TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 382
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....f Income Tax (Appeals)-22, Mumbai ["the CIT(A)"] erred in directing the Assistant Commissioner of Income Tax, 10(3) , Mumbai ("the A.O.") to find out the ratio of investment in shares to the total assets and apply the same to the amount of interest paid by the assessee while making the disallowance u/s 14A of Income Tax Act, 1961("the Act"). 1.1 The CIT(A) erred in confirming the action of the A.O. in making the disallowance under section 14A without pointing out any specific expenditure incurred by the appellant to earn the dividend income which was exempt u/s 10(34) of the Act. 1.2 Without prejudice to above, the CIT(A) erred in not directing such expenses which were 'in relation' to investment to be capitalized. 1.3 The Appellant prays that the disallowance u/s 14A be deleted. 1.4 Without prejudice to above, the said disallowance u/s 14A be made on reasonable basis. 2. The CIT(A) erred in confirming the action of the A.O. in disallowing the claim u/s 35(2AB) on the alleged ground that it had failed to furnish the certificate in the prescribed form issued in the prescribed authority. 2.1 The appellant prays that the claim for the deduction u/s 35(2AB) of the Act be allowed.....
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....2-2009 passed by the AO u/s. 143(3) of the Act. 5. Aggrieved by the assessment order dated 24-12-2009 passed by the AO u/s. 143(3) of the Act, the assessee filed first appeal with the learned CIT(A). 6. Before the learned CIT(A), the assessee submitted that Rule 8D of Income Tax Rules, 1962 is not applicable for the assessment year 2007-08 and the disallowance should be made on reasonable basis for the expenses incurred in relation to the earning of income not forming part of the total income. It was submitted by the assessee that no expenses have been incurred by the assessee to earn dividend income which is claimed as exempt u/s 10(34) of the Act. The assessee relied upon the decision of Hon'ble Bombay High Court in the case of Godrej and Boyce Manufacturing Company Limited v. CIT (2010) 328 ITR 81(Bom.) and stated that Rule 8D of Income Tax Rules, 1962 is applicable from the assessment year 2008-09 and cannot be applied retrospectively and disallowance is to be worked out on reasonable basis. The learned CIT(A) rejected the contentions of the assessee and held that the assessee has mixed pool of funds both interest bearing as well interest free funds and it is not acceptable ....
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.... reasonable disallowance be sustained. It was submitted that strategic investments are made by the assessee and no expenses were incurred by the assessee attributable to the earning of exempt income. 9. The ld. DR supported the orders of the learned CIT(A). 10. We have heard the rival parties and considered the material on record including case laws relied upon by the parties. We have observed that the assessee had made investments of Rs. 226.02 lacs as at 31-03-2007 ( Rs. 226.02 lacs as at 31-03-2006) which are stated to be strategic investment. The assessee's own funds are to the tune of Rs. 5562.13 lacs as at 31-03- 2007 and Rs. 3902.04 lacs . The audited financial statements for financial year 1997-98 to 2006-07 are filed by the assessee and are placed in paper book page 47-106. It could be observed as detailed above that the assessee's own funds are much higher than the investments made by the assessee which are capable of yielding exempt income. The assessee received dividend income of Rs. 1,15,64,882/- which was claimed as an exempt income u/s. 10(34) of the Act. The assessee has also submitted details of various loans raised by the assessee and interest paid to contend th....
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....ssee in reply submitted certain details and the AO observed that the claim of the assessee while framing assessment u/s 143(3) of the Act for assessment year 2006-07 has been examined at length by calling details. It was held in the assessment for assessment year 2006-07 that the assessee R & D facility has not been approved by the prescribed authority i.e. Secretary , Department of Scientific and Industrial Research. It was further held that the R & D expenditure shows that the same has been incurred and related purely to sales promotion , testing, manpower expenses and includes expenditure incurred on clinical drug trial , obtaining approval from the regulatory authorities under any central, state or provincial Act and filing an application for a patent. It was held that the assessee has not furnished any evidences to establish that it has an in-house R & D facility which carried out any research and development activities in respect of any drug or pharmaceuticals. The assessee did not also complied with conditions mentioned in the form no 3CK for the purposes of making application to the prescribed authority and form no 3CL granting approval for the said facility has not been fu....
