The ITA allows the deduction of income tax


The Income Tax Appeal Tribunal (ITAT) in Pune has ruled that expenses incurred for product testing and validation are of a tax nature to allow a deduction under the provisions of the Income Tax Act 1961. ‘income tax.

During the previous year relevant to the assessment year under review, the assessee-appellant, Mahale Behr India Pvt. Ltd, incurred an expenditure of Rs.2,45,34,542/- for testing and validation, of which an amount of Rs.1,02,94,971/- was recovered from customers, and the balance of development expenditure of revenue of Rs. 1,42,39,571/- was claimed as revenue expenditure. However, the valuation agent had treated the same as a capital expenditure and had allowed depreciation on the basis that the expense had been incurred to improve existing products.

The bench of the tribunal consisting of Accountant member Shri Inturi Rama Rao and Judicial member Shri Sonjoy Sarma observed that the true nature of the expense had not been questioned by the valuation officer.

Considering that the expenses were incurred solely for the upgrading of existing products, the Tribunal concluded that “without question, the appellant has been in the business of manufacturing automotive components since 1999. As a result of these expenses, no new asset has not been created nor has a new product actually materialized. The expenditures were incurred solely for the purpose of facilitating the existing automotive component manufacturing business and enabling management to conduct business operations more efficiently and productively. The Honorable Supreme Court in (i) Empire Jute Co. Ltd. vs. CIT, 124 ITR 1 and (ii) Alembic Chemical Works Co. Ltd. vs. CIT, 177 ITR 377 (SC) held that expenses incurred on the existing business incurred in the course of the existing business.

Shri RD Onkar appeared for the assessee.

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Mahale Behr India Pvt. Ltd vs. DCIT

Counsel for the Appellant: Shri RD Onkar

Counsel for the Respondent: Shri Sunil Kumar



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