TaxTMI 
TaxTMI 
2013 (9) TMI 803
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....forward of unabsorbed depreciation has expired. 3. The facts relating thereto are set out in brief. During the assessment year 2002-03, the assessee claimed set off of the following amounts of unabsorbed depreciation pertaining to the assessment years 1990-91 to 1992- 93. Assessment year Unabsorbed depreciation 1990-91 Rs.2,27,94,320/- 1991-92 Rs.7,12,16,003/- 1992-93 Rs.9,68,19,884/- The assessing officer noticed that the Finance (No.2) Act, 1996 had brought an amendment in S. 32(2) of the Act with effect from 1.4.1997, according to which the period of carry forward of unabsorbed depreciation was restricted to eight years. However, the said restriction was removed with effect from 1.4.2002. The assessing officer, by placing reliance on the amendment carried out by Finance (No.2) Act, 1996 and on noticing that the period of eight years has expired for the unabsorbed depreciation relating to the assessment years cited above, held that the assessee is not entitled to claim set off of the above said amounts against the profit declared for the assessment year 2002-03. In the appeal filed by the assessee, the Ld CIT(A) allowed the claim of the ass....
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.... Ltd 123 ITD 89 (Vizag) (b) DCIT V/s. Time Guaranty Ltd (40 SOT 14)(Mum)(SB) (c) General Motors India Ltd V/s. DCIT (25 Taxman.com 364)(Guj). 7. Thus the view taken by learned CIT(A) is supported by the circular issued by the CBDT and also the decisions referred supra. Under these circumstances, we do not find any reason to interfere with his decision on this issue. 8. We shall now take up the appeals filed by both the parties for the assessment year 2004-05. The issue urged in both the appeals relate to the treatment of "Grants-in-aid" received by the assessee from Government of India. 9. The facts relating to the same are stated in brief. The assessee carried out Research and Development Activities and claimed weighted deduction under S.35(2AB) of the Act at 150% of the expenditure to the tune of Rs.69.72 crores. The assessing officer noticed that the assessee has received a sum of Rs.7.10 crores from Government of India towards certain projects. It was seen that the assessee did not credit the said amount to its Profit and Loss account. The assessee explained that the grants in aid received from Government of India and the expenditure rel....
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.... grant in aid as Rs.5.75 crores in the place of Rs.7.10 crores, without conducting any verification through the assessing officer. On the contrary, the Learned Authorised Representative submitted that the details of grant in aid received during the year are given in the annual report of the assessee company, more particularly in Note no.8 of Schedule P attached to the Annual report. 13. We have heard the parties on this issue. The question is about the quantum of amount received by the assessee during the year under consideration by way of "grant in aid" towards Research and Development Activity. While the AO has adopted a figure of Rs.7.10 crores, the learned CIT(A) has taken it as Rs.5.75 crores. Before us, the assessee placed reliance on Note no.8 of Schedule-P of the Annual report to submit that it had received an aggregate amount of grant in aid of Rs.11.75 crores during the year under consideration, which consisted of Rs.5.75 crores towards "Research and Development" activity and Rs.6.00 crores towards VRS compensation payments. However, as contended by Learned Departmental Representative, the learned CIT(A) has accepted the submissions of the assessee and the assessing of....
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.... be directly related to business of the ECIL. This said proposal of the R&D project is submitted to DAE. After a series of verification and review, DAE approves a project and the related grant. Obligations of ECIL. 6. ECIL is under an obligation to utilise the amount under the specified sub-heads related to R&D projects as approved by DAE. ECIL is under an obligation to provide an account of utilisation, provide detailed results of the projects and to refund any surplus remaining unutilized out of the grants received. The substance of the terms underlying the grants clearly establishes ECIL as a trustee to the funds bestowed on it by DAE. R&D Expenditure 7. The above Two paragraphs describe the role of ECIL in respect of R&D projects carried out with the approval and grants from DAE. Apart from the above, ECIL carries on In-House R&D projects the cost of which is borne out of its revenues. 8. Hence it is paramount importance to realize that there are two kinds of R&D expenditure incurred by ECIL. 1. In House R&D expenditure ....
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....ason to treat the expenses incurred out of such grant in aid as "not allowable". (b) We find that Sec. 35(2AB) does not link the "Research and Development expenses" to the sources of funds. (c) If the grant in aid is considered as "revenue receipt", then it becomes the assessee's own money and hence the stand taken by the tax authorities to treat the grant in aid as "sponsored money" is contradictory to their own stand. 19. We further notice that the weighted deduction u/s 35(2AB) is allowed with reference to the expenditure incurred on "Research and Development". However, the tax authorities have disallowed the expenses @ 150% of the grant in aid amount, without matching the expenses with the Grant in aid amount. In any case, we have already noticed that the decision taken by the tax authorities to make the said disallowance is contradictory to their own stand. 20. The assessee's case is that the said grant in aid is a "tied up grant". However, this stand has not been examined by the assessing officer. 21. All these discussions would show that the issues relating to the nature of the grant in aid, the R & D expenses incurred out of the said....