Can
the expenditure incurred by the assessee on techno-economic feasibility report
for the manufacture of a new product be eligible for deduction under section
35D?
Case : CIT
v. Tamil Nadu Road Development Co. Ltd. (2009) 316 ITR 380 (Mad.)
Section
: 35D of the Indian Income-Tax Act ,1961
The assessee-company engaged in
the business of implementation of the industrial policy and creation of
infrastructure facilities in the State of Tamil Nadu on a commercial framework
claimed deduction in respect of the expenditure incurred on account of
techno-economic feasibility report for the manufacture of new products. The
Assessing Officer disallowed the deduction treating it as a capital
expenditure. The Commissioner (Appeals) allowed the assessee's claim on the
finding that the expenses incurred were covered under section 35D of the Income-tax Act, 1961,
as the expenses were incurred to find out new ideas by conducting test studies and pilot studies
for improving the existing business and, therefore, could not be treated as
capital expenditure. This was confirmed by the Tribunal and the High
Court.
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