case the expenditure so incurred on developing the prototypes constitutes a sheer loss. It is still further relevant to note that the manufacturing of products from such develo....