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2024 (9) TMI 1866
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....below are independent and without prejudice to each other. 1. The order of the Deputy Commissioner of Income-tax, Central Circle 3(3), Chennai ('learned AO') dated 30 August 2022 bearing Document Identification Number ('DIN'): ITBA/AST/S/143(3)/2022- 23/1045032369(1) passed pursuant to the directions issued by the Hon'ble Dispute Resolution Panel ('DRP") is erroneous, bad in law, prejudicial to the Appellant and contrary to the facts and circumstances of the case. Issue No. 1 - Disallowance of depreciation on retention money amounting to RS. 80,65,113 2. The learned AO/ Hon'ble DRP has erred in law and facts by disallowing depreciation on plant and machinery amounting to Rs. 80,65,113/- in relation to the portion of retention money payable to the contractors by the Appellant. 3. The learned AO/ Hon'ble DRP has erred in holding that the liability to the extent of retention money is contingent and not an ascertained liability. 4. The learned AO / Hon'ble DRP ought to have appreciated that the Appellant has an enforceable debt to pay the retention money though the payment would be made subject to fulfillm....
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....faction to the suo-moto disallowance under section 14A of the Act made by the Appellant for the subject year. Issue No. 4-- Disallowance of provision for warranty amounting to Rs. 2,46,09,532 15. The learned AO / Hon'ble DRP has erred in disallowing the provision made for warranty of Rs.2,46,09,532 by the Appellant on a scientific basis during the year. 16. The learned AO /Hon'ble DRP failed to appreciate the fact that the Appellant has accounted for provision for warranty based on mercantile system of accounting which has been followed consistently. 17.The learned AO /Hon'ble DRP has erred in holding that there is no contractual obligation for the Appellant in respect of provision for warranty without fully appreciating the facts and circumstances of the case of the Appellant. 18. The learned AO/ Hon'ble DRP ought to have appreciated the scientific method followed by the Appellant for calculation of the amount of provision for warranty and has erred in disallowing the same without going through the warranty computation and without providing any explicit and cogent reasons for the rejection of the scientific method follow....
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....cause notice dated 09 September 2021 and as such the order suffers from non-compliance with principles of equity and natural justice Issue No. 6- Disallowance of entrance fee and club service fee paid by the Appellant amounting to Rs. 16,91,849 29. The learned AO /Hon'ble DRP has erred in disallowing the amount of entrance fee and club service fee paid by the Appellant during the subject year amounting to RS. 16,91,849 which is the genuine business expenditure of the Appellant. Issue No. 7 Disallowance of expenses in relation to employee's contribution to relevant fund under section 36(1) (ya) of the Act 30.The learned AO /Hon'ble DRP has erred in disallowing the employee's contribution of Rs.2,90,370/- to Employee State Insurance Scheme ('ESI') remitted after the due date specified in ESI Act, 1948 but before the due date of filing of return of income for the subject AY. 31. The learned AO / Hon'ble DRP has failed to appreciate that that on a joint reading of sections 36(1)(va) and 438 of the Act, even though the ESI contribution had been made after the relevant statutory due date, the same shall be allowed a....
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....apital expenditure incurred by the Appellant in its Trichy Unit. 40. The learned AO / Hon'ble DRP, without appreciating the fact that the approval for in-house R&D facility for the Trichy Unit has been granted by the DSIR [being the prescribed authority under the provisions of the Act] from 01 April 2016, has grossly erred in stating that the R&D facility at Trichy was not in operation during the subject year. 41. The learned AO /Hon'ble DRP has erred in disallowing the claim of deduction on R&D expenses under section 35(2AB) without appreciating that the DSIR being the prescribed authority under the provisions of the Act has scrupulously verified the claim in detail for the subject A Y. 42. Without prejudice to the above grounds, the learned AO / Hon'ble DRP failed to appreciate that for the purpose of claiming deduction under section 35(2AB) of the Act, the relevant event is 'incurrence of expenditure' not 'put to use' of capital asset on which deduction is claimed. 43. The learned AO / Hon'ble DRP failed to appreciate that it is a settled position of law that where any question arises on the validity of the dedu....
