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2016 (10) TMI 1303 - ITAT CHENNAIRecomputation of deduction claimed by the assessee u/s 80IB - CIT(A) had summarily rejected the claim of the assessee that R&D activities carried on had no bearing with Pondicherry Unit - HELD THAT:- As stated in the annual report for financial year 2004-05 that R&D carried out by the assessee was to absorb the technology for air assisted direct injection for two stroke engines, and product launch was proceeding as per schedule, for Indian three wheeler application. It is not disputed by the lower authorities that products manufactured at Pondicherry Unit and Maraimalainagar Unit though similar were not identical. That the products were different is clear from the list enumerated in paper book page 110 - products were different - R&D unit itself as such was situated in Maraimalainagar Unit. This is evident from letter dated 15.4.2004 of Ministry of Science and Technology of New Delhi, giving recognition to the R&DRP Unit, placed at paper book page 62. When the assessee asserted that R&D was exclusively for Maraimalainagar Unit and for its products, in our opinion, without any evidence being brought on record the lower authorities should not have taken a view that such expenditure was also relatable to Pondicherry Unit - reallocation of R&D expenditure was not called for in the facts and circumstances of the case. Such reallocation of R&D expenditure and the consequent reduction in claim u/s 80IB of the Act stands deleted. Benefit of deduction u/s 80IB denied - Foreign exchange fluctuation gain/loss - HELD THAT:- . Rule of consistency requires that when foreign exchange loss is considered as expenditure for calculating deduction u/s 80IB of the Act in earlier years, when there is a surplus in a subsequent year, it should not be excluded. When a similar set of facts permeates through a number of years and there is nothing on record to show that a different view was required to be taken on such set of facts, though rule of res judicata does not apply to income tax proceedings, rule of consistency has to be applied unless there is a gross violation of law which calls for a deviation. We are of the opinion that the lower authorities erred in not allowing the claim of deduction u/s 80IB of the Act on foreign exchange gains. Reallocation of electricity and rental expenditure incurred for the Head Office to the Pondicherry Unit while working out deduction u/s 80IB - HELD THAT:- As decided in own case [2011 (4) TMI 1342 - ITAT CHENNAI] it was held by this Tribunal that assessee could not show why the Head Office expenditure ought not have been allocated in proportion to total turnover. The facts and circumstances being the very same, we do not find any reason to interfere with the order of the CIT(A) in this regard. Ground Nos. 9 & 10 are dismissed. Claim of deduction by the R&D Unit of Maraimalainagar Unit disallowed - HELD THAT:- Assessee being already into the line of manufacturing fuel injection systems, developing the technology for an improved version of fuel injection system cannot be considered as a new venture at all. In taking this view, we are just fortified by the judgment of Apex Court in Alembic Chemical Works Co. Ltd [1989 (3) TMI 5 - SUPREME COURT] - We also note from the break-up of expenditure given by the assessee in page 64 of the paper book that these were salaries, travel and administrative expenditure, technical guidance, components, consumables and tools, preliminary fee etc. These payments do not give any enduring benefit to the assessee nor result in acquisition of any capital asset. In the circumstances, we are of the opinion that the disallowance was not called for. Such disallowance stands deleted. Upward adjustment for notional interest calculated on the advances given by the assessee to its wholly owned subsidiary called M/s Amtec Precision Products Inc, in USA - HELD THAT:- Finding a comparable uncontrolled transaction, where a loan was given to an entity which was subsidiary to the tested party, and whose capital stood completely eroded due to loss was not practical or feasible. The simple reason is that no other person would have given any loan to such an entity, whatever might be the interest rate since the chances of recovery was negligible. In such a situation, when there could have been no reasonably identifiable comparable uncontrolled transaction, computation of comparable uncontrolled price by applying of Rule 10B(1), fell at the threshold. Section 92C(1) prescribes computation of ALP by comparable uncontrolled price method, resale price method, cost plus method, profit split method, transactional net margin method and any other method prescribed by the Board could have been applied. In our opinion, the question of benchmarking the transaction of the nature mentioned, applying any of the methodology prescribed in sec.92C(1) did not arise at all due to the particular facts and circumstances. According to us, fastening of an interest rate on the assessee when there was no comparable uncontrolled rate that could have been identifiable was incorrect. We, therefore, have no hesitation in deleting the addition made by the Assessing Officer/TPO. Interest u/s 234A - HELD THAT:- We are of the opinion that this matter can be looked into by the Assessing Officer and if there was no delay in filing the return, question of levy of interest u/s 234A of the Act would not arise. Accordingly, this ground is allowed for statistical purposes. Addition based on TDS certificates - payment to the assessee fell u/s 194J of the Act and sec. 194C was mentioned by mistake - HELD THAT:- Assessee had placed before the Assessing Officer letter dated 5.6.2013 issued by M/s Visteon Climate Systems India Ltd where they had mentioned that they had received some testing service from the assessee on which it had made a provision of ₹ 32 lakhs in its accounts. It was also mentioned by the said party that the payment to the assessee fell u/s 194J of the Act and sec. 194C was mentioned by mistake. It is also not disputed that Form 16A was updated by the deductor. In such circumstances, we are of the opinion that the addition ought not have been made just for a reason that a mistake was committed by the deductor in the TDS certificate issued. In addition there was nothing on record to show that assessee had rendered any services which could earn it income of ₹ 1.6 crores. In our opinion, the addition was not called for. Such addition stands deleted. Ground of allowed. Deduction u/s 80IA claimed on windmill division - HELD THAT:- We find that the issue raised by the assessee is squarely covered in its favour by the judgment of the Jurisdictional High Court in the case of Velayudhaswamy Spinning Mills P. Ltd. [2010 (3) TMI 860 - MADRAS HIGH COURT] - The SLP filed by the Department against the said judgment was dismissed by the Apex Court. In such circumstances, we are of the opinion that prior year depreciation could not have been forcibly set off against the income of the assessee when the initial assessment year for which the assessee preferred the claim was different. We, therefore, allow Ground raised by the assessee.
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