TaxTMI 
TaxTMI 
2026 (10) TMI 660
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....arising from the assessment order dated 18.12.2019 passed by the Assistant Commissioner of Income-tax, Circle 9(1)(2), Mumbai ('the Assessing Officer') under section 143(3) of the Act for the assessment year 2017-18. 2. The assessee has raised the following grounds of appeal: "1. On the facts and in the circumstances of the case and in law, the Appellant respectfully challenges the order dated 26.09.2025 passed under section 250 of the Act upholding the assessment order dated 18.12.2019 passed under section 143(3) of the Act. 2. Disallowance under section 14A read with Rule 8D - Rs. 11,64,635/- (a) The learned CIT(A) erred in upholding the disallowance of Rs. 11,64,635/- under section 14A of the Act. (....
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....ny of the above grounds." 3. Briefly stated, the assessee is engaged in the manufacture of water-soluble films and bio-compostable products. It filed its return of income on 30.11.2017 declaring total income of Rs. 14,57,96,930/- under the normal provisions and book profit of Rs. 2,75,05,088/-. The case was selected for scrutiny and the assessment was completed under section 143(3) at a total income of Rs. 26,54,47,563/-. The Assessing Officer made a disallowance of Rs. 11,64,635/- under section 14A read with Rule 8D and a further disallowance of Rs. 11,84,86,000/- under section 37 read with section 115BBF(2). The learned CIT(A) confirmed both additions. The assessee is, therefore, in appeal before us. 4. Ground no. 1 is general and d....
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....ure in accordance with the prescribed method only if, having regard to the accounts of the assessee, he is not satisfied with the correctness of the assessee's claim. The requirement is not an empty formality. The Assessing Officer must first notice the claim actually made by the assessee, examine it with reference to the accounts and record why it is not correct. Only thereafter can the machinery of Rule 8D be applied. 8. In the present case, the computation of income placed on record shows a suo motu disallowance of Rs. 16,86,936/-. The Assessing Officer nevertheless proceeded throughout on the contrary premise that no amount had been disallowed. The general observations recorded in paragraph 3.3 of the assessment order address a claim....
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....7 read with section 115BBF(2). The learned CIT(A) agreed that expenditure attributable to royalty income taxable at the concessional rate could not again reduce income taxable at the normal rate and affirmed the disallowance. 10. Before us, the learned Authorised Representative did not dispute that expenditure properly attributable to royalty income governed by section 115BBF has to be identified in accordance with law. His principal objection was to the basis and quantum adopted by the Assessing Officer. It was submitted that total royalty income of Rs. 22,86,09,908/-arose from eight patents, but royalty of only Rs. 12,52,61,284/- relating to six patents was offered under section 115BBF at the prescribed rate. Royalty of Rs. 10,33,48,62....
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....ub-section (2), which begins with a non obstante clause, provides that no deduction in respect of any expenditure or allowance shall be allowed under any provision of the Act in computing the income referred to in section 115BBF(1)(a). Thus, expenses having a nexus with the qualifying royalty stream cannot be used to reduce the other business income while the corresponding gross royalty enjoys the special rate. At the same time, the amount to be so excluded must rest on relevant facts and a reasonable nexus. Section 115BBF(2) does not authorise an indiscriminate allocation of every item in the Profit and Loss Account merely in the ratio of gross receipts. 12. The Assessing Officer adopted 72.35 per cent by taking the entire royalty of Rs....