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....ound, the learned AO / TPO and Hon'ble DRP erred in making transfer pricing adjustment without a detailed economic analysis but basis a comparison of bank guarantee rates, without appreciating that due to differences in business operations, risk parameters, etc. bank guarantees are inherently different from and cannot be compared with letter of comfort. Further, the learned AO / TPO failed to provide the Appellant an opportunity to review the comparables adopted for the arm's length range proposed at the time of issuing the SCN and provide its contentions, thereby violating principles of natural justice. Others 51. The learned AO has erred in law and facts, by initiating penalty proceedings under Section u/s. 274 read with section 271AA and section 270A of the Act, without appreciating the contentions placed in the above grounds. 52. The Appellant craves leave to add, supplement, amend, delete or otherwise modify any of the grounds stated hereinabove before commencement of or at the time of hearing. 3. The brief facts of the case are that, the assessee company is engaged in the business of manufacturing and selling of automobiles tyres....
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....ce on 04.07.2022, upheld the additions made in the draft assessment order. Hence, the addition made in the draft assessment order is hereby confirmed. 4. On the basis of the above discussion, the assessment proceedings is completed u/s. 143(3) r.w.s. 144C(13) of the Act, 1961 and total assessed income is determined as under: S. No Description Amount Income returned for AY 2017-18 1180,33,99,840 ADD: Determination of Arm's Length Price 6,48,34,571 ADD: Disallowance of Depreciation on retention money payable 80,65,113 ADD: Disallowance of Forex Gain/Loss and Forward contract premium charges: 18,85,53,023 ADD: Disallowance as 14A r.w.r. 8D 26,20,528 ADD: Disallowance of excess provision for warranty 2,46,09,532 ADD: Issue of transactions of the assessee company through MRF- Singapore: 23,76,15,197 ADD: Disallowance of Entrance Fees and Club Services Fees 16,91,849 ADD: Disallowance of expenses in relation to employee's contribution to the relevant fund 2,90,370 ADD: Disallowance of deduction claimed u/s. 35(2AB) of the Act, 1961 70,46,94,053 Assessed ....
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....(SC) held as follows: "4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date." Hence, the ld. Counsel argued that the entire liability is allowable as revenue expenditure/ depreciation on the capitalised expenditure. Further he stated that this issue has been decided in favour of the assessee in its own case by this Hon'ble ITAT in ITA No.641 to 645/Chny/2018 (Enclosed in Page No.13 of the paper book of case laws - Para 3.1 of the order) and hence prayed for deleting the addition of Rs.80,65,113/- made by the AO, by allowing the ground of the assessee. 5.4 Per contra the Ld. DR relied on the assessment order of the AO. 5.5 We heard the rival arguments and perused the materials on record. We note that the very same issue has already been dealt by this tribunal in assessee's own case by holding as under: "3.1 We heard the rival contentions, find merit in the submissions made by the AR. Since, the assessee is maintaining mercantile system of accounting, upon the basis of which the profits or gains are....
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....ments and perused the materials on record. We note that the very same issue has already been dealt by this tribunal in assessee's own case by holding as under: "5.1 We heard the rival submissions. Since, the assessee pleads that the foreign currency loan was used for the purpose of acquiring the assets in India, it is clear from the orders of the lower authorities that the relevant facts in connection with this claim have not been verified and hence this issue is remitted back to the AO for verification as to whether the impugned asset(s) were purchased in India with the foreign currency loan or not. If it is/they are of Indian origin, then section 43A would not apply. In such case, since the assessee is maintaining its books of account on mercantile system basis and following the Accounting Standard-11, then the ratio of Woodward Governor India Pvt. Ltd., [312 ITR 244 (SC)] would apply and accordingly the loss claimed by the assessee has to be allowed. Subject to the above verification and findings, the issue is remitted back to the AO and the assessee's corresponding grounds of appeals are treated as partly allowed for statistical purposes. 5.2. With reg....
