AI Drafter 
TaxTMI 
TaxTMI 
2023 (5) TMI 957
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....2017 for Assessment Years 2011-12 & 2012-13, respectively. Since all these appeals involve common issues, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. Nobody has been appearing on behalf of the assessee right from the beginning when the appeals were first posted for hearing. Though the hearing in these appeals commenced way back in the year 2018, it was only on the 10th May, 2022, when the matter came up for hearing, that the learned CIT-DR apprised the Bench that the assessee's case had been referred to NCLT and the matter is pending. He was accordingly directed by the Bench to ascertain the status of the case pending with the NCLT; to which on the next date of hearing i.e. on 7th July, 2022, the learned DR submitted that the assessee-company was in liquidation. Notice was directed to be issued to the Official Liquidator namely CA Ramchandra Dallaram Choudhary and the matter was adjourned for hearing on 24.08.2022. In the meanwhile, on 21.07.2022, the Official Liquidator Shri Ramchandra Dallaram Choudhary filed a letter in the Registry mentioning the entire facts relating to the assessee's case for all the appeal....
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.... case, pertained to only one of the years in appeal before us i.e. AY 2011-12 and that the admission of the Department's claim made no difference or had no impact to the hearing of appeal being proceeded with since if the Department won the case, the claim would remain intact; but, on the contrary, if the Department lost the case, the claim would get reduced to that extent. Therefore, noting the same, the matter was treated as heard on 01.03.2023. 4. As noted above, since the assessee has remained unrepresented throughout the course of hearing before us, we proceed to dispose of the appeals ex-parte qua the assessee, on the basis of material available on record. 5. We have noted that in the three appeals pertaining to the Department for AYs 2010-11, 2011-12 and 2012-13, the issues raised are identical relating to disallowance of expenses under Section 14A of the Act, disallowance of deduction under Section 80JJA of the Act, disallowance of prior period expenses and disallowance of interest under Section 36(1)(iii) of the Act. These issues are more or less repeated in all the appeals of the Department. Therefore, we shall be taking up the appeals pertaining to AY 2010-11 and i....
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....t the assessee had not furnished any documentary evidence to prove its eligibility for deduction under Section 35(2AB) of the Act of Rs.11.44 crores since it had failed to prove with evidence that the in-house research and development facility was approved by DSIR. The Assessing Officer noted that the assessee had not furnished copies of Form 3CK, 3CL and 3CM for claiming the aforesaid deduction and accordingly he held that the assessee was, therefore, not entitled to claim deduction under Section 35(2AB) of the Act of Rs.11,44,57,375/-. His findings in this regard are recorded at paragraph No.5.5 & 5.6 of the order which read as under:- "5.5 On perusal of the above submissions it is seen that the assessee has not furnished any details/documentary evidence to prove that the in house research facility was approved by DSIR. The assessee has also not furnished any evidence to prove that it fulfilled the requisite conditions for allowance of deduction as prescribed in section 35 of the Act. The assessee was specifically requested to furnished copies of Form 3CK, 3CL and 3CM. The assessee has not furnished copies of such forms. It may be mentioned that Form No.3CM is the order ....
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....written submission: 5.4 Without prejudice the aforementioned, it is submitted that the appellant has incurred capital expenditure of Rs.7,50,72,249/- and revenue expenditure of Rs.36,98,000/- on scientific research facility. Accordingly while claiming deduction u/s 35(2AB), 150% of capital expenditure amounting to Rs.11,26,08,374/- (150% of 7,50,72,249/-) was claimed. Since Rs.36,98,000/- on account of revenue expense was already debited in profit and loss account, an additional 50% of such expenditure amounting to Rs. 18,49,000/- (50% of 36,98,000/-) was claimed. While computing the impugned disallowance the Assessing Officer has disallowed Rs.11,44,57,375/- (11,26,08,374 + 18,49,000) u/s 35(2AB). In this connection the appellant would like to mention that the Assessing Officer is not justified in making entire disallowance @ 150% in case ' of capital expenditure of Rs.7,50,72,249/-. Such expenditure is even otherwise allowable @ 100% as per the provisions laid down in section 35(l)(iv). The relevant excerpts of section 35 (1) (iv) are as follows: 35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed : ......
