TaxTMI 
TaxTMI 
2015 (6) TMI 924
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....- "2. That the Ld. CIT(A), erred on facts and in law, by confirming the disallowance of the expenditure of Rs. 18,731,381 on account of development charges incurred in the normal course of carrying on the business, considering the same to be in the nature of capital expenditure. 3. That without prejudice to the ground no.2 above, the Ld. CIT(A) has erred in facts and in law, by confirming the action of the Ld. AO of not allowing depreciation on development expenses, though the Ld. AO had recorded in the reasons for reopening of the assessment that depreciation @ 25% was allowable on the development charges. 3. It is a case of reopened assessment and one of the reasons for reopening the assessment was that the assessee had claimed a....
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....ment Order u/s 144C holding them as expenses of capital nature which has been confirmed by the Hon'ble Dispute Resolution Panel-I, New Delhi. Accordingly, the addition as suggested in the Draft Order has been made. On the similar lines, the development charges amounting to Rs. 1,87,31,381/- debited to the P&L account during the year under consideration revenue expenditure are held to be expenses of capital in nature. Therefore, the development expenses of Rs. 1,87,31,381/- are disallowed. Accordingly, an addition of Rs. 1,87,31,381/- is made." 5. Aggrieved by the disallowances made, assessee carried the matter in appeal before the ld. CIT(A) but without any success,. While rejecting the grievance of the assessee, learned CIT(A) reaso....
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....C) at p. 477, in the case of Indian Molasses Col. Ltd. Vs. CIT (1959) 37 ITR 66 (SC) at p. 162. Further, this principle of law has been explained by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. Vs. CIT (1980) 17 CTR (SC) 113: (1980) 124 ITR 1 (SC) In this case, the Hon'ble Supreme Court has laid down the following principles of law :- (i) It is not a universally true proposition that what may be a capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. The fact that a certain payment constitutes income or capital receipt in the hands of the recipient is not material in determining whether the payment is revenue or capital disbursement qua the payer;(ii) There ma....
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....lysis of the above quoted decisions, the following principles of law emerge:- (i) Generally. When the expenditure is incurred for obtaining an advantage of enduring benefit, it would be on capital account. So, however, there may be cases where the test of enduring benefit may breakdown. (ii) ln order to determine the nature of an expenditure to be revenue or capital account, it is necessary to consider the effect of the expenditure from the practical and business point of view taking into consideration the larger context of business necessity or expediency. In the light of the above principles the nature of expenditure incurred by the appellant is to be examined. Perusal of the details of expenses filed by the appellant show that t....
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.... Counsel for the assessee. In view of the same, respectfully following the decision of the Co-ordinate Bench of the Tribunal in the assessee's own case for the Assessment Year 1995-96 we allow this ground of the assessee for both the AYs 2007-08 and 2008-09." 9. We have also noticed that it is an undisputed position that expenses in question are incurred on testing the performance of local components vis-à-vis similar components used outside India, to improve performance, import substitution and monitoring compliance with safety standards, and for bench marking performance of it's products. This exercise is essentially a continuous process which permeates different accounting years, and does not result in such an enduring ....