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.... same issue has already been dealt by this tribunal in assessee's own case by holding as under: This appeal has been filed by the Revenue under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) challenging the order dated 09.05.2018 made in ITA.No.643/Chny/2017 for the assessment year 2011-12 on the file of the Income Tax Appellate Tribunal, Madras 'D' Bench, Chennai ('the Tribunal' for brevity). 2. The Revenue has raised the following substantial question of law for consideration: "Whether the Tribunal was justified in directing the AO to restrict the disallowance made u/s. 14A of the I.T. Act, 1961 to the extent of dividend income earned especially when the section does not provide for any such exceptions?" 3. We have heard Mrs. R. Hemalatha, learned Senior Standing Counsel appearing for the appellant-Revenue and Mr. R. Vijayaraghavan, learned counsel for the respondent-assessee. 4. The issue is with regard to disallowance made under Section14A of the Act. 5. The Tribunal, after taking note of the submissions made by the assessee and also the decision in the case of Joint Investments ....
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....e note that the very same issue has already been dealt by this tribunal in assessee's own case by holding as under: 7. We have heard rival contentions and gone through facts and circumstances of the case. We noted from the order of CIT(A) that neither the AO nor CIT(A) has examined the details filed before them during the set aside assessment proceedings or even remand proceedings by the AO and simply noted that the assessee could not establish that all the conditions prescribed in the decision of Hon'ble Supreme Court in the case of Rotork Controls India Pvt. Ltd., supra are satisfied. We noted that the authorities below have neither examined the issue nor gone into the details and just simpliciter confirmed the disallowance. Moreover, we noted from the Tribunal order for assessment year 2010-11 in ITA No. 740/Mds/2014 dated 15.05.2015, wherein the Tribunal has given categorical finding while setting aside the matter to the file of the AO by observing in para 7 as under :- 7. We have heard both the sides and perused the materials on record. According to the ld.AR, the assessee has adopted the financial year 2008-09 as base year. The retail sale a....
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....sioner of Income-tax(Appeals). Therefore, it is not clear that what extent the liability actually required in the assessment year under consideration while framing the assessment by the Assessing Officer. The provision made whether on actual quantification or not, was not verified by the Assessing Officer. The Commissioner of Income- tax(Appeals) after getting the assessee's actual working of warranty not get verified from the AO and he has decided himself that it is correct. Therefore, in our opinion it is appropriate to remit the issue to the file off the Assessing Officer to examine the actual quantification of the provisions made towards warranty and decide in the light of the judgment of Supreme Court in the case of Rotork Controls India Pvt. Ltd. (supra). 7.1 We noted that the issue of warranty can be allowed on satisfying the following conditions as held by Hon'ble Supreme Court in the case of Rotork Controls India Pvt. Ltd. (supra) :- a. That there an enterprise has a present obligation as result of past event. b. It is probable that an out flow of resources will be required to settle the obligation and c. A reliable estimate can ....
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.... Appellant has filed modified return offering such income) and these grounds of appeal are academic. 9.2 Since, the Assessee has entered into APA and not pressed the Ground Nos. 20 to 28, we dismiss the grounds as not pressed. 10. Issue 6: Disallowance of entrance and club service fee paid by the Appellant of Rs. 16,91,849/- Ground Nos. 29: Contention of AO/DRP: The AO has disallowed a portion of entrance and club service expenses incurred by the Appellant for the purpose of business for not furnishing any documentary evidence. Relevant extracts of the final order: "Hence, as per direction received by the DRP, Bangalore and verification of details submitted by the assessee, the expenditure to the tune of Rs. 16,91,849/- (Rs. 51,41,849/- - Rs. 34,50,000/-) is disallowed and added back to the total income of the assessee for the A Y. 2017-18." - (Pg No. 21 of the final order) Relevant extracts of the DRP order: "For the rest, as no documentary evidence has been filed before the Panel, the Panel confirms the disallowance of the balance."- (Para No. 7.3 in Pg No. 20 of the DRP order) 10.1 The Ld.AR stated that the assessee has incurred the expense....