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....he authorities below. The Ld.CIT(A) has given a categorical finding of fact, while denying assesses claim of 100% capital expenditure incurred on research and development as per section 35(1)(iv) of the Act, that the assessee was unable to substantiate its claim of having incurred capital expenditure for Research and Development. In the absence of any representation on behalf of the assessee, the said finding of fact by the Ld.CIT(A) has remained uncontroverted before us. We therefore see no reason to interfere in the order of the Ld.CIT(A) denying assesses claim of 100% deduction of capital expenses incurred on Research and development u/s 35(1)(iv) of the Act. Also since the assesses claim of having incurred capital expense is not established its alternate claim of allowance of depreciation on the same also is not tenable. In view of the above ground of appeal No.1-2 raised by the assessee is dismissed. 13. In effect appeal of the assessee is dismissed. 14. We shall now deal with Department's appeal No.2174/Ahd/2016 for Asst. Year 2010-11. Ground no.1 raised by the Revenue reads as under: "1) That the ld.CIT(A) erred in law and on facts in deleting the additi....
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....rd. On perusing the Balance sheet, we find that there is no change in investments at the year under as at 31st March, 2007 and as at 31st March 2008 meaning thereby that prima facie no new investments have been made by the Appellant during the year. Further on perusing the Balances sheet as at 31st 8 ITA No 245/AHD/2013 . A.Y. 2008-09 March 2008 we find that the share holders fund comprising of Share capital and reserves and surplus were to the extent of Rs.1.49 crores and during the year Appellant has also earned profit after tax of Rs.60.39 lacs meaning that the availability of interest free funds with Appellant at the year-end were in excess of investments. From the details of other income placed on record, it is seen that during the year dividend earned by the Appellant is of Rs.20,498/- and the disallowance made by A.O u/s 14A is of Rs. 1,02,007/- and thus the disallowance u/s. 14A worked out by A.O is more than the tax free income. Before us, Id. D.R. has not brought any decision of Tribunal or High Court on record to controvert the submissions made by Id. A.R that disallowance u/s. 14A cannot be more than tax free income. On the other hand, while dictating the order, we have....
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....15 Considering the above ratio of decisions, disallowance u/s r.w.r. 8D of Rs.2,46,343 is directed to be restricted to Rs.87,700/- i.e. exempt income received in the form of the balance disallowance. Thus, this ground of Appeal of the Appellant is therefore, partly allowed." 17. Before us, the ld.DR was unable to either controvert the facts relating to the issue that the exempt income earned by the assessee amounted to Rs.87,700/- nor was he able to controvert the legal proposition that disallowance under section 14A of the Act could not exceed exempt income. 18. We have noted the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Corrtech Energy Ld., 372 ITR 97. As held by us, the disallowance under section 14A of the Act cannot exceed the exempt income. 19. In view of the above, in the absence of the ld.DR being able to controvert the finding of the ld.CIT(A), either on facts or in law, we therefore, see no reason to interfere in order of the ld.CIT(A) deleting the disallowance under section 14A of the Act to the extent of Rs.1,58,643/-. Ground no.1 raised by the Revenue is dismissed. 20. Ground no.2 of the appeal reads as under: 2)....
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....d other High Courts in para 3.4 of its written submission. On careful consideration of entire facts, it is observed that Appellant has not given any proof that such expenditure is crystallised in current year hence argument of Appellant that such expenditure is as under: "5. We have heard rival contentions. Page 13 to 16 of the paper book comprise all details of assessee's prior period expenditure amounting to Rs. 67,88,591/-falling under major heads of C & F, misc. expenditure, outward freight and travelling etc. Its ledger accounts reveals that the same have been recognized on various dates from 01-04-2005 to 31-03-2006. There is hardly any dispute on genuineness aspect of the above stated expenditure heads. This is not the Revenue's case that the same is capital expenditure otherwise not allowable u/s. 37 of the Act. Both the lower authorities nowhere rebut assessee's case that it has been following past practice or the issue stands decided in its favour in earlier assessment years. Case law (1958) 33 ITR 681 (Bom) CIT vs. Nagri Mills Co. Ltd holds that when an assessee company is assessed at uniform rate, year of raising an expenditure claim is of ....
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....or in law, we see no reason to interfere in order of the ld.CIT(A) deleting the disallowance of prior period expenses of Rs.12,31,000/-. Ground no.2 raised by the Revenue is dismissed. 25. Ground no.3 reads as under: "3. That the ld.CIT(A) erred in law and on facts in deleting the disallowance of deduction of Rs.8,10,34,266/- made u/s.80JJA of the I.T. Act." 26. Issue raised by the Revenue in the above grounds relates to disallowance of deduction made by the AO of Rs.8,10,34,266/- claimed by the assessee under section 80JJA of the Act which was deleted by the ld.CIT(A). 27. The ld.CIT(A) has dealt with the issue at para-7 of his order. The Ld,CIT(A) noted the reasons for the AO disallowing the claim, as finding that the assessee failed to qualify for claiming deduction under section 80JJA of the Act on account of the assessee not fulfilling either of the criteria laid down in the section for claiming the deduction, of employing biodegradable waste and producing any item as referred to in Section 80JJA of the Act out of the same. Thus, the ld.CIT(A) noted that pre-requisite for claiming deduction under section 80JJA of the Act being employment of biodegradable wast....
