Appeal partly allowed, remand for re-examination of charges disallowance. Section 14A disallowance deleted. Appeal delay condoned.

The appeal was partly allowed, with the issue of disallowance of Rs. 2,47,85,290/- for drawing and designing charges remanded back to the Assessing Officer for re-examination. The disallowance of Rs. 1,35,957/- under Section 14A of the Income-tax Act was deleted. The delay in filing the appeal was condoned by the Tribunal due to the Covid-19 period and in line with the Hon'ble Apex Court's directive to extend the limitation period.

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Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of Rs. 2,47,85,290/- for drawing and designing charges.
3. Disallowance of Rs. 1,35,957/- under Section 14A of the Income-tax Act, 1961.

Summary:

1. Delay in Filing the Appeal:
The appeal filed by the assessee was delayed by 59 days. The assessee claimed that the delay was due to the Covid-19 period and referred to the Hon'ble Apex Court's directive to extend the limitation period. The Tribunal found the submission satisfactory and condoned the delay.

2. Disallowance of Rs. 2,47,85,290/-:
The assessee claimed expenses for drawing and designing charges incurred outside India, which were disallowed by the Assessing Officer (AO) on the grounds that they were not wholly and exclusively relatable to the assessee's business. The CIT(A) upheld the AO's findings. The assessee argued that these expenses were related to an equipment sale agreement with Mckeown International, Texas, and were necessary for the successful performance of the contract. The Tribunal noted that the agreement allowed for sub-contracting and that the expenses were indeed related to the contract. However, the Tribunal found that the agreements with the parties providing the drawing and designing services were not produced before the authorities. Therefore, the Tribunal restored the matter back to the AO for re-examination, directing the AO to verify the nexus of the payments with the agreement and allow the expenses if they were indeed related.

3. Disallowance of Rs. 1,35,957/- under Section 14A:
The assessee contended that the disallowance under Section 14A was uncalled for, as the interest expenses were minimal and related to car loans and late payment of TDS, which were already added back. The Tribunal observed that the AO had made the disallowance by applying Rule 8D without recording dissatisfaction with the assessee's suo moto disallowance. Citing relevant case laws, the Tribunal held that the disallowance under Section 14A was uncalled for and deleted it.

Conclusion:
The appeal was partly allowed, with the issue of Rs. 2,47,85,290/- disallowance remanded back to the AO for re-examination, and the disallowance under Section 14A of Rs. 1,35,957/- deleted.

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