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....ve gone through the orders of the authorities and we note that the AO by following the decision the Hon'ble Supreme court in the case of Checkmate Services (P.) Ltd (supra) has made the disallowance of sum of Rs.2,90,370/- under section 36(1)(va) of the Act, on account of employee's contribution to the provident fund etc. which was not credited to the employee's account by the due date under the respective law. Therefore, we do not find any merit in the grounds of the appeal of the assessee and confirm the action of the AO. Thus, the ground Nos.30 to 32 of the assessee is dismissed. 12. Issue 8: Disallowance of claim made by the Appellant under section 35(2AB) of the Act (Ground Nos. 33to 44) 12.1 The assessee claimed deduction under section 35(2AB) of the Act with respect to its R&D units in Thiruvottiyur and Trichy. But the AO based on a survey which happened in 20/11/2019 by relying on his own erroneous interpretation of the statements and other facts disallowed certain amounts on an ad-hoc basis. The DSIR after extensive verification has granted its approval in Form 3CL on 08/04/2021 with respect to the eligible capital and revenue expenditure. 12.2 The AO&....
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....rated low aspect ratio passenger radial tyres ● All steel truck radial tyres ● Special tyres for gravel rally and winter rally ● Helicopter tyres ● To develop compounds and tyre design parameters to conform to the performance requirements of the tyres for specialized applications and to satisfy the needs of the automobile Original Equipment Manufactures. ● R&D on process development for improvement of productivity, consistency and precision. ● Process development for fuel and energy conservation ● To evaluate new materials and regular raw material sources for cost optimization and import substitution. ● To develop new machinery& modify the existing equipment & accessories for improved accuracy & reliability and also for import substitution as a part of indigenous development. ● Advance design concepts for tyre development 3. Whether the nature of the business is related to the proposed objectives of the scientific research contemplated by the company: Yes. 4. Details of the nature of existing in-house Research and Development facil....
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....that the Appellant had not completed constructing one of the buildings in its Trichy R&D unit by considering the statement of Mr. Cheriyan Zachariah during the survey proceedings (Page No. 579 of the factual paper book) and hence, the entire deduction claimed on capital expenditure with respect to Trichy R&D unit during the relevant AY was disallowed. The Ld.AR also stated that the main reason for the AO's conclusion is that one of R&D building have not been completed and hence the Appellant is not entitled for weighted deduction u/s.35(2AB) which is without any basis. Relevant extracts of the final order: "Further it is also seen that as per milestone reports submitted by contractors that the substantial building in Trichy Unit was completed only towards the end of April, 2018"(Pg No. 24 and 25 of final order) Relevant extracts of DRP order: "Clearly emanating from the statements recorded from the Survey are facts that the Trichy R&D unit was not in operation during the F. Y. 2016-17 relevant to assessment year 2017- 18." (Para No. 10.4 in Pg No. 35 of the DRP order) 12.4.2 At the outset, the Ld.AR stated that the assessee has not claimed deductio....
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....hat although the prescribed Authority for quantification of the Expenditure eligible for weighted deduction u/s.35(2AB) of the Act is DSIR, the findings of the Survey carried out by the Department u/s 133 A cannot be ignored." - Para No. 10.5 in Pg No. 36 and 37 of the DRP order 12.5.1 The Ld.AR submitted that it is not the jurisdiction of the AO to sit on judgment of what constitutes high-end R&D activity and what doesn't. This is exactly why the DSIR exists and for the AO to superimpose and substitute the DSIR is beyond the provisions of the Act read with Rules. It is also pertinent to mention that the assessee as part of the approval by DSIR must submit reports on the activities undertaken in their R&D Unit every year. There is no finding by the DSIR that the activities carried out by the Appellant in their R&D Unit is of inferior quality as has been erroneously deduced by the AO based on his own interpretation of survey statements. Therefore, there is no basis for the AO to conclude that there is no high-end R&D activity in the Thiruvottiyur R&D unit. 12.5.2 Further, the Ld. AR argued that the sworn statement relied on by the AO deals with an entirely different issue ....
