ITAT Adjusts Corporate Guarantee Rate, Allows Section 80-IC Deduction, and Approves R&D Expenses Without DSIR Approval

The ITAT allowed the appeal of the assessee, addressing several issues. The Tribunal adjusted the corporate guarantee rate to 0.5% based on prior case law. It upheld the provision for the "Shahenshah Scheme" as scientifically based, allowing the appeal on this ground. The Tribunal determined that interest on FDRs is eligible for deduction under section 80-IC. Foreign travel and R&D expenses were deemed allowable, with the latter not requiring DSIR approval. The Tribunal corrected the installation date for depreciation claims, allowing the appeal. The order was pronounced on 11/10/2023.

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Issues Involved:
1. Corporate Guarantee
2. Shahenshah Scheme
3. Interest on FDRs/Deduction u/s 80-IC
4. Education cess and TDS
5. Foreign Travel Expenditure
6. R&D Expenses
7. Depreciation

Corporate Guarantee:

This issue is covered by the Co-ordinate Bench of ITAT in the assessee's own case for A.Y. 2014-15. The Tribunal directed that the adjustment in respect of corporate guarantee provided to AEs be determined at the rate of 0.5% instead of 1.3% as determined by the revenue, relying on judgments of the Hon'ble High Court of Bombay.

Shahenshah Scheme:

The issue of disallowance of provision made for sales incentive under the "Shahenshah Scheme" was addressed by the Co-ordinate Bench of ITAT in the assessee's own case for A.Y. 2014-15. The Tribunal held that the provision made by the assessee in respect of the scheme is on a scientific basis and thus, the revenue was not justified in making the addition. The appeal on this ground was allowed.

Interest on FDRs/Deduction u/s 80-IC:

This issue was also covered by the Co-ordinate Bench of ITAT in the assessee's own case for A.Y. 2014-15. The Tribunal held that the interest income earned from fixed deposits, which were required to be maintained as per statutory requirements, is inextricably linked to the main business activity of the assessee and is eligible for deduction u/s 80IC. The appeal on this ground was allowed.

Education cess and TDS:

These grounds were not pressed by the assessee.

Foreign Travel Expenditure:

The assessee claimed foreign travel expenses incurred in connection with the business. The Tribunal held that since the expenses are incurred in connection with the business of the assessee, no disallowance on this account is called for. The appeal on this ground was allowed.

R&D Expenses:

The R&D expenses consisted of establishment expenses incurred at R&D units. The Tribunal held that the expenses are allowable u/s 35(1) @ 100% and that the approval of DSIR is not required for claim u/s 35(1)(i). The appeal on this ground was allowed.

Depreciation:

The issue of depreciation and additional depreciation on machinery was addressed, where the AO disallowed the claim based on the installation date. The Tribunal, after examining the evidence, held that the installation date was March 4th, 2011, and not April 3rd, 2011, as interpreted by the revenue authorities. The appeal on this ground was allowed.

Conclusion:

In the result, the appeal of the assessee was allowed. The order was pronounced in the open court on 11/10/2023.

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