CIT CHANDIGARH vs. M/S RECORDERS AND MEDICARE PVT. LTD.

To be referred to the Reporters or not?

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 the Income-tax Act, 1961 (for brevity, ‘the Act’), is directed against the concurrent findings recorded by the CIT(A) and the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh (for brevity, ‘the Tribunal’), in their orders dated 18.2.2009 and 23.6.2009 (A-2 & A-3 respectively). The assessee-respondent had declared its income in respect of assessment 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 Assessing Officer noticed that the expenditure amounting to Rs. 1,60,21,364/- from Chandigarh Unit and Rs. 83,99,177/- from Baddi Unit, had been deferred as R&D expenditure in the computation chart. The assessee-respondent claimed that their R&D Department is duly recognized by the Ministry of Science and Technology, Government of India since 1980, which is renewed every three years after considering the previous performance. The assessee-respondent has been following the mercantile system of accounting and their stand as noted by the Tribunal is that since the expenditure was incurred on scientific research during the relevant period, approval from the Ministry of Science and Technology was required. It has also claimed that such expenditure has to be regarded as revenue expenditure under Section 35(1) of the Act. The certificate of renewal from the Ministry of Science and Technology was produced before the 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 the CIT(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, CIT v. Keen Pesticides (P) Ltd., 97 Taxman 306 (Kar); CIT v. Yamuna Digital Electronics (P) Ltd., 238 ITR 717 (A.P.); CIT v. Sunderam Fastners Ltd., 233 ITR 455 (Mad.); and Tube Investment of India Ltd. v. CIT, 125 Taxman 421 (Mad.). The genuineness of the expenditure has not been disputed by the revenue. Accordingly, no infirmity has been found in the order directing to allow 100% expenditure in the assessment year 2005-06. Having heard learned counsel we are of the view that apart from the findings of fact recorded by the CIT(A) and the Tribunal, the genuineness of the expenditure has not been doubted. It has also been found that the assessee- respondent has been following mercantile system of accounting and the registration certificate from the Ministry of Science and Technology further authenticate their expenditure. There is, thus, no question of law much less a substantive question of law, warranting admission of appeal, arises for determination of this Court. Accordingly, the appeal fails and the same is dismissed. (M.M. KUMAR) JUDGE (JITENDRA CHAUHAN) April 29, 2010 JUDGE Pkapoor