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....rred in making an ad-hoc disallowance in this regard. 12.6.2 Further, the Ld.AR stated that the sworn statement relied by the AO deals with an entirely different issue (i.e., transaction of the assessee with MRF SG) and it does not deal with the technical qualification of the employees of the assessee and hence, the conclusion arrived at by the AO is erroneous. 12.7 Issue No.4: Disallowance due to capitalisation of assets in advance in the Thiruvottiyur R&D unit: Contention of AO/DRP: The AO has examined, a sample of TWO machineries purchased for the R&D unit and has stated that the "acceptance letter" for the machinery was dated in the next FY, whereas the assessee has capitalised the same in the current year. He has relied on the sworn statement of one Mr. Anindya Kundu. (Question No.2 in Page 584 of the Factual paper book). Relevant extracts of the final order: "The response of the Shri. AnindyaKundu, Chief accounts Manager of MRF of Thiruvottiyur plant, to Q.2 of statement recorded during the course of survey proceedings u/s. 133A of Income tax Act, 1961 on 21.11.2019 clearly shows that in assets where there were no installation certificates were pushed ....
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....d. 12.7.5 Per contra the Ld.DR relied on the orders of the AO / DRP and stated that the data and details found during the survey proceedings cannot be ignored and hence the action of the AO/DRP is in accordance of law and hence the assessee's ground on this issue be dismissed. 12.7.6 We have heard the rival contentions and gone through the relevant materials and orders of the authorities below. It is admitted fact that, during the Assessment year 2017-18, the assessee has incurred certain expenditure of both revenue and capital in nature, towards its R & D division for the 2 units situated at Thiruvottiyur and Trichy. Accordingly, in the relevant A.Y. 2017- 18 the assessee has claimed weighted deduction of an expenditure on Scientific Research U/s.35(2AB) of the Act, to the tune of Rs.276,70,98,974/- on Revenue Expenditure of Rs.40.63 Crores (Weighted deduction of Rs. 81.26 Crores) and Capital Expenditure of Rs.97.72 crores (Weighted deduction of Rs.195.44 Crores) with respect to its 2 R&D units situated at Thiruvottiyur and Trichy. Further, the DSIR as per Form 3CL issued dated 08/04/2021, has approved eligible R & D Expenditure as per Section 35(2AB) of the Act in the c....
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....ition initially in the year 1974. Subsequently it had applied for obtaining renewal of recognition multiple times with the latest renewal granted in the year 2018 upto the year 2021. The Trichy R & D unit had applied for and obtained recognition from DSIR in the year 2018 upto the year 2021. During the course of survey proceedings U/s.133A of the Act, held on 21/11/2019 and statements recorded from the employees of the company and revenue authorities obtained certain information in respect of the expenditure incurred by the assessee towards R&D units. The Assessee has furnished before the DSIR, the details of various research projects undertaken by the R&D units, the details of the scientific equipment used by these units, the qualification of people involved in the research and the same have been taken into consideration by the DSIR before granting the above recognition. 12.7.9 According Ld.AR as a part of the recognition process, the DSIR authorities have visited the premises of R&D centres situated at Thiruvottiyur and Trichy in 2018, to satisfy themselves of the research activity carried out by the assessee at such units. The detailed presentation explaining the existing and....
