Tribunal allows R&D deduction, dismisses Revenue's contentions on disallowances and depreciation rate. &D

The Tribunal allowed the assessee's claim for weighted deduction on R&D expenditure, directing the Assessing Officer to allow the balance of additional depreciation. Disallowances on additional depreciation for electrical installation and logistic service charges were upheld. The Tribunal dismissed the Revenue's contentions on proportionate disallowance under Section 10B and depreciation rate on UPS. The assessee's appeal was partly allowed, while the Revenue's appeal was dismissed.

---

---

Issues Involved:
1. Disallowance of weighted deduction under Section 35(2AB) of the Income Tax Act.
2. Disallowance under Section 14A of the Act.
3. Non-adjudication of an issue relating to computation of deduction under Section 10B.
4. Disallowance of carry forward additional depreciation.
5. Disallowance of additional depreciation on electrical installation.
6. Proportionate disallowance of deduction claimed under Section 10B.
7. Disallowance under Section 40(a)(i) on logistic service charges.
8. Depreciation rate on UPS.

Issue-wise Detailed Analysis:

1. Disallowance of Weighted Deduction Under Section 35(2AB):
The assessee was aggrieved by the disallowance of a claim for weighted deduction on R&D expenditure of Rs. 28,33,318/-. The claim was curtailed by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals) on the grounds that DSIR approval was only for Rs. 10,11,02,517/-. The Tribunal, following its own decision in the assessee’s case for AY 2009-2010, allowed the claim, stating that the actual expenditure incurred for scientific research should be allowed as deduction subject to compliance with Rule 6. The genuineness of the expenditure was not in dispute.

2. Disallowance Under Section 14A:
The assessee did not press this ground. Consequently, it was dismissed as not pressed.

3. Non-adjudication of Issue Relating to Computation of Deduction Under Section 10B:
The assessee did not address any arguments on this ground, and it was not included in the chart of issues submitted. Therefore, it was dismissed as not argued.

4. Disallowance of Carry Forward Additional Depreciation:
The assessee claimed additional depreciation for plant and machinery acquired in the previous year, arguing that only 50% was allowed initially and the balance 50% should be allowed in the current year. The Tribunal, relying on the jurisdictional High Court’s decision in Brakes India Ltd vs. DCIT, directed the Assessing Officer to allow the claim of the balance additional depreciation of Rs. 1,02,18,216/-.

5. Disallowance of Additional Depreciation on Electrical Installation:
The claim for additional depreciation on an air circulator was disallowed by lower authorities, considering it as electrical installation. The Tribunal found no evidence to classify the air circulator as plant and machinery and upheld the disallowance.

6. Proportionate Disallowance of Deduction Claimed Under Section 10B:
The Revenue was aggrieved by the deletion of proportionate disallowance of deduction under Section 10B, arguing that R&D expenses should be charged to the unit claiming the deduction. The Tribunal, following the Apex Court’s affirmation of the Karnataka High Court’s decision in CIT vs. Yokogawa India Ltd., held that the deduction under Section 10B is to be computed independently for the eligible undertaking and dismissed the Revenue’s ground.

7. Disallowance Under Section 40(a)(i) on Logistic Service Charges:
The Revenue contended that the assessee should have deducted tax on logistic service charges paid to a non-resident. The Tribunal, referring to its earlier decision in the assessee’s case for AY 2007-08 to 2009-10, upheld the Commissioner of Income Tax (Appeals)’s deletion of the disallowance, noting that the services were rendered outside India and the non-resident had no permanent establishment in India.

8. Depreciation Rate on UPS:
The Revenue challenged the allowance of depreciation at 60% on UPS. The Tribunal, referring to its decision in the assessee’s case for AY 2007-08 to 2009-10, upheld the Commissioner of Income Tax (Appeals)’s direction to allow depreciation at 60%, considering UPS as part of the computer system.

Conclusion:
The appeal of the assessee was partly allowed, and the appeal of the Revenue was dismissed.

---