TaxTMI 
TaxTMI 
2018 (5) TMI 801
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....rom Business, Long Term Capital Gains of Rs. 46,07,29,018/-) and Book Profit of Rs. 3,00,07,52,895/- u/s 115JB of the Act. 2.1. Since assessee transacted with Associated Enterprises (AE) as defined- in Section 92A of the Act, the case was referred to Transfer Pricing Officer [TPO] who issued Transfer Pricing Order dated 27-01-2014 by making an adjustment of Rs. 12,65,12,038/- u/s 92CA of the Act. The AO framed a Draft Assessment Order u/s 143(3) dated 10-03-2014 taking into account the above Transfer Pricing Order. The AO vide his draft order determined the total income at Rs. 2,35,76,34,030/- under normal computation and at Rs. 3,00,07,52,895/- u/s. 115JB. 2.2. Assessee vide letter dated 16-04-2014 accepted the Draft Assessment Order (without prejudice to its right of appeal under the Act) in terms of sub-section (2) of Section 144C of the Act. Accordingly, the AO passed the final order u/s. 143(3) r.w.s 144C(3). Aggrieved by the said order assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A), assessee contested various additions and the Ld.CIT(A) allowed the appeal partially. Assessee and Revenue are in appeal before us. 3. We have heard the Ld. Counsel a....
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..... Hitachi Home and Life Solutions (1) Ltd.(2014) 41 taxmann.com 540 wherein the Hon'ble High Court held that, where assessee's interest free funds far exceeded investments made for earning exempted dividend income, and AO had also failed to establish nexus between borrowed funds and investments made, no disallowance could be made u/s 14A. Hence, following the Hon'ble High Court's decision in the above case, the submissions made by the appellant are accepted and also the disallowance worked out under Rule 8D by the appellant are accepted after verifying the same. Therefore, the addition made by the Assessing Officer is confirmed to the extent of Rs. 86 lakhs ( later modified to 8.6 lakhs u/s 154 of the IT Act) and the ground of appeal is partly allowed". 5.1. It was the contention that assessee has not earned any dividend income and has not claimed any exemption. Therefore, the provisions of Section 14A are not applicable. 5.2. Having considered the rival contentions, we find that assessee has not earned any dividend income during the relevant assessment year. The Co-ordinate Bench in the case of Prathista Industries Ltd., Vs. DCIT in ITA No. 1302/Hyd/2015 date....
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....is expenditure of Rs. 56,35,712/- in respect of R&D Expenditure is to be considered u/s. 35(1), if not for the weighted deduction u/s 35(2AB). Assessing Officer is directed to examine the necessary expenditure and allow the claim. This ground is allowed for statistical purposes". 7.4 Hence, respectfully following the Hon'ble ITAT decision on the above said ground, additions made by the Assessing Officer deleted and the ground of appeal is allowed". 6.1. On this issue, both Assessee and Revenue are in appeal. Assessee is asking for modification of the order, whereas Revenue is in appeal for allowing the ground by the CIT(A). 6.2. We notice that the direction of CIT(A) is to be modified, ITAT vide its order referred to above in the order of CIT(A) has clearly held that expenditure which is not allowable u/s. 32(2AB) by virtue of DSIR certificate (to the extent not certified) is allowable u/s. 35(1), that means to the extent of 100% of the claim, assessee would be eligible for the expenditure, whereas the weighted deduction of balance 50% would not be eligible. However, Ld.CIT(A) directed the entire amount to be allowed without noticing the said difference. Since th....
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....wance u/s. 14A of the Act. Even though Ld.CIT(A) has accepted that there is no nexus between the borrowed funds and investments made, the CIT(A), however, partly confirmed disallowance to an extent of Rs. 8.60 Lakhs [subsequently modified by the order as against Rs. 86 Lakhs confirmed in the order], which was contested by assessee in its appeal. This issue is already discussed in the appeal of assessee and since there is no dividend income received from the investments and claimed as exempt during the year, disallowance per se does not arise. Therefore, assessee's ground was allowed in assessee's appeal. Consequent to that, there is no merit in Revenue's ground contesting the issue. Accordingly, the same is dismissed. 11. Ground No. 3: This ground is wrongly taken by Revenue, whereas it should have taken the ground on the other amount of Rs. 5,00,565/- pertaining to depreciation in respect of non-competing fee paid in AY. 2002-03 to M/s Medicorp Technologies ltd allowed by the ITAT in those years. Following the Co-ordinate Bench decision in that year, ITAT is consistently allowing the depreciation on the WDV on this amount which Ld.CIT(A) has allowed. Revenue should have taken t....