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....had disallowed certain expenditure after issue of the Form 3CL by the DSIR, the prescribed authority for the quantification of expenditure for claim made U/s 35(2AB). Since the DSIR is the prescribed authority quantification of expenditure for claim of weighted deduction under section 35(2AB), We are of the opinion that the AO has correctly restricted the weighted deduction u/s. 35(2AB)as quantified by the DSIR. Hence we uphold the action of the AO and grounds of objection raised are hereby rejected. R&D expenses claimed for a building where building was not completed: Findings of the Survey U/s 133 A and the conclusions of the AO It is also seen that as per milestone reports submitted by contractors that the substantial building in Trichy Unit was completed only towards the end of April, 2018. In this regard, Sworn statement u/s. 131 of Income tax act, 1961 was recorded from Shri. Cheriyan Zachariah working as GM Bias Plant and also Administrative Head of R&D Unit, MRF on 21.11.2019 during the course of survey proceedings u/s. 133A of Income Tax Act, 1961 in the office of MRF Ltd. Perambalur. Shri. Cheriyan, in his statement, has dearly mentioned that the entire ....
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....ence on the basis of facts presented before us by the AO which were not controverted by the assessee, we are of the opinion that the AO was correct In disallowing weighted deduction claimed u/s. 35(2AB) of Income tax Act, 1961 in respect of capital expenditure incurred in R&D, Trichy to the tune of Rs.63.7 Cr and relevant capital expenditure to the tune of Rs. 31.85 Cr for AY.2017-18. Work claim of R &D Expenses on large testing items which were not installed at all at Thiruyottiyur As per the AO: It was also found during Survey that R &D expenses at Thiruvottiyur has been claimed on Non R& D work also. It is also seen that work claim of R & D Expenses was made on large testing items which were not Installed at all at Thiruvottiyur. The AO's conclusions were based on the statement recorded of Sri. AnindhyaKundu and Sri. Elavarasan regarding letters of acceptance. On the basis facts gathered during Survey and the statements of the above quoted persons, the AO concluded that Certain assets were capitalized during FY 2016-17 (relevant to the AY 2017-18) for which acceptance letters were dated subsequently {in FY 2017-18) and hence the AO has arrived at a conclusi....
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.... were not shared with it are misplaced as the statement recorded are shared with the persons whose statements are recorded. The statements may not have been recorded on oath as in the case of statements recorded U/s 132(4) but they do throw Information on the activities of the assessee which have been corroborated with the facts gathered during Survey which has not been contradicted by the assessee. Hence, We find no reason to interfere with the findings of the AO. Accordingly the Grounds of objection raised on this issue are rejected." 12.8.2 Now, we proceed to understand the provisions of section 35(2AB) based on the judicial precedents relied on by the assessee; In the case of Tejas Networks Limited [ITA No. 1073 of 2008/ Hon'ble Karnataka High court], the identical issue has been dealt and their lordships held that the assessee's claim of deduction u/s. 35(2AB), pursuant to certificate issued by prescribed authority i.e. DSIR, approving such claim, the AO cannot deny weighted deduction in respect of scientific expenditure. Further, the AO cannot sit in judgement over report submitted by prescribed authority. The relevant extract of the decision is given below: ....
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.... only though the Audit Certificate dated 10.04.2013 - Annexure - E issued by the auditor of the assessee indicated Rs. 7,009 lakhs as weighted deduction. 27. A plain reading of Section 35(2AB) would clearly indicate that where a company is engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) or in-house research and development facility as approved by the prescribed authority, then, they shall be allowed a deduction of a sum equal to one and a half times of the expenditure so incurred. The word used 'shall' in the above said provision ordinarily mean that it should be understood in the context in which it is used and there cannot be departure in this regard. The said provision would also indicate that such expenditure as approved by the prescribed authority would be entitled for being allowed as a weighted deduction. There being no dispute to the fact that DSIR being the prescribed authority in the instant case, ha....
