The Tax PublishersITA Nos. 1516 to 1521/Bang/2019
2021 TaxPub(DT) 0785 (Bang-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Where assessee had treated the R&D expenditure as capital expenditure by showing it as intangible assets in its balance sheet, however, it was not known whether intangible assets shown by assessee in its balance sheet included revenue expenditure or not? Accordingly, issue was remanded for proper classification of R &D expenditure which was in the nature of revenue expenditure or capital expenditure.

Capital or revenue expenditure - R&D expenses incurred for modification/adaption of existing products - -

Assessee claimed deduction of R & D expenses incurred for modification/adaption of existing products. Assessee capitalized this expenditure in books of account as intangible asset and, therefore, same was disallowed by AO. Assessee's case was that expenses though accounted as intangible asset under development in books of account, were to be allowed as deductible under section 37(1). Held: Assessee had treated the R&D expenditure as capital expenditure by showing it as intangible assets in its balance sheet, however, it was not known whether intangible assets shown by assessee in its balance sheet included revenue expenditure or not? Accordingly, issue was remanded for proper classification of R &D expenditure which was in the nature of revenue expenditure or capital expenditure. Thereafter, portion of revenue expenditure on R & D to be allowed as business expenditure years, on the other hand, R & D expenditure which was in the nature of capital expenditure was to be disallowed and depreciation to be granted.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2011-12 to 2015-16



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