DCIT 2(2), MUMBAI vs. TRACTOR ENGINEERS LTD, MUMBAI

These two appeals are filed by the Revenue against different orders of the Ld. CIT(A)-6, Mumbai pertaining to assessment years 2009-10 & 2010-11. Since issue in both these appeals is common, they were heard together and disposed of by this common order for the sake of convenience.

The only issue in both these appeals is that the Ld. CIT(A) erred in deleting the disallowance made by the Assessing Officer on account of Research and Development expenses.

Briefly stated the facts are that the assessee is engaged in the business of manufacture and sale of under carriage parts filed its return of income on 29.9.2009 and 29.9.2010 declaring loss of Rs. 24,77,19,621/- and Rs. 81,47,506/- for the Assessment Years 2009- 10 and 2010-11 respectively. The assessments were completed u/s. 143(3) and while completing the assessments, the Assessing Officer disallowed R&D expenses of Rs. 69,17,917/- and Rs. 44,33,000/- claimed by the assessee in the Assessment Years 2009-10 and 2010- 11 observing that there is no evidence on record to show that the R&D activities were carried out by the assessee and no material adduced by the assessee in respect of R&D expenses.

On appeal, the Ld. CIT(A) after considering the submissions of the assessee and the evidences furnished therein allowed the claim of the assessee. The Ld. Departmental Representative submits that assessee has not furnished any details in respect of the expenditure claimed by the assessee towards R&D expenses. Thus, the Assessing Officer has rightly disallowed the claim of the assessee. He strongly placed reliance on the orders of the Assessing Officer in disallowing the R&D expenses.

The Ld. Counsel for the assessee submits that all the details regarding R&D expenses were filed in the course of assessment proceedings before the Assessing Officer. He submits that the complete details of expenditure incurred towards R&D expenses were filed before the Assessing Officer. He further submits that certificate of registration of design dated 15.12.2008 issued by Government of India in respect of design submitted to evidence the assessee’s claim regarding the R&D activities carried on by the assessee. It is further submitted that detailed note and nature of activities carried out alongwith supporting vouchers and payments incurred for R&D are submitted before the Assessing Officer. The Ld. Counsel for the assessee however submits that the Assessing Officer disallowed the claim of the assessee made u/s. 35(1) towards R&D expenses completely ignoring the details and evidences furnished by the assessee.

We have heard the rival submissions and perused the orders of the authorities below. The claim of the assessee was basically denied by the Assessing Officer for want of documentary evidences to show that the assessee has incurred expenditure for R&D activities. The Ld. CIT(A) considering the submissions and evidences furnished before him allowed the claim of the assessee. The Revenue in its appeal challenged the order of the Ld. CIT(A) in allowing the claim of the assessee. In the grounds of appeal, the Revenue is challenging that the R&D expenses were allowed by the Ld. CIT(A) without appreciating that the assessee failed to furnish supporting documentary evidences to establish that the R&D activities were carried out by it during the year.

In the result, both the appeals filed by the revenue are allowed for statistical purpose.