2019 (1) TMI 993 - AT - Income Tax

Tribunal upholds CIT(A) decisions on R&D deduction, exempt income expenses, and director's personal expenses.

The DCIT Circle-1 (1) (2) Ahmedabad Versus M/s. Deversons Industries Pvt. Ltd.

The Tribunal upheld the CIT(A)'s decisions in all issues, disallowing the weighted deduction under section 32(2AB) of the Income Tax Act for R&D ... Disallowance of weighted deduction u/s.35(2AB) - R & D Division Expenses - assessee is engaged in the business of manufacturing, trading, and export of dyes and dyes intermediates - Held that:- The issue is covered in favor of the assessee by the order of this Tribunal in assessee’s case [2018 (4) TMI 253 - ITAT AHMEDABAD] wherein as held that there is no scope for any other interpretation and since the approval is granted during the previous year relevant to the assessment year in question, we are of the view that the assessee is entitled to claim weighted deduction in respect of the entire expenditure incurred under Section 35(2AB) of the Act by the assessee. Addition u/s. 14A r.w. Rule 8D - Held that:- As decided in assessee's own case [2018 (4) TMI 253 - ITAT AHMEDABAD] interest paid by the assessee was subsequently and assessee was having sufficient interest free fund to cover up the investment earning exempt income. Therefore, we are of the considered opinion that provisions of Section 14A are not attracted. Disallowance of depreciation expenses and vehicle expenses - allowable busniss expenses - personal use of asset - Held that:- We are of the considered opinion that such depreciation are allowed as it is not disputed that funds for purchases of the car were provided by the assessee company which is also reflected in the accounts of the assessee company. In our opinion, when the car is actually used for the purpose of business of the company depreciation thereon cannot be denied. Regarding the vehicle expenses and insurance expenses, we find that the cars were used by the body corporate and these were also shown as fixed assets in the balance sheet in the year under consideration. As we have allowed the depreciation in respect of such vehicles, we are inclined to allow the amount of vehicle and insurance expenses to the extent deleted by the CIT(A). We also note that the assessee was a limited company and, hence, it could act through its directors only. Thus, if cars were used by the directors for their personal use also, the same could be added to the income of the directors as perquisite but insofar as, the assessee-company was concerned the entire expenditure was for its business as the directors were appointed to look after the business of the assessee-company. Hence, no disallowance could be made in the hands of the assessee-company on account of personal use of directors. - Decided against revenue Issues involved:1. Disallowance of weighted deduction u/s.32(2AB) of the Income Tax Act.2. Disallowance of expenses u/s.14A r.w. Rule 8D of the IT Act.3. Disallowance of depreciation and vehicle expenses.Detailed Analysis:1. The first issue involves the disallowance of weighted deduction u/s.32(2AB) of the Act. The appellant, a Private Limited Company, claimed a deduction for R&D division expenses without the mandatory certificate from DSIR. The CIT(A) deleted the addition based on a previous order. The Tribunal upheld the decision citing similar cases and dismissed the Revenue's appeal.2. The second issue concerns the disallowance of expenses u/s.14A r.w. Rule 8D. The Assessing Officer disallowed expenses related to exempt income, which the CIT(A) partly confirmed. The Tribunal, following a previous order, upheld the CIT(A)'s decision, dismissing the Revenue's appeal.3. The final issue revolves around the disallowance of depreciation and vehicle expenses. The Assessing Officer disallowed vehicle expenses and insurance expenses due to personal use by directors. The CIT(A) partly confirmed the disallowance. The Tribunal, in line with a previous order, dismissed the Revenue's appeal, stating that no disallowance could be made for personal use and upheld the CIT(A)'s decision.In summary, the Tribunal upheld the CIT(A)'s decisions in all issues, citing previous orders and legal interpretations, ultimately dismissing the Revenue's appeal.