2022 (5) TMI 1222

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....rder dated 31.08.2021 in ITA No. 624/PUN/2018 for the assessment year 2011-12 had partly allowed the appeal of the assessee. The Tribunal, inadvertently, did not adjudicate the second issue raised in the ground of appeal no. 8. Thereafter, the assessee moved a Miscellaneous Petition praying recall of appeal for adjudication of this ground of appeal no. 8. The Tribunal vide order dated 05.11.2021 recalled the appeal. 3. First, we reproduce the ground of appeal no. 8 which was inadvertently not adjudicated by this Tribunal, reads as under:- "8. Learned CIT A erred in disallowing revenue expenditure of Rs. 1,42,39,571/- on product testing prototyping and verification expenses debited to the Profit and Loss Account by the appellant ....

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....material grade and (vii) Due to supplier quality, customer complaints, filed complaints. The submissions made by the assessee was also extracted by the Assessing Officer in para 6.1 of the assessment order. On consideration of the said explanation, the Assessing Officer held that the expenditure was incurred on the development of products and designs for which the assessee had obtained the patents and, therefore, the expenditure is capital in nature. On appeal before the ld. CIT(A), the ld. CIT(A) taking into consideration the fact that the appellant had tested new prototypes for which the customers have reimbursed the expenses on sale of prototypes. Ld. CIT(A) also held that there is new line of product and therefore such expenditure ou....

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....rove the existing products. The true nature of the expenditure had not been doubted by the Assessing Officer. Undisputedly, the appellant is in the business of manufacturing of automotive components since 1999. As result of this expenditure, no new asset has been created nor new product did actually materialize. The expenditure was only incurred for the purpose of facilitating the existing business of manufacturing of automotive components and enabling the management to conduct the business operations more efficiently and productively. The Hon'ble Supreme Court in the case of (i) Empire Jute Co. Ltd. v. CIT, 124 ITR 1 and (ii) Alembic Chemical Works Co. Ltd. v. CIT, 177 ITR 377 (SC) held that expenditure incurred on the existing busines....