Tribunal rules in favor of assessee, dismissing revenue's appeal. Order pronounced July 13, 2016.

The Tribunal allowed the appeal filed by the assessee and dismissed the appeal filed by the revenue, deciding all issues in favor of the assessee. The order was pronounced on 13th July, 2016.

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Issues Involved:
1. Reduction in Quantum of MAT Credit U/sec 115JAA.
2. Disallowance of Commission U/sec.9 r.w.s. 195 and Sec 40(a)(i).
3. Allowance of Depreciation.
4. Deletion of Disallowance u/s.14A r.w. Rule 8D.
5. Deletion of Disallowance u/s.35 in respect of Capital Expenditure on Research and Development.

Detailed Analysis of the Judgment:

Issue No. 1: Reduction in Quantum of MAT Credit U/sec 115JAA
The assessee argued that the CIT(A) erred in computing MAT credit available for set-off U/sec 115JAA by excluding "Education Cess" and "Surcharge" from the tax credit. The assessee cited the Supreme Court case of CIT Vs. K. Srinivasan and other judgments to support that education cess and surcharge are part of "tax" under Sec 2(43) r.w.Sec 4 of the Income Tax Act. The Tribunal found that income tax includes surcharge and educational cess for giving credit u/s.115JAA of the Act, as supported by the law in CIT Vs. Vacment India. The Tribunal directed the Assessing Officer to allow the MAT credit against the tax liability of the assessee, including surcharge and educational cess, thus deciding the issue in favor of the assessee.

Issue No. 2: Disallowance of Commission U/sec.9 r.w.s. 195 and Sec 40(a)(i)
The assessee challenged the disallowance of commission paid to foreign agents, arguing that the payments were for services rendered outside India and were not liable to TDS provisions of Sec.9 or Sec. 195. The Tribunal noted that the Assessing Officer did not differentiate between professional services and commission paid for exports. The Tribunal cited relevant case laws, including CEAT International S.A. Vs. CIT, and concluded that the matter requires fresh examination by the Assessing Officer to differentiate the expenses towards professional services and commission paid for exports. The issue was remanded back to the Assessing Officer for re-examination.

Issue No. 3: Allowance of Depreciation
The revenue challenged the CIT(A)'s decision to allow depreciation of Rs. 10,86,873/-. The Tribunal noted that this issue had been consistently decided in favor of the assessee in previous years by both the CIT(A) and the ITAT, and upheld by the Bombay High Court. The Tribunal found no reason to deviate from the established precedent and upheld the CIT(A)'s decision, thus deciding the issue in favor of the assessee.

Issue No. 4: Deletion of Disallowance u/s.14A r.w. Rule 8D
The revenue challenged the deletion of disallowance of Rs. 10,19,830/- made u/s.14A r.w. Rule 8D. The CIT(A) had followed the ITAT's decision in the assessee's case for the previous year, which held that no administrative expenses were incurred for holding investments in group concerns. The Tribunal found that the CIT(A) had correctly followed the ITAT's order and the facts were identical to the previous year. The Tribunal upheld the CIT(A)'s decision, thus deciding the issue in favor of the assessee.

Issue No. 5: Deletion of Disallowance u/s.35 in respect of Capital Expenditure on Research and Development
The revenue challenged the deletion of disallowance of Rs. 1,82,02,000/- made by the A.O. u/s.35. The CIT(A) had allowed the claim, noting that the assessee received approval for weighted deduction u/s.35(2AB) after the due date for filing a revised return. The Tribunal agreed with the CIT(A) that the appellate authorities can entertain such claims even if made after the time limit for filing a revised return, provided the claim is genuine and approved by the competent authority. The Tribunal upheld the CIT(A)'s decision, thus deciding the issue in favor of the assessee.

Conclusion:
The Tribunal allowed the appeal filed by the assessee and dismissed the appeal filed by the revenue, thereby deciding all issues in favor of the assessee. The order was pronounced in the open court on 13th July, 2016.

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