TaxTMI 
TaxTMI 
2016 (2) TMI 418
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.... assessment proceedings, Assessing Officer on verification of the return of income and accompanying statements, found that the assessee has claimed weighted deduction of Rs. 1,77,03,533 under S.35(2AB) of the Act for expenditure incurred on scientific research. The Assessing Officer noticing the same, called upon the assessee's explanation justifying its claim of deduction by furnishing necessary details such as approval of competent authority, etc. In response to the query raised, the assessee submitted that it was having a in-house R&D Centre which is recognised by Department of Scientific and Industrial Research(DSIR). In support of such claim, assessee filed letter No.TU/IV-RD/2509/2011 dated 29.4.2011, wherein the recognition of in-house R&D unit of the assessee was renewed upto 31.3.2015. The Assessing Officer referring to S.35(2AB) and Rule 6 observed that for weighted deduction under the said provision, the assessee is required to make application in Form No.3CK to the prescribed authority, i.e. DSIR and the prescribed authority has to grant approval in Form No.3CM and also submit a report in respect of approval granted for in-house research and development facility in Form....
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.... provisions it is very much clear that assessee would be entitled to claim deduction under section 35(2AB) for the expenditure incurred towards research and development, if the research and development facility is recognised by the competent authority, which is DSIR in the Ministry of Science and Technology and approval in the prescribed manner, i.e. Form No.3CM is obtained from the competent authority. Therefore, the approval in Form 3CM, even if it is issued by any Scientist of DSIR would, in our view, entitle the assessee to claim deduction under S.35S(2AB). 9. Keeping in view the aforesaid statutory provision, we have to examine the facts of the present case. It is observed that for claiming deduction under S.35(2AB), assessee has relied on two letters issued by Scientist G, referred to hereinabove. It is seen that one letter, as placed at page 13 of the paper-book, relates to Certificate of Registration for availing customs duty exemption. Second letter, placed at page 14 of the paper-book, is in respect of renewal of recognition granted to the Inhouse R & D facility till 31.3.2015. The assessee neither before the departmental authorities nor before us has produced any approv....
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....ibed form, of the prescribed authority, i.e. either Scientist G of DSIR or any other authority from DSIR, as required in S.35(2AB) of the Act, and redecide the matter in accordance with law, and after giving reasonable opportunity of hearing to the assessee. Accordingly, grounds raised by the assessee on this issue are allowed for statistical purposes. 13. In grounds No.6 to 11, the assessee has challenged the disallowance made under S.36(1)(iii) of the Act out of bank interest and financial charges. 14. Briefly, facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee made investment of Rs. 2,50,93,178 in equity share capital of two companies, namely, M/s. Creative Healthcare Pvt. Ltd. and M/s. Vivimed Holdings Ltd., dividend income from which is exempt from tax. Assessee during the relevant previous year has claimed deduction towards bank interest and financial charges for an amount of Rs. 9,57,01,000. The Assessing Officer further noticed that secured and unsecured loans shown by the assessee are Rs. 96,14,40,000 and Rs. 76,70,15,000 respectively. After examining the details in respect of investment in equity shares of the two companies, th....
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....ellate proceedings before the CIT(A), a remand report was called from the Assessing Officer, wherein the Assessing Officer accepted the payments made through Axis Bank as from internal accruals of the company. Further, the financial statement submitted by the assessee also demonstrates that sufficient interest free fund was available with the assessee to make the investment in equity shares of the two companies. Hon'ble Bombay High Court in the case of C.I.T. vs. Reliance Utilities & Power Ltd., (2009) 313 ITR 340 (Bom.) has held that when the assessee has mixed funds, i.e. both interest free and interest bearing funds, presumption would be interest free advances are from interest free funds available with the assessee. Applying the same principle, it has to be held that the investment in equity shares were made from out of surplus interest free funds available with the assessee. Further, it is a fact on record that investments in equity shares have been made during the period from 8.10.2005 to 21.1.2007 and not in the previous year relevant to the assessment year under dispute. The Department also has not controverted the contention of the assessee that no disallowance out of ....
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....the assessee submitted before us that the entire FCCBs were raised abroad and the payments were also made through assessee's bank account abroad. He submitted that as the source from which the bonds were raised were outside India and the payment of interest is also outside India, the provisions of S.195 would not apply, since the payments were made to non-residents outside India. In this context, he relied upon the following decisions- (a) Asstt. Director of Income-tax(International Taxation), Ahmedabad V/s. Adani Enterprises (2015 ) 63 taxmann.com.11 (Ahmedad-Trib) (b) Mahindra & Mahindra Ltd. V/s. Dy. Commissioner of Incometax (2012) 24 taxmann.com.267 (Mumbai) 27. The Learned Departmental Representative, on the other hand, relied upon the findings of the departmental authorities. 28. We have considered the submissions of the parties and perused the material on record. As could be seen, the assessee has raised long term bonds from the international market by issuing FCCBs of US $ 50 Million, with option to convert into equity shares or claim repayment after five years. The bonds were raised in the financial year 2007-08 with interest rate of 1% per annum. It is the claim of....