ACIT 14(1)(2), MUMBAI vs. DOW AGRO SCIENCES INDIA P.LTD, MUMBAI

This appeal filed by the Revenue on 10.4.2015 is against the order of the CIT (A)-22, Mumbai for the assessment year 2002-2003. In this appeal, Revenue raised the following effective ground which reads as under:- “On the facts and in the circumstances of the case and in law, the CIT (A) erred in treating the capital expenditure on research and development of Rs. 93,41,333/- as revenue expenditure without appreciating the fact that the expenditure spend for enduring benefit to the assessee and it is a depreciable asset.”

In this appeal, Revenue is aggrieved with the relief granted by the CIT (A) in respect of „Research and Development‟ (R&D) expenses of Rs. 93.41 lakhs. Briefly stated relevant facts of the case are that the assessee is engaged in the business of „manufacturing and trading of pesticides, agro chemicals and seeds‟. Assessee filed the return of income declaring the loss at Rs. 4,17,19,058/-. Assessment was completed u/s 143(3) of the Act, wherein AO made certain disallowance and disallowance of Rs. 93.41 lakhs is one of such disallowance, which is the subject matter of appeal before the Tribunal. In the return of income, assessee claimed the said expenditure of Rs. 93.41 lakhs as „allowable expenditure‟ and in the scrutiny assessment, AO treated the same as „capital expenditure‟ and added to the income of the assessee. Aggrieved, assessee carried the matter in appeal before the first appellate authority. 3. During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) granted relief to the assessee by treating the said amount of Rs. 93.41 lakhs as revenue expenditure as claimed by the assessee. While granting relief, CIT (A) relied on his order in the assessee‟s own case for the AY 2005-06. The contents of paras 3.4 to 3.7 of the CIT (A)‟s order (page 4 of the CIT (A)‟s order) are relevant in this regard. As per the contents of para 3.6, CIT (A) heavily relied on the order of the CIT (A) for the AY 2005-06 and extracted the contents of para 7.4 of that order of the CIT (A). Aggrieved with the said decision of the CIT (A), Revenue is in appeal before the Tribunal by raising the above mentioned ground. 4. During the proceedings before us, Ld Counsel for the assessee filed an order of the Tribunal in assessee‟s own case vide for the AY 2005-06 and others, dated 20.9.2016 and submitted that the relief granted by the CIT (A) in that year has attained finality. Bringing our attention to the grounds raised