Just because benefits of research may have enduring benefit, expenditure cannot be considered as capital in nature

 There is no dispute with the fact that assessee has commenced business activity during the year. As seen from the nature of the expenditure claim by assessee under the head research expenses, the entire expenditure pertains to use of raw material, freight and other expenditure which are in revenue field and there is no capital expenditure involved nor any capital asset was purchased as part of these expenses. Just because the benefits of research may have some enduring benefit, the expenditure cannot be considered as capital in nature. Following the principles laid down by the Supreme Court in the case of Empire Jute Co. Ltd, vs. CIT (supra), we hold that this expenditure is revenue in nature. Even otherwise once it is established that the expenditure is for the purpose of research, provisions of section 35 with reference to expenditure on scientific research are also equally applicable and alternately expenditure is allowable as such.

INCOME TAX APPELLATE TRIBUNAL, MUMBAI

ITA No.2420/Mum/2010

(Assessment year: 2006-07)

Scientific Precision (P) Ltd Vs  ACIT

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