TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 1230
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....facts are same in both the appeals. Therefore, for the purpose of disposal of both the appeals, we decide the appeal for the A.Y. 2011-2012. ITA.No.505/Del./2017 - A.Y. 2011-2012 (M/s. National Research Development Corporation, New Delhi.) 3. In this Departmental Appeal, the Department has challenged the deletion of addition of Rs. 1.78 crores under section 37(1) of the I.T. Act, 1961 under the Head "Salary Expenses". 3.1. The assessee challenged the disallowance of salary expenses of Rs. 1.78 crores paid to its employees before the Ld. CIT(A). The assessee claimed that A.O. has erred by claiming that assessee is maintaining separate accounts for NRDC and Expenditure on Grants. The A.O. noted that as per Auditor's Report that for man po....
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....its. The A.O. accordingly made the addition. 3.2. The assessee challenged the addition before the Ld. CIT(A). The written submissions of the assessee is reproduced in the appellate order, in which assessee explained that Corporation is carrying activities under Invention Promotion Programme ["IPP"] and Technology Promotion Programme ["TPP"] out of recurring/yearly grants-in-aid received from Department of Scientific and Industrial Research. As per the policy of the accounting policy of the Corporation expenses identifiable with specific grants have been charged to those grants as per approved annual plan. Other common expenses not identifiable with any grant have been apportioned equally among the various grants of the Corporation. All the....
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....inancial statements. The Corporation was allocating man power cost as per the past practice, however, the Ministry vide Order Dated 19.10.2010 had capped the said grant towards utilisation of salary. By the said letters the Ministry capped the manpower cost @ Rs. 1.23 crores towards TPP and @ Rs. 1.25 crores towards IPP. Thus, the Corporation restricted their allocation towards the said expenditure to that extent. Thus Corporation could not allocate the expenditure more than permitted limit. The grants have been received by Corporation on annual basis, the said grants have to be used by Corporation in accordance with the directions of the Government. Any excess of expenditure over grant received in accordance with the directions of the Gov....
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....re old employees of the Corporation and the expenses booked are all genuine. Taxes have been deducted by the Corporation and paid for all the employees to whom salary have been paid by the Corporation. All the said employees are carrying work of the Corporation and grant activities. Therefore, the addition is wholly unjustified. 4. The Ld. CIT(A) considering the explanation of assessee and material on record, deleted the entire addition. His findings in para 3.2.3 is reproduced as under : "I have considered the submissions of the Appellant and observations of the Assessing Officer. It is apparent that Assessee is not maintaining separate books of accounts for NRDC and grants since the Assessee is preparing only one Balance Sheet. The As....
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.... and disallowance made by the Assessing Officer is uncalled for and is accordingly deleted." 5. The Ld. D.R. relied upon the Order of the A.O. and submitted that excess salary is paid in contravention of rules and regulations of the Department of Scientific and Technology, Government of India governing Government Grants, therefore, it is not allowable under section 37 of the I.T. Act, 1961. 6. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that salary have been correctly allowed by the Ld. CIT(A). 7. After considering the rival submissions, we do not find any merit in the Departmental Appeal. The Assessee Corporation is receiving grants on annual basis and th....