TaxTMI 
TaxTMI 
2015 (11) TMI 1374
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.... head 'product development expenses'. Since the assessee could not elaborate the nature of expenditure claimed, the AO held that the line that divides revenue expenditure from capital expenditure is often very thin and hazy. Therefore, to decide on which side of line the expenditure falls, it is not necessary to look at the nature of business, nature of expenditure and the nature of right acquired. If the expenditure is for the initial outlay of acquiring or bringing into existence an asset or advantage of an enduring benefit to the business which is being carried on, or for extension of the business that is going on, or for a substantial replacement of an existing business asset, the same would be capital expenditure. From the head of expenditure, i.e. product development expenditure it is very much clear that it will give enduring benefit to the assessee. Relying on the decision of the DRP in the case of Behr India Ltd. for A.Y. 2006-07 the AO treated the expenditure as capital in nature. After allowing depreciation of Rs. 67,806/- out of the total expenditure of Rs. 2,71,223/- the AO disallowed an amount of Rs. 2,03,417/-. 4. Before CIT(A) the assessee submitted that the said....
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....ry year to remain in the field. Therefore, there is constant upgradation of the original product already manufactured and sold by the assessee. He submitted that the said recurring expenses consist of performance tests, reimbursement of prototype development of components/sub-parts and testing expenses. Such expenses have not resulted into creation or acquisition of any asset, right or property or any advantage of enduring nature in assessee's hands. Referring to the decision of the Pune Bench of the Tribunal in the case of the sister concern of the assessee namely ACIT Vs. Spicer India Pvt. Ltd. vide ITA Nos. 1191, 1192/PN/2007 and ITA No.102/PN/2008 for A.Y. 2001-02, 2003-04 and 2002-03 respectively order dated 24-04-2008 he submitted that the Tribunal in the said decision has held that the said expenses were incurred by the assessee on an on-going basis in the operation of assessee's business and therefore fully allowable in the year of incurring of expenses. Referring to the decision of Hon'ble Gujarat High Court in the case of Gujarat Small scale Industries Corporation Ltd. Vs. CIT reported in 142 ITR 35 he submitted that the Hon'ble High Court in the said decision has held th....
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....view of the above and in view of the detailed reasoning given by the Ld.CIT(A), we find no infirmity in the order of the CIT(A) on this issue. Accordingly, the same is upheld and the ground raised by the revenue on this issue is dismissed. 10. Ground of appeal No.2 by the revenue reads as under : "2. Whether on the facts and in the circumstances of the case, the CIT(A) was justified in treating the expenditure incurred towards shifting of its manufacturing operations as revenue in nature, when the nature of the expense itself suggest that it is not a recurring expenditure and is incurred very few times in the entire business life of the assessee?" 11. Facts of the case, in brief, are that the assessee in its profit and loss account has debited an amount of Rs. 6,70,000/- on account of shifting expenses. On being questioned by the AO to furnish justification for claiming of such expenditure incurred on shifting of plant and machinery from one unit to another as revenue expenditure, the assessee submitted the details of the said expenses along with bills and vouchers. On examination of the details, the AO noted that these expenses have been incurred for shifting and installa....
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...., doing business of manufacturing sugar at Sitalpur, found that the place suffered from ravages of floods and the quality of sugarcane was not in sufficient quantity there. With a view to increasing its business, therefore, the assessee shifted the factory to Garauv and in the process of dismantling the building and machinery and transporting and erecting them at Garauv incurred an expenditure of Rs........ It was in that context that the Supreme Court held that the expenditure was in the nature of capital expenditure because it was incurred not for the purpose of carrying on business but for setting up the same with a greater advantage for the trade than it had in its previous set up. The Supreme Court did not lay down Assistant a general rule that shifting expenses should in every case be considered Assistant capital expenditure. We are in fact aware that in another High Court decision shifting expenses have been allowed Assistant revenue expenditure, though we cannot readily lay our hands thereon, nor has the assessee brought that decision to our notice. The facts on record indicate that the assessee which was carrying on business in a convenient locality had necessarily to shif....
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....an existing accrued liability at the time of sales the same is claimed as deduction in the return of income". The AO, therefore, asked the assessee to justify the claim of expense on account of provision for warranty of Rs. 21,49,404/- along with basis for computation of provisions, details of provision claimed in the earlier year and returned back during the year, amount not being utilized etc. Since there was no response from the assessee and since the warranty provision made during the year was Rs. 7,96,200/-, the AO following the orders of his predecessors in assessee's own case for earlier years disallowed the warranty provisions of Rs. 7,96,200/- made during the year and added the same to the total income of the assesse. 18. In appeal the Ld.CIT(A) following the decision of the Tribunal in assessee's own case for A.Y. 2006-07 deleted the addition by observing as under : "6.4 Ground No.4 is regarding disallowance of Warranty provision of Rs. 7,96,200/-. I have carefully considered the facts of the case, the assessment order and the submissions of the appellant. After hearing the appellant I find that this issue is squarely covered in favour of the assessee by the decisio....