Commissioner Of Income Tax-I, Chandigarh v. M/S Recorders & Medicare Systems (P) Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 48 of 2010 (O&M) Date of Decision: April 29, 2010 Commissioner of Income Tax-I, Chandigarh ..Appellant Versus M/s Recorders & Medicare Systems (P) Ltd. ...Respondent CORAM:HON'BLE MR. JUSTICE M.M. KUMARHON’BLE MR. JUSTICE JITENDRA CHAUHANPresent:Ms. Urvashi Dhugga, Advocate,for the revenue-appellant. 1.To be referred to the Reporters or not?2.Whether the judgment should be reported in the Digest? M.M. KUMAR, J. The instant appeal by the revenue, filed under Section 260-A of theIncome-tax Act, 1961 (for brevity, ‘the Act’), is directed against the concurrentfindings recorded by the CIT(A) and the Income Tax Appellate Tribunal,Chandigarh Bench ‘B’, Chandigarh (for brevity, ‘the Tribunal’), in their ordersdated 18.2.2009 and 23.6.2009 (A-2 & A-3 respectively). The assessee-respondent had declared its income in respect ofassessment year 2005-06at Rs. 47,05,545/- in its return filed on 31.10.2005,which was processed as such. During the scrutiny proceedings, the AssessingOfficer noticed that the expenditure amounting to Rs. 1,60,21,364/- fromChandigarh Unit and Rs. 83,99,177/- from Baddi Unit, had been deferred asR&D expenditure in the computation chart. The assessee-respondent claimedthat their R&D Department is duly recognized by the Ministry of Science andTechnology, Government of India since 1980, which is renewed every threeyears after considering the previous performance. The assessee-respondent hasbeen following the mercantile system of accounting and their stand as noted bythe Tribunal is that since the expenditure was incurred on scientific researchduring the relevant period, approval from the Ministry of Science and Technology was required. It has also claimed that such expenditure has to beregarded as revenue expenditure under Section 35(1) of the Act. The certificateof renewal from the Ministry of Science and Technology was produced beforethe CIT(A) who has duly discussed the provisions of Section 35(1) of the Act.The Tribunal expressed its agreement with the findings and conclusions of theCIT(A) holding that the expenditure was made for the purposes of its business.The Tribunal has relied upon four judgments of various High Court, namely,CITv. Keen Pesticides (P) Ltd., 97 Taxman 306 (Kar); CITv. YamunaDigital Electronics (P) Ltd., 238 ITR 717 (A.P.); CITv. Sunderam FastnersLtd., 233 ITR 455 (Mad.); andTube Investment of India Ltd.v. CIT, 125Taxman 421 (Mad.). The genuineness of the expenditure has not beendisputed by the revenue. Accordingly, no infirmity has been found in the orderdirecting to allow 100% expenditure in the assessment year 2005-06. Having heard learned counsel we are of the view that apart fromthe findings of fact recorded by the CIT(A) and the Tribunal, the genuineness ofthe expenditure has not been doubted. It has also been found that the assessee-respondent has been following mercantile system of accounting and theregistration certificate from the Ministry of Science and Technology furtherauthenticate their expenditure. There is, thus, no question of law much less asubstantive question of law, warranting admission of appeal, arises fordetermination of this Court. Accordingly, the appeal fails and the same isdismissed. (M.M. KUMAR)JUDGE April 29, 2010 (JITENDRA CHAUHAN) JUDGE Pkapoor