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....urchased by the assessee was nothing but biological waste and from the same the assessee had produced biological agents i.e. enzymes, and thus qualified for the deduction under section 80JJA of the Act. The observation of the facts as noted by the AO and the arguments made before him at para 7.1 of his order are as under: "7.1 I have carefully considered the Assessment Order and the submission filed by the Appellant. The AO has observed that Appellant has shown total purchases of Rs. 20.77 crores in Profit & Loss Account of Biofeed Division which includes captive purchase at Rs.7.40 crores (including Maize purchased of Rs. 5.97 crores) and out of the balance Rs.13.37 crores, Rs.11.64 crores are shown as purchase of feed and these items are not bio-degradable waste as defined in Section 80DA. The AO also referred to definition of European Commission for Environment wherein Bio-degradable Waste is defined and came to conclusion that raw material used by Appellant is not bio-degradable waste. It was also contended by AO that Appellant has not produced any article being generation of power, production of bio-fertilizer, bio-pesticide, production of bio-gas or biological agent ....
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....ellant that allocation is on scientific basis hence allocation on turnover basis is not required. 30. The ld.CIT(A) thereafter went on to first to deal with requirement under the law for claiming deduction under section 80JJA of the Act noting that to be eligible to claim deduction under the said section, the assessee needed to satisfy two conditions, viz. (i) there should a collection and processing of or treatment of biodegradable waste, and (ii) this waste should be used for generating power or producing bio-fertilizers, bio-pesticides or other bio-logical agents etc. This analysis of the ld.CIT(A) is at para 7.2 of his order as under: "7.2 On careful consideration of entire facts, it is observed that provisions of section 80JJA reads as under: "Where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power or producing bio fertilizers, bio-pesticides or other biological agents or for producing biogas or making pellets or briquettes for fuel or organic manure, there shall be allowed, in computing the total income of the assessee, a dedu....
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....ctivity or from outside purchase. Hon'ble Bombay High Court in the case of CIT vs. Padma S. Bora [2013] 355 ITR 368 wherein it is held as under: "7. We have considered the submissions. We find that on examination of the evidence both Commissioner of Income Tax (appeals) as well as Tribunal have reached finding of fact that bagasse is a biodegradable waste used for making briquettes for fuel by the respondent assessee. This finding of fact was based on evidence led before the authorities by the respondent-assessee. We find that bagasse is a waste of the sugar factory. This waste is a bio-degradable waste and the same is collected on consideration by the respondent assessee from the factory. There could be no universal definition of the word "waste". The term waste has to be understood contextually i.e. place where it arises and the manner h-. which it arises during the processing of some article. The fact that sugar industry also regards Bagasse as waste is evident from Circular dated 4/2/2006 issued by the Sugar Commissioner, Maharashtra State, Pune. Besides the ITC classification of the Exim policy also classifies bagasse as a waste of sugar industry under Chapter 23 ....
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....bserved that all these residue maize, husk, feeds are generated from agro-processing industries and same are capable of being decomposed in nature without creating any damage to the nature. Appellant has argued that in environment there are plenty of microorganisms and these micro-organisms consume any material and release simple elements those are useful for environment and materials which can be consumed by these micro-organisms is called biodegradable. Further, bio-degradable agro-waste used by Appellant for producing biological agent being bio-feed are composed of various nutrition components such as protein, fibre, fat, vitamins, minerals, etc., and such waste is used to cultivate and multiply the useful microorganisms. It is the natural principle that when nutrition available in biodegradable waste is used by micro-organism, they rapidly grow and multiply manifold under suitable temperature. These facts reveals that Appellant has collected and processed bio-gradable waste only. In assessment order, AO has stated that waste collected by Appellant is not bio-degradable but he has not made any brought any evidences in support of his claim that how waste used by....
