Tribunal grants relief on disallowances, allows deductions for R&D expenses and business loss

The tribunal partly allowed the assessee's appeals on various disallowances, including expenditure under section 35D, revenue expenditure treated as preoperative, loan processing fees, and depreciation on a let-out building. The tribunal also allowed deductions for weighted deduction on R&D expenses and business loss on the sale of a subsidiary. Additionally, the tribunal dismissed the revenue's appeals and ruled against the revision under section 263, remanding specific issues back to the assessing officer for fresh consideration.

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Issues Involved:
1. Disallowance of expenditure under section 35D.
2. Disallowance of revenue expenditure as preoperative in nature.
3. Disallowance of loan processing fee and bank charges.
4. Disallowance under section 14A.
5. Disallowance of depreciation on let-out building.
6. Disallowance of weighted deduction under section 35(2AB).
7. Disallowance of business loss on sale of subsidiary.
8. Addition of foreign exchange gain.
9. Disallowance of loss on forward exchange contracts.
10. Addition based on Form 26AS.
11. Disallowance of prepaid expenses.
12. Disallowance of commission.
13. Transfer pricing issues.
14. Deduction under section 80IA.
15. Jurisdiction under section 263.

Issue-wise Detailed Analysis:

1. Disallowance of expenditure under section 35D:
The appellant claimed expenditure under section 35D for issue expenses and increase in authorized capital, which was disallowed by the AO based on precedents. The tribunal remanded the issue back to the AO for fresh consideration, following its earlier decision in the appellant's case for A.Y. 2007-08.

2. Disallowance of revenue expenditure as preoperative in nature:
The appellant incurred expenses for the expansion of its business, which were disallowed by the AO as preoperative. The tribunal found that the expenses were revenue in nature and related to the expansion of an existing business, not a new one. The tribunal allowed the deduction under section 37.

3. Disallowance of loan processing fee and bank charges:
The appellant's claim for loan processing fees and bank charges for setting up a new plant was disallowed as preoperative. The tribunal allowed the deduction, treating the expenses as revenue in nature.

4. Disallowance under section 14A:
The AO disallowed an amount under section 14A, which was reduced by the DRP. The appellant claimed double disallowance, and the tribunal remanded the issue to the AO for verification.

5. Disallowance of depreciation on let-out building:
The appellant's claim for depreciation on a let-out building was treated as income from house property by the department. The tribunal dismissed the appellant's ground, following its earlier decision for A.Y. 2009-10.

6. Disallowance of weighted deduction under section 35(2AB):
The appellant's claim for weighted deduction on R&D expenses incurred outside India was disallowed. The tribunal allowed the deduction, holding that the expenses were related to in-house R&D activities.

7. Disallowance of business loss on sale of subsidiary:
The appellant claimed a business loss on the sale of its subsidiary, which was disallowed by the AO. The tribunal allowed the claim, holding that the investment was made for commercial purposes and not for accretion of investment.

8. Addition of foreign exchange gain:
The AO added unrealized foreign exchange gain to the total income. The tribunal deleted the addition, noting that the same amount was offered to tax in the subsequent year.

9. Disallowance of loss on forward exchange contracts:
The AO disallowed the loss on forward exchange contracts as notional. The tribunal allowed the deduction, holding that the loss was a business loss and not notional.

10. Addition based on Form 26AS:
The AO added an amount based on Form 26AS, which the appellant claimed was offered to tax in the subsequent year. The tribunal directed the AO to verify and delete the addition if it was already taxed.

11. Disallowance of prepaid expenses:
The AO disallowed prepaid expenses as not related to the income of the year. The tribunal allowed the deduction, holding that the expenses were revenue in nature and did not create any capital asset.

12. Disallowance of commission:
The AO disallowed a provision for commission as unascertained liability. The tribunal dismissed the appellant's ground, following its earlier decision for A.Y. 2009-10.

13. Transfer pricing issues:
The appellant challenged the transfer pricing adjustments made by the AO. The tribunal remanded the issues related to the exchange rate, corporate guarantee, and provision of IT services to the AO for fresh consideration.

14. Deduction under section 80IA:
The appellant's claim for deduction under section 80IA was not made in the return. The tribunal directed the AO to examine the claim on merits.

15. Jurisdiction under section 263:
The Pr. CIT revised the draft assessment order under section 263. The tribunal quashed the revision, holding that the draft assessment order cannot be revised under section 263.

Conclusion:
The tribunal partly allowed the appeals of the assessee for statistical purposes, dismissed the appeals of the revenue, and allowed the appeal against the revision under section 263. The matters were remanded to the AO for fresh consideration on specific issues.

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