2017 (9) TMI 1043

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..... 3. The following questions are framed for consideration: "(i) Whether on the facts and in the circumstances of the case, the Tribunal exceeded jurisdiction in setting aside the claim of weighted deduction under Section 35 (2AB) of the Act to the file of the assessing officer to re-examine the issue on grounds, which were not even subject matter of appeal before the Tribunal? (ii) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in not deleting the disallowance made under section 14A of the Act, despite holding that the assessing officer had failed to (i) record his satisfaction in terms of Section 14A(2)/(3) and (ii) establish direct/ proximate nexus of expenses with the earning of exempt divid....

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....on of 50% amount of Rs. 6,52,42,288/-. 8. The AO further invoked Section 14A of the Act and computed disallowance of Rs. 1,02,73,361/-. The reason that weighed with the AO in making the above disallowance as regards the exempt income was that the AO observed that Section 14A was straightaway attracted but no expenses were claimed. The AO then surmised that certain expenses ought to have been incurred for earning the dividend income like purchase of raw materials, salaries, etc. The AO proceeded to apply Rule 8D (2) and (3) of the Income Tax Rules as applicable at the relevant time and worked out the disallowance as Rs. 1,02,73,361/-. 9. In the appeal filed by the Assessee before the Commissioner of Income Tax (Appeals) ['CIT (A)'], on....

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....ble to concur with the impugned order of the ITAT on both the aspects. Having held that the R&D expenditure as claimed by the Assessee ought to have been allowed, there was no question of remanding the matter to the AO for returning a finding on whether the expenditure was of revenue or capital nature. This is because, under Section 35 (2AB) of the Act, both revenue and capital expenditure are allowable in their entirety, excluding expenditure in the nature of cost of any land or building. There was going to be no purpose served in analysing whether the expenditure was of revenue or capital nature. In fact, the AO himself had allowed 100% of the expenditure both of revenue and capital nature and the disallowance was only the additional 50% ....