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....o the learned CIT(A). The learned CIT(A) observed that the AO has stated in his remand report that the assessee has not submitted the certificate in the prescribed forms viz. Form No. 3CL and Form 3CM issued by the prescribed authority , which is Secretary, DSIR, Ministry of Scientific Research. The learned CIT(A) concurred with the findings of the AO and confirmed the disallowance as the assessee failed to submit the prescribed forms issued by prescribed authorities, vide appellate orders dated 31.01.2011 passed by learned CIT(A). 14. Aggrieved by the appellate order dated 31.01.2011 passed by learned CIT(A) , the assessee filed second appeal with the Tribunal. 15. Before the Tribunal, learned counsel for the assessee submitted that the assessee has received approval from prescribed authorities and the assessee has duly complied with the requirements of the approval by the prescribed authorities as well requirements of Section 35(2AB) of the Act and the assessee is now eligible for weighted deduction claimed by the assessee in the return of income filed with the revenue. It was submitted by learned counsel for the assessee that if an opportunity is given , then the assessee will....
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....granting weighted deduction u/s. 35(2AB) of the Act in accordance with law. We would like to clarify and place on record that we have not made any comments on merits of the claim of the assessee for weighted deduction u/s 35(2AB) of the Act and the AO shall adjudicate this issue on merits in accordance with law uninfluenced by observation, if any made by us on this issue of claim of deduction u/s 3(2AB) of the Act in this order. The provisions of Section 35(2AB) of the Act allows weighted deduction and is a beneficial provisions and hence the same is to be strictly construed at the first stage to determine the eligibility of the assessee under the beneficial provision and once the entitlement and eligibility of the assessee is established by strictly construing the same, then the provision is to be liberally construed so that full effect is given of the beneficial provision to achieve the intended objective for which the beneficial statutory provision is placed on the statute. Needless to say proper and adequate opportunity of being heard shall be accorded by the AO to the assessee in accordance with principles of natural justice in accordance with law , and all the relevant eviden....
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....te proceedings . The learned CIT(A) called for remand report from AO to establish the genuineness of the claim of the assessee. The AO sent the remand report to the learned CIT(A) wherein the AO made observations w.r.t. write off's as under: "i. The sum of Rs. 2,50,852/- written off in respect of M/s. Software Algorithms (I) P. Ltd. represents advance given for purchase of export related software , which was a capital advance. Hence, write off of such capital advance cannot be allowed as revenue deduction. ii. Deferred premium account of Rs. 1,02,592 is claimed to be on account of foreign exchange fluctuation difference pertaining to FY 05-06. The said claim is not allowable as the same is prior period expenditure / charge and the assessee is following mercantile system of accounting. iii.Service Tax credit of 04-05 amounting to Rs. 6,14,920 is claimed as deduction by the assessee. The said service tax is not paid during the year. The deduction for service tax is not allowable as per the provisions of Section 43B of the Act. The assessee has not furnished any details as to why the claim is made in the year under consideration. iv. A sum of Rs. 28,780 is claimed as excess paymen....
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....rial on record. We have observed that the assessee has claimed deduction for write off advances to the tune of Rs. 14,44,832/- which was not allowed by the authorities below as in their opinion the assessee has not complied with the requirements of Section 36(1)(vii) read with Section 36(2) of the Act. The learned CIT(A) called for remand report from the AO which was confronted to the assessee but the assessee did not submitted any explanation before the learned CIT(A) in response to remand report of the AO. It is the contention of the assessee that the assessee was not given proper and adequate opportunity by the learned CIT(A) which prevented assessee from giving reply before learned CIT(A) in response to the remand report of the AO. It is the contentions of the assessee that if the matter/ issue is set aside to the file of the AO, then the entire details will be submitted to the AO and the AO can make necessary verifications, enquiries, examination and investigation before granting the benefit of claim of deduction on account of write off advances to the tune of Rs. 14,44,832/-. The assessee has placed all documents in connection thereof in paper book page 154-262. We are of the....