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....tured item as defined in 80JJA or not. The AO has simpliciter stated that Appellant has not manufactured any item referred in Section 80JJA whereas Appellant has emphatically argued that Appellant manufactures "bio-feed" which are biological agent as defined in Section 80JJA. During the course of Assessment Proceedings as well in Appellate Proceedings the Appellant submitted the process of manufacturing of bio-feed along with charts reproduced hereinabove. It is observed that biodegradable waste collected by Appellant are further processed with the help of fermentation to produce biological agents being enzymes which are biocatalysts. Appellant has also explained the process of bio-feed in three parts being culture development, seed preparation and final production in plant. It is observed that specific micro-organisms are added in the fermentation process which at specified control parameters of pH, temperature, aeration and time produces specific Enzymes. For each Enzyme a specific microorganism is used will changing the raw material (bio-degradable waste) proportions. Enzymes help in improving the any metabolic reaction in various industrial applications. They help in speeding u....
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....igned that the group company of the Appellant being Anil Bioplus Limited has also claimed similar deduction under Section 80JJA which was disallowed by Assessing Officer on similar ground and such disallowance was deleted by CIT (Appeals)-l, Ahmedabad vide his order dated 27th January, 2016 in Appeal No. 66/CIT(A)-l. Considering the facts discussed herein above, the Appellant has manufactured biological agent which is entitled for deduction under Section 80JJA of the Act. 34. On the basis of the above factual aspects to which the provision of law were applied by the ld.CIT(A), he held, the assessee was entitled to claim deduction under section 80JJA of the Act having fulfilled all the parameters required by the said section and also finding no basis with the AO for denying deduction tothe assessee. 35. The ld.CIT(A) thereafter went on to note that the AO had also raised another issue regarding allocation of expenditure between eligible and non-eligible units also. On this aspect, the ld.CIT(A) noted certain pertinent points that the assessee had given comprehensive working of profits derived from 80JJA units on purchases, could not be allocated on the basis of turnov....
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....ance under Section 80UA made by the AO for Rs.8,10,34,266/- is deleted. This ground of Appeal is allowed. As noted by us above, the ld.CIT(A) has based his order of allowing the entire claim of deduction to the assessee under section 80JJA of the Act applying provision of law to the facts of the case . 36. The ld.DR has been unable to point out any infirmity in the finding of the ld.CIT(A) that items purchased by the assessee, classified as bio-feed, did qualify as biodegradable waste as defined in section 80JJA of the Act, and item produced by the assessee from these bio-feed i.e. enzymes, qualified as "biological agents" as required by section 80JJA, and that the basis of allocation of expenditure by the assessee between the units and eligible for deduction under section 80JJA of the Act and not eligible for deduction 80JJA adopted by the assessee was consistent and correct. The ld.DR having unable to disturb the finding of the ld.CIT(A) either on facts and or in law, we see no reason to interfere in the order of the ld.CI(A) allowing the assessee's entire claim of deduction under section 80JJA of the Act. Ground of the appeal No.3 of the Revenue is dismissed. 37. In ....
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.... rejected the above identical grounds of the Revenue based on the reasons and conclusion made in that year. Admittedly there is no disparity on the facts and circumstances between the present year and the earlier assessment year cited (supra) qua the issues presently before us. Therefore, the observations and findings, we made in the foregoing paragraph no.14 to 37 holds good and apply mutatis mutandis to this appeal for Asst. Year 2012-13 also. We reject the above three grounds also in the present year by adopting same conclusion. 44. Next ground is ground no.(b) which reads as under: "That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs.13,32,326/- made u/s.115JB of the Act." 45. The issues raised in the above grounds are two folds viz. (i) with respect of disallowance made under section 14A of the Act, (ii) addition of disallowance made under section 14A while computing MAT income as per the provisions of section 115JB of the Act. 46. Here we are concerned with issue no.(ii) where the Revenue is aggrieved by action of the ld.CIT(A) in deleting the addition of Rs.13,32,326/- made under section 115JB of the Act. 47. We find that the issu....
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....see has utilised the funds for the business purpose; that if the holding company advances loan to its subsidiary and the subsidiary has utilised the same for the business purpose, then the assessee would be entitled to claim deduction of interest on its borrowed loans; that the assessee has sufficient interest free funds in the form of own capital, accumulated profits and other interest free creditors and loans to cover interest free advances to sister concern, and therefore no disallowance under section 36(1)(iii) of the Act was called for. After considering the submissions of the assessee, the ld.CIT(A) observed that the assessee has huge own funds as against the interest free advances given by the assessee for Rs.3.15 crores, and the presumption would be that such interest bearing advances were given out of own funds and not out of interest bearing funds available with the assessee. To support this observation, the ld.CIT(A) has relied on various case laws, which are noticed in the impugned order from page nos.52 to 54. He accordingly deleted the impugned addition made by the AO. 51. We have heard the ld.DR; perused orders of the Revenue authorities. It is evident that the AO....