TaxTMI 
TaxTMI 
2022 (9) TMI 1396
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....cer [AO] u/s.143(3) of the Act on 28.03.2016. The only ground urged in the appeal is disallowance of expenditure of Rs.169.60 Lacs as incurred by the assessee on Biotechnology Research & Development during the year. 2. It is the submission of Ld. AR that the assessee has requisite approval from competent authority to carry out the Research & Development (R&D) activities. The Ld. AR submitted that there would be a difference in setting-up of a business and commencement of a business. The Ld. AR also submitted that the approval so granted was further extended for 3 years in the year 2015. To assail the addition, Ld. AR drew our attention to the provisions of Sec. 35(3) and submitted the revenue has no right to disallow the expenditure with....
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....usiness of Bio-technology R&D and the assessee had expended such amount. 5.2 However, Ld. AO held that assessee did not have any income relatable to Bio-technology R&D and the unit was in fledgling stage and no business was carried out. The cardinal principle laid down in the charging Section 28 is that the business should have been carried on by the assessee before an expense could be allowed to the assessee. The expenses incurred till setting up of business would be capital expenditure only and would not attain the character of revenue. Further, the expenses were incurred in setting the profit earning machinery in motion. As per the Act, expenses of revenue nature incurred during running of business and generation of income could only ....
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....efore, the claim would be admissible. The nature of expenses so incurred has been tabulated in para-12 of the impugned order. 6.3 However, rejecting the plea of the assessee, Ld. CIT(A) held that as per Explanation to Sec.35(1)(i) where the expenditure relate to periods before the commencement of the business, expenses incurred during the three years immediately preceding the commencement of the business, would be allowable in the year of commencement of business. Further, the extent of allowance is to be certified by the prescribed authority and it has to state that the expenditure has been incurred on such scientific research. Therefore, both the language of the main clause as well as the proviso clearly shows that for claiming the exp....
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....sessee is in further appeal before us. Our findings and Adjudication 7. From the fact, it emerges that the assessee is engaged in repairs and maintenance activities. The assessee diversified its business line and intended to engaged in the area of bio-technology products. For the same, it carried out research and incurred expenses during the year. For the same, the assessee obtained recognition for in-house R&D and started carrying out R&D activities of bio-tech products. The approval was given by DSIR vide approval letter dated 20.07.2012 (page 8 of paper book dated 25.11.2021). This approval has not been considered by lower authorities. As per this letter, the department has decided to accord recognition to the in-house R&D un....
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....ed long back in the year 1996 and its business had already commenced and it is not the case that the business had not commenced. 10. The provisions of Sec.35(1) provide for deduction of expenditure on scientific research which is laid out or expended on scientific research related to business. The explanation provide that where such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973) on payment of any salary (as defined) to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately prec....
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....he concerns must be common as reflected in the balance sheet of the company. In other words, there may be several permutations and combinations that may arise for determining whether the expenditure is revenue or capital and each case must, of course, be dealt with on the broad principles that have been accepted by the Courts. Finally, Hon'ble Court held that since the control over the two units is in the hands of the same management and administration and there was unity of control leading to an inter-connection, inter-dependence and inter-lacing of the two ventures such that it can be said that the fuel injection equipment project is only an extension of the existing business of the assessee and, therefore, the expenditure incurred by the....