The Commissioner Of Income Tax-I, Chandigarh v. M/S Essen Deinki, Chandigarh

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 280 of 2012 Date of decision: 09.01.2013 The Commissioner of Income Tax-I, Chandigarh ...Petitioner Versus M/s Essen Deinki, Chandigarh ..Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI Present:- Ms. Urvashi Dhugga, Advocate for the petitioner. HEMANT GUPTA, J. (Oral) The Revenue is in appeal under Section 260A of the Income TaxAct, 1961 (for short 'the Act') against the order dated 24.05.2012 passed bythe Income Tax Appellate Tribunal, Chandigarh Bench 'A' Chandigarh (forshort 'the Tribunal) in ITA No. 704/CHD/2010 for the assessment year2000-01. The Revenue has framed the following substantial question oflaw:- “Whether ITAT was right in law as well as on facts in allowing theResearch & Development expenses where items for which Research& Development had been claimed as capital expenditure and thesame were already developed and sold by the assessee?” The assessee claimed that a sum of Rs.45,57,784/- is capitalexpenditure incurred on Research and Development during the relevantassessment year. The assessee furnished the information that such expenditure was incurred for development of 14 Pin Double Decker RelaySocket and for 48x96 panel meter. The Assessing Officer found that sucharticles were already being sold by the assessee, therefore, it was found thatthe Research and Development expenditure claimed by the assessee is notallowable expenditure under Section 35(1)(iv) of the Act and consequentlymade addition to the income of the assessee. The said order of the Assessing Officer was set aside by theCommissioner of Income Tax on 26.03.2010. The said order has beenaffirmed by the Tribunal vide order dated 24.05.2012. The Tribunal observed that development of new project throughResearch is a continuous process because technology is changing very fast .Thus, even if assessee has developed 14 Pin Double Decker Relay Socketand 48x96 panel meter but still the prototype may require furtherimprovement. Mere selling of units will not show that the assessee alreadyhas the technology of the same product. Consequently, the order of theCommissioner of Income Tax was upheld. Learned counsel for the appellant has vehemently argued that theproduct on which the assessee has claimed capital expenditure was alreadybeing marketed, therefore, such expenditure has been rightly disallowed bythe Assessing Officer and that such finding has been set aside without anyadequate reasoning. We have heard learned counsel for the appellant and do not findany merit in the present appeal. It could not be disputed that the assesseehas carried out Research and Development activities. The entire basis ofargument is that the product for which the assessee has claim expenditure during the course of assessment proceedings was already being marketed. We find that the capital expenditure incurred on the Research andDevelopment activities is a continuous process and even if a specificproduct has been sold at one stage, but still the developments in the productcan be carried out. It is finding of fact recorded by the Learned Tribunal thatthe assessee has incurred expenditure for research and developmentactivities. Consequently, we find that no substantial question of law arisesfor consideration by this Court in the present appeal. The same isaccordingly dismissed. (HEMANT GUPTA) JUDGE ( RITU BAHRI ) JUDGE January 09, 2013G.Arora/Vimal