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....he Act itself, since the prescribed authority being possessed of requisite expertise, it would be in a better position to certify as to whether such expenditure claimed by the assessee under Section 35(2AB) would fall within the said provision or outside. This exercise of examining the correctness of the Certificate issued by the prescribed authority is not available to the Assessing Officer as could be seen from scheme of Section 35 the Act. 28.It is in this background, sub-section (4) of Section 43 will have to be considered, which defines as to what activities would constitute "scientific research" as indicated under the said Section namely, Section 43(4). As to whether any expenditure incurred in the acquisition of rights in or arising out of scientific search as indicated in clause (ii) of sub-section (4) of Section 43 is an issue which requires to be examined the prescribed authority itself and it would not be in the domain of the assessing authority to undertake such an exercise. When Section 35(2AB), Section 35(3) and Section 43(4) of the Act are read harmoniously, the irresistible conclusion that has be drawn would be that assessing officer cannot sit in judgment ....
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...., the Assessing Officer still had to examine whether such company had fulfilled the conditions referred to in clause (iv), as such other conditions as may be prescribed, reference to which we find in rule 18DA. Any other view would create conflict of decision making process. Even revenue could not dispute that many of these requirements prescribed under rule 18DA are to be examined by the prescribed authority. If once the prescribed authority examines such conditions and upon being satisfied that the conditions are fulfilled, grants approval, can the Assessing Officer take a different view? The answer obviously has to be in the negative. First and foremost, the prescribed authority is a specialised body having expertise in the field of scientific research and development. The requirements are extremely complex scientific requirements and have therefore, been rightly placed in the hands of an expert body to judge Secondly, there is no reason why once an authority which is prescribed under the rules for a specific purpose has been invested with statutory functions, the Assessing Officer should be allowed to overrule the decision of the said body. Thirdly, there are multiple indicatio....
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.... Judged from such angle, once the approval is granted by the prescribed authority and such approval is valid, it would no longer be open for the Assessing Officer to verify the satisfaction of the conditions prescribed under rule 18DA in order to refuse deduction under section 80-1B(8A). This however, does not mean that other issues relevant to the claim of deduction by the assessee would be taken away from the jurisdiction of the Assessing Officer. For example., in this very case, the Assessing Officer had doubt about the sample storage income being part of the income from eligible business. After hearing the assessee, he disallowed the deduction holding that the same does not form part of the income of the assessee's business of scientific research and development. 21. Before closing, we may refer to the decision cited by Shri. Bhatt for the Revenue. In case of Southern Technologies Ltd (supra), the issue was regarding the taxability of income ignoring the provisions contained in the Companies Act concerning non banking financial company which permitted adjustment of a provision for possible diminution of value of assets of the company allowing the company to show on....
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....arch and it also wants the assessee to get the benefit immediately in the year in which he incurs the expenditure in the nature of revenue or capital for scientific research and therefore the Legislature refers to incurring of the expenditure and not the using of the asset. 20. Once it is established that the expenditure was incurred for the purpose of scientific research and the conditions incorporated in Section 35 of the Act are fulfilled, in our opinion, the Revenue cannot expect the assessee to start using the asset immediately. In a given case the assessee might have to go on incurring expenditure for several years before putting the asset to actual use. If the interpretation advanced by standing counsel for the Revenue is accepted, we are afraid, the assessee would not be in a position to avail of the deduction under Section 35 of the Act to the extent to which the Legislature intends to give to the assessee. It is also pertinent to note that the deduction under the provisions of Section 35 of the Act is given only during the previous year in which the expenditure is incurred. If the assessee has taken several years to construct or acquire a particular asse....
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.... such expenditure is incurred. The assessee becomes entitled to deduction even if the asset in question is not actually used, provided it has incurred capital expenditure during the previous year on scientific research. 21. In view of the above, we noted that for the purpose of claiming deduction of capital expenditure U/s. 35(1)(iv) read with Section 35(2) of the Act, what is necessary is incurrence of expenditure, which the assessee company has incurred and not the user of the asset during the previous year in which such expenditure is incurred. Further, the eligible year of claiming deduction is the year of incurrence of such expenditure. In view of above, it will be observed that as per Section 35(I)(iv) read with Section 35(2) of the Act, deduction for capital expenditure incurred is allowable under the said section, as under: "(i) Deduction under the provisions of Section 35 of the Act is given only during the previous year in which the expenditure is incurred; (ii) Accordingly, an assessee cannot be deprived off the benefit of deduction in respect of capital expenditure under the provisions of Section 35 of the Act if the asset is not used in the p....
