2023 (7) TMI 895 - AT - Income Tax

Assessee's appeals partly allowed, revenue's dismissed. Tribunal orders re-examination by AO.

Turbo Energy Private Limited Versus Deputy Commissioner of Income Tax, Large Tax Payer Unit -1, Chennai

Turbo Energy Private Limited Versus Deputy Commissioner of Income Tax, Large Tax Payer Unit -1, Chennai - TMI Issues Involved:1. Disallowance of deduction claimed under Section 80IC.2. Disallowance of weighted deduction claimed under Section 35(2AB).3. Restriction of depreciation on UPS.4. Disallowance of expenses related to exempt income under Section 14A read with Rule 8D.5. Deletion of addition made towards disallowance under Section 40(a)(i) for non-deduction of TDS on payment made to non-resident.Issue-wise Detailed Analysis:1. Disallowance of Deduction Claimed under Section 80IC:The assessee claimed deduction under Section 80IC for profits derived from its unit in Rudrapur, Uttarakhand, asserting that the unit was engaged in manufacturing turbochargers and parts. The Assessing Officer (AO) disallowed the deduction, arguing that the process did not qualify as manufacturing under Section 2(29BA). The Tribunal referenced its earlier decision in the assessee's own case, where it had set aside the issue for further verification. Consequently, the Tribunal directed the AO to re-examine the claim, considering all relevant evidence and averments.2. Disallowance of Weighted Deduction Claimed under Section 35(2AB):The assessee claimed weighted deduction for in-house R&D expenditure. The AO disallowed the expenditure exceeding the amount certified by the competent authority in Form 3CL. The Tribunal upheld the disallowance, referencing its previous decision in the assessee's case, which concluded that deductions are limited to amounts certified by the competent authority.3. Restriction of Depreciation on UPS:The assessee claimed 60% depreciation on UPS, treating it as part of computers and software. The AO restricted the depreciation to 15%, classifying UPS as electrical equipment. The Tribunal referred to its earlier rulings, including the case of Sundaram Asset Management Ltd, and held that UPS is an integral part of computers, thus eligible for 60% depreciation. The AO was directed to allow the higher depreciation rate.4. Disallowance of Expenses Related to Exempt Income under Section 14A read with Rule 8D:The AO disallowed expenses related to exempt income under Rule 8D, resulting in an additional disallowance of Rs. 3,76,846. The assessee argued that it had sufficient own funds to cover investments yielding exempt income and that only investments yielding exempt income should be considered for disallowance. The Tribunal agreed but noted the lack of detailed evidence from the assessee. The issue was remanded to the AO for re-examination, with the directive that disallowance should not be less than the assessee's suomoto disallowance.5. Deletion of Addition Made towards Disallowance under Section 40(a)(i) for Non-deduction of TDS:The AO disallowed payments made to a non-resident service provider under Section 40(a)(i) for non-deduction of TDS, classifying the payments as managerial services taxable under Section 9(1)(vii). The CIT(A) deleted the disallowance, following a precedent in the assessee's own case, which held that the services did not fall under managerial or technical services and were rendered outside India without a permanent establishment. The Tribunal upheld the CIT(A)'s decision, affirming that the payments were not subject to TDS under Section 195.Conclusion:The appeals filed by the assessee for both assessment years were partly allowed for statistical purposes, and the appeals filed by the revenue were dismissed. The Tribunal directed further examination and re-computation by the AO on specific issues, ensuring compliance with legal provisions and precedents.