Expenditure incurred for developing new product when abandoned it is a deductible expenditure

CA V.K. Subramani

Every business needs to adopt to various market situations, be it changing choice of customers or technology upgradation or compulsion necessitated by competitors' activity. To skim the market, product innovation is a must. Human beings have taken challenges and today both technology and market demand work in tandem to bring the best out of innovators.

In the context of income-tax, a company may incur expenditure to develop a new product. It may range from pin to plane. Introduction of new product may be research on medicines and/or could also be software. In Pr. CIT v. Trigent Software Ltd. 2022 TaxPub(DT) 7832 (Bom-HC) : (2023) 457 ITR 765 (Bom) the assessee incurred Rs.7.09 crore towards development of a new product. The assessee was subjected to reassessment proceedings. The assessee submitted that it was an expenditure incurred for development of a new product which was ultimately abandoned. The entire amount which was claimed as expenditure was added to the total income of the assessee in reassessment.