2016 (10) TMI 1247 - AT - Income Tax

Tribunal rulings on Revenue's appeal for 2008-09, assessee's appeals for 2008-09 to 2010-11

The Deputy Commissioner of Income Tax, Corporate Circle 3 (1), Chennai Versus M/s. Tractors and Farm Equipments Ltd. And M/s. Tractors and Farm Equipments Ltd. Versus The Assistant Commissioner of Income Tax, Corporate Circle 3 (1), Chennai

The Deputy Commissioner of Income Tax, Corporate Circle 3 (1), Chennai Versus M/s. Tractors and Farm Equipments Ltd. And M/s. Tractors and Farm Equipments ... Issues Involved:1. Condonation of delay in filing the appeal by the Revenue.2. Disallowance under section 14A of the Income Tax Act, 1961.3. Disallowance of bad debt written off.4. Restriction of the claim of R&D expenditure under section 35(2AB) of the Act.Issue-wise Detailed Analysis:1. Condonation of Delay in Filing the Appeal by the Revenue:The Revenue's appeal was filed late by three days due to the records being mixed up with other files. The Tribunal condoned the delay, noting that the assessee did not object seriously to the condonation request.2. Disallowance under Section 14A of the Income Tax Act, 1961:The core issue was whether the disallowance under section 14A should be restricted to 2% of the exempted income or computed as per Rule 8D. The Tribunal observed that the assessee earned dividend income exempt under section 10(34) but did not exclude any related expenditure. The Assessing Officer disallowed Rs. 1,46,62,697/- as per Rule 8D, while the CIT(A) restricted it to 2% of the dividend income. The Tribunal cited the Bombay High Court's decision in Godrej & Boyce Mfg. Co. Ltd. v. DCIT, which held that Rule 8D applies from the assessment year 2008-09. Consequently, the Tribunal restored the Assessing Officer's order and allowed the Revenue's appeal.For the assessment years 2009-10 and 2010-11, the Tribunal upheld the Assessing Officer's disallowance under Rule 8D, following the precedent set in M/s. Lakshmi Ring Travellers v. ACIT. The Tribunal dismissed the assessee's appeals for these years.3. Disallowance of Bad Debt Written Off:For the assessment year 2008-09, the assessee wrote off Rs. 16,73,43,000/- as bad debt from its sister concern, M/s. Alpump Limited. The Assessing Officer disallowed this, arguing that the advances were not given in the normal course of business and there was no business exigency. The CIT(A) upheld this disallowance, referencing section 36(1)(vii) and section 36(2) of the Act, and the Madhya Pradesh High Court's decision in Binodiram Balchand & Co. v. CIT. The Tribunal agreed with the CIT(A), noting that the assessee failed to show efforts made for recovery and did not meet the conditions under section 36(2).For the assessment years 2009-10 and 2010-11, the Tribunal dismissed the assessee's appeals on similar grounds, disallowing bad debts of Rs. 6,42,23,108/- and Rs. 1,15,00,000/- respectively.4. Restriction of the Claim of R&D Expenditure under Section 35(2AB) of the Act:For the assessment year 2010-11, the assessee claimed Rs. 26,70,95,840/- under section 35(2AB) for R&D expenditure. The Assessing Officer restricted this to Rs. 25,95,58,340/- as allowed by DSIR, disallowing the balance. The CIT(A) upheld this, and the Tribunal agreed, citing section 35(2AB)(2), which prohibits claiming the same expenditure under any other provision once claimed under section 35(2AB).Conclusion:The Tribunal allowed the Revenue's appeal for the assessment year 2008-09 and dismissed the assessee's appeals for the assessment years 2008-09 to 2010-11. The decisions were based on the application of Rule 8D for disallowance under section 14A, the non-fulfillment of conditions under section 36 for bad debt write-offs, and the statutory restriction on claiming R&D expenditure under multiple provisions.