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....t under section 115P of the Act. 13.1 The Ld.AR stated that the assessee is eligible for the credit of the DDT paid for the subject year. The AO to be given a direction to allow the credit of the full DDT paid by the assessee and to delete the consequential interest under section 115P of the Act. 13.2 Per contra the Ld. DR stated that the issue may be remitted back to AO for verification. 13.3 Since, the details of DDT paid by the assessee needs to be verified for giving credit, we remit back this issue to the files of the AO for verification of the DDT Paid by the assessee and the credit of the same be given in accordance with law. Thus, the ground Nos.45 & 46 of the assessee is allowed for statistical purpose. 14. Issue 10: Additional claim on deduction under section 115-O(1A) of the Act for the purpose calculation of DDT payable (Ground Nos. 47 and 48) 14.1 The Ld.AR stated that the assessee has received an amount of Rs. 11,48,306/- from its foreign subsidiary (M/s. MRF Sri Lanka). The assessee had duly paid tax on such dividend received from MRF Sri Lanka under section 115BBD of the Act. In the return of income filed for the subject year, the assessee had inadver....
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....4 in favour of the assessee for the A.Y.2017-18 in IT(TP)A No. 64/Chny/2022, is applicable mutatis mutandis to the grounds raised by the assessee in the A.Y. 2018-19 and hence these grounds of the assessee are allowed in terms of para Nos .6.3 to 6.4(Supra). 20. Issue 3: Disallowance u/s. 14A of the Income-tax Act, 1961 ('the Act') (Ground Nos. 12 to 14 for A.Y. 2018- 19 &Ground Nos. 7 to 11 for 2019-20) 20.1 Since, the facts are similar and the same has been adjudicated in paranos. 7.3 to 7.4 in favour of the assessee for the A.Y. 2017-18 in IT(TP)A No.64/Chny/2022, is applicable mutatis mutandis to the grounds raised by the assessee in these A.Y. 2018-19 & 2019-20 and hence these grounds of the assessee are allowed in terms of para Nos. 7.3 to 7.4(Supra). 21. Issue 4: Disallowance of excess provision of warranty (Ground Nos. 15 to 19 for A.Y. 2018-19 &Ground Nos. 12 to 16 for A.Y. 2018-19) 21.1. Since, the facts are similar and the same has been adjudicated in para nos. 8.3 to 8.4 in favour of the assessee for the A.Y. 2017-18 in IT(TP)A No.64/Chny/2022, is applicable mutatis mutandis to the grounds raised by the assessee in these A.Y. 2018-19 & 2019-20 and he....
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....adjudicated in para 14.3 in favour of the assessee for the A.Y.2017-18 in IT(TP)A No. 64/Chny/2022, is applicable mutatis mutandis to the grounds raised by the assessee in the A.Y.2018-19 and hence these grounds of the assessee are allowed for statistical purpose in terms of para No. 14.3(Supra). 27. Issue 10: Short-credit of TDS granted in the final order (Ground No. 44for 2018-19 & Ground No.32 for the A.Y. 2019-20) The fact that the AO has not given full credit of the TDS credit eligible to the assessee for the A.Y. 2018-19 & 2019-20. 27.1 The Ld.AR stated that the Assessee is eligible for the credit of the entire TDS claimed by the Assessee in the return of income filed for the A.Y. 2018-19 & 2019-20 and hence he prayed for issuing a direction to allow the entire credit of the TDS eligible to the assessee. 27.2 Per contra the Ld. DR stated that the issue may be remitted back to AO for verification. 27.3 Since, the details of TDS credit available to the assessee needs to be verified for giving credit and we remit back this issue to the files of the AO for verification of the TDS to the assessee and the credit of the same be given in accordance with law. Thus, the ....