TaxTMI 
TaxTMI 
2019 (3) TMI 724
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....urn of income for impugned assessment year on 27.09.2013 declaring loss of Rs. 1,08,57,211/-. The case of assessee was selected for scrutiny under CASS and accordingly, notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was issued on 08.09.2014. During the course of assessment proceedings, AO observed that assessee has incurred expenditure of Rs. 1,39,05,544/- towards Product Development Cost. The assessee claimed the said expenditure as "Revenue". The AO held that the expenditure was incurred for Product Design Development which would have definitely resulted in enduring benefit to the assessee. Therefore, the expenditure cannot be allowed on "Revenue Account". 3. Against the assessment order dated 03.0....
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....f the assessee in market, therefore these expenditure cannot be considered as expenses of Revenue nature? 5. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) erred in inferring that the expenses were incurred on account of subjecting the assessee's product to testing which is done on ongoing basis every year to cater to the needs of customers & that the expenses is incurred for testing & trials of products already being manufactured & sold by the assessee? 6. The appellant craves leave to add, amend or alter any of the above grounds of appeal." 4. Shri Suhas Bora appearing on behalf of assessee submitted at the outset that assessee had incurred expenditure on product development. The afore....
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....velopment which would result in enduring benefit to the assessee over a period of time. The ld.D.R. placed reliance on the decision of Hon'ble Gujarat High Court in the case of Torrent Pharmaceuticals Ltd., Vs. ACIT reported as 230 Taxman 204 to substantiate his contentions that the product development expenditure by the assessee is on "Capital Account". 6. I have heard the submissions made by rival sides and have perused the orders of authorities below. I have also considered the decisions on which both sides have placed reliance. The undisputed fact that emerges from the record is that assessee had incurred expenditure towards product development. The assessee is engaged in manufacturing of components for Automobile industry that is hi....
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....which does not result into creation or acquisition of any assets, then there is no merit in holding the expenditure to be of enduring benefit. The assessee is carrying out this exercise of modification and improvisation in the products in order to test suitability in the environment in which it is to be used and hence, the said expenditure is duly allowable in the hands of the assessee as revenue expenditure. The bill wise nature of expenses are tabulated at page 6 of the order of CIT(A) and perusal of the same reflects expenditure to be revenue in nature. Once, the expenditure has not been incurred for the development of new product but is for the improvisation of the products already being manufactured by the assessee, then such ....