TaxTMI 
TaxTMI 
2017 (4) TMI 1030
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.... u/s.35(2AB) of the Act on the R&D expenditure incurred ruing the assessment year under consideration. For the purpose of allowability of the claim, the assessee was asked to produce the approval of the expenditure by the Competent Authority as per the provisions of the section 35(2AB) of the Act. The assessee submitted Form No.3CL dated 22.12.2011 issued by the Competent Authority i.e. Department of Scientific and Industrial Research in which the following R& D expenditure has been approved for assessment year 2011-12. Sl No. Expenditure A.Y 2011-12 (Rs. in lakhs) 1 Land and Buildings Nil 2 Capital equipment 526.20 3 Eligible Revenue expenses (excluding aldn and building) Nil Total R&D Expenditure 526.20 The AO found that the assessee had claimed excess deduction of Rs. 4,19,14,375/- and the AO had disallowed that amount on the ground that form 3CL given by the authority did not have the approval for the revenue expenditure, though it had approval for the capital expenditure. Based on the computation statement furnished by the assessee and Form No.3CL, the AO disallowed the amount of excess claim as follows:- Sl. No. Expenditure Claimed Allowable....
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....se requirements. Therefore, if the conditions stipulated in the said statues are not fulfilled, the amounts will become ineligible for the weighted deduction, to be claimed against the business income of the year. 3.3 Thus, in view of the above reasons, the weighted deduction of 200% u/s.35(2AB) of the Income Tax Act is available only on approval by the DSIR and that too on the R&D expenses certified in the Form No.3CL. Any expenditure is not eligible for weighted deduction. However, the other R&D expenditure (i.e. which is not approved by the DSIR), which is revenue in nature, is allowable for normal deduction @ 100°k u/s.35(1) of the Act. No capital expenses incurred for R&D is allowable u/s.35 of the Income Tax Act. 3.4 According to Ld.CIT(A), the total R&D expenditure eligible for weighted deduction u/s.35(2AB) of the Act is Rs. 5,26,20,000/- and the weighted deduction available to the appellant is Rs. 10,52,40,000/-. The balance of R&D expenditure of Rs. 4,07,41,300/- (i.e. R&D capital expenditure of Rs. 11,73,074 and R&D revenue expenditure of Rs. 3,95,68,226) which was not approved by the DSIR is not_eligible for weighted deduction u/s.35(2AB) of the Act. The unapprove....
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....TR 32 Accordingly, we hold that the matter is required to be referred by the AO to the prescribed authority and only on the basis of such order from the prescribed authority, as may be passed, that the AO has to make any disallowance. Accordingly, this issue is remitted to the file of AO for any further action as may be deemed fit in accordance with law, to make disallowance out of the R&D expenditure claimed by the assessee. This ground is partly allowed for statistical purposes. 5. The next ground of appeals is regarding the Assessing Officer's action of disallowance made u/s.14A of the Act r.w.r. 8D of the Income Tax Rules, relating to the expenses pertaining to the exempted income. 5.1 The facts of the issue are that the Assessing Officer in his order noticed that the appellant, during the financial year 2010-11 relevant to the A.Y. 2011-12, made substantial amounts of investments in purchase of shares/mutual funds, the income from which is exmpt from tax in the hands of the Assessee. However, the assessee has not segregated any expenditure pertaining to the earning of the said exempted income from the investments made in shares and mutual funds. Therefore, the AO invoked....
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....nt year 2007- 2008?" 14. Nothing much turns on the use of the word 'includable' and the phrase 'under the act' in s. 14A and we are not persuaded to accept the emphasis laid or the interpretation of the same by the Revenue. An assessment in terms of the Income tax Act is specific to an assessment year and the related previous year. S.4 of the Act, which imposes the charge to tax reads thus: Charge of income-tax 4. (1) Where any Central Act enacts that income -tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income tax shall be charged accordingly. Thus, where the statute indented that income shall be recognized for taxation in respect of any previous other than that immediately preceding the relevant assessment year, the provision shal....
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....Rs. 3,04,66,594/-, totaling to Rs. 5,19,37,891/-. Agrrieved, the assessee carried the appeal before the Ld.CIT(A). 7.2 During the appellate proceedings, the assessee's counsel submitted before the Ld.CIT(A) that the appellant company, during appellate hearings, submitted that the company was engaged in the manufacturing of mainly "Zincovit", a healthcare supplement, but not a pharmaceutical product. In order to create awareness of the product and popularize it, the best persons were the medical practitioners only. The Company also claimed that the above sales promotions expenses and other selling expenses are mainly in the forms of refrigerators, LCD TVs, Laptops, gold coins etc, which are mainly intended to disseminate the information to the medical practitioners and from them to the ultimate consumers. Therefore, these expenses are essentially advertisement expenses for creating awareness and to promote sales. The appellant further claimed that it is neither engaged in the manufacturing of any pharmaceutical product nor prohibited by any law from incurring such expenses. Hence the appellant claimed that the above expenses, which are incurred wholly and exclusively for the pu....
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....ring funds for advancing loans for lesser interest rates. Hence, the invoked the provisions of the section 36(1)(iii) of the Act and disallowed proportionate interest of 3.5%, being the difference in the interest paid @ 13.5 % and the interest received @ 10%, amounting to Rs. 33,15,053/-. Aggrieved, the assessee carried the appeal before the Ld.CIT(A). 9.2 The assessee company, during appellate proceedings, submitted that the inter-corporate deposits were from its own interest- free funds. The appellant further explained that the inter-corporate deposits were a strategic investment to protect the interests of the assessee. Hence, the appellant stated that the Assessing Officer is not justified in disallowing proportionate interest u/s.36(1)(iii) of the Act. The Ld.CIT(A) observed that the assessee's explanation is that the inter-corporate deposits to the group concerns is a strategic investment and hence should not be considered for the purpose of determining the disallowance of proportionate interest u/s. u/s.36(1)(iii) of the Act, has little merits. Strategic investments means the investments in other concerns with which the assessee has close and immediate business transact....
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....nnot be any disallowance for this purpose. He relied on the judgment of CIT v. Bharti Televenture Ltd. [2011] 331 ITR 502 (Delhi) and judgment of jurisdictional High Court in the case of CIT v. Hotel Savera [1999] 239 ITR 795 (Mad.) and also relied in the case of Woolcombers of India Ltd. v. CIT [1982] 134 ITR 219 (Cal.) Ld.D.R submitted the assessee is having huge borrowing on which it has paid interest, as such disallowance is confirmed. 11. In this case, the Commissioner of Income-tax(Appeals) deleted the addition on the reason that the assessee is having accumulated own fund at Rs. 38.43 crores as per the balance sheet dated 31.03.2011 and also interest free deferred Tax Reserve at Rs. 6.70 crores, totally Rs. 45 crores and the amount was advanced from its own funds. The assessee claimed deduction towards interest paid to various loans at Rs. 5.60 crores. The Assessing Officer noticed that the assessee has diverted the funds of Rs. 28 crores to its sister concern as advance free of interest. The Assessing Officer was of the opinion that the proposed interest on the amount invested like this is not for the purpose of business and the same was disallowed proportionately. As per ....