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Facts
The assessee filed an appeal against the order of the Addl. CIT(A) confirming the disallowance of Rs.12,11,894/- under Section 35(1)(iv) for scientific expenditure and Rs.1,29,297/- for reimbursement of customs duty.
Held
The Tribunal held that the disallowance of scientific expenditure was erroneous as it was revenue in nature and should have been allowed under Section 37. The issue regarding customs duty reimbursement was remanded for verification.
Key Issues
Whether the scientific expenditure claimed is revenue in nature and allowable under Section 37, and the allowability of customs duty reimbursement.
Sections Cited
250, 35(1)(iv), 37
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : This appeal filed by the assessee is directed against the order of the Addl/JCIT(A)-11, Mumbai (hereinafter “ Addl. CIT(A)”) dated 09.08.2024 relevant to the assessment year 2017-18. The grounds of appeal
raised by the assessee are as under:
1. 1. For that the order of the Ld. Additional / Joint Commissioner of Income-Tax (Appeals), NFAC [JCIT(A), for short], under section 250 of the Income-Tax Act, 1961 (Act) dated 09.08.2024 is erroneous, bad in law, and was passed ignoring the facts and merits of the case.
2.1. For that the Ld. JCIT(A) erred in confirming the disallowance of Rs.12,11,894/-under section 35(1)(iv) of the Act, by holding that the expenditure relating to the disallowance relates to revenue items. 2.2. For that the Ld. JCIT(A) ought to have allowed the impugned expenditure u/s 37 of the Act, inasmuch as the same is of revenue nature and relates to business of the appellant. 3.1. For that the Ld. JCIT(A) erred in confirming the disallowance of Rs.1,29,297/- attributable to reimbursement of customs duty paid to M/s. Aramex India P. Ltd. by the appellant.
For these and other additional grounds that may be adduced before or at the time of hearing, the appellant prays that the appeal be allowed.
Ground Nos.1 & 4 are general in nature, therefore no adjudication is required.
Ground No.2 is against the confirmation of the disallowance of Rs.12,11,894/- u/s. 35(1)(iv) of the Act made by the A.O, holding that the scientific expenditure claimed is revenue expenditure.
4. The Ld. Authorized Representative (A.R) of the assessee before us has submitted that the A.O and Ld. Addl. CIT(A), while disallowing the claim of scientific expenditure u/s 35(1)(iv) of the Act as not capital in nature has held the expenditure revenue expenditure, therefore the same should have been allowed u/s. 37 of the Act.
The Ld. Departmental Representative has supported the order of Ld. Addl. CIT(A).
We have heard the rival submissions, and perused the materials available on record. We find that the A.O has disallowed the claim of scientific expenditure u/s 35(1)(iv) of the Act for the reason that it is neither in capital in nature nor for scientific purpose has held it as revenue expenditure. Once the A.O/Addl. CIT(A) have the business expenditure as revenue, the same is eligible to be allowed u/s 37 of the Act. We, therefore direct the A.O to delete the addition and allow the same u/s 37 of the Act.
Ground No.3 is against confirmation of disallowance of Rs.1,29,297/-, attributable to the reimbursement of customs duty paid to M/s. Aramex India P. Ltd. by the assessee. The A.O on the basis of reconciliation of custom duty payment found that an amount Rs.1,29,297/- was not reconciled, and therefore made the addition of Rs.1,29,297/-. The assessee explained that this amount was paid by a third party. On appeal, the Ld. Addl. CIT(A) confirmed the addition for the reasons that assessee failed to prove that the expenditure was on account of customs duty paid by the third party.
We have heard the rival submissions, and perused the materials available on record. The assessee has submitted that custom duty payment was not reconciled because custom duty of Rs.1,29,297/- was paid by M/s. Aramex India P. Ltd., which was reimbursed by the assessee. We find that assessee’s claim needs verification by the A.O, therefore remand the matter back to the file of the A.O for necessary verification.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced on 04th April, 2025.