2016 (4) TMI 219 - KARNATAKA HIGH COURT

Claim for deduction under Section 35(2AB) - assessing authority adopted the net expenditure for allowing the weighted deduction and same was done on the basis of DSIR guidelines - Tribunal setting aside the computation made by the assessing authority in respect of claim for deduction under Section 35(2AB) - Held that:- Tribunal has proceeded on the premise that when the regular work is in the nature of R&D work done and sold, it becomes a business income and chargeable as business income. It is only when the assets acquired in the process of carrying on R&D work, if they are sold, such realization would go to reduce the expenditure of scientific research.In our view, the approach to the issue considered by the Tribunal is appropriate. In any case, no substantial question of law would arise for consideration as canvassed.

Addition u/s 14A r.w.r. 8D - Held that:- Disallowance of interest expenses in the present case made under Rule 8D(2)(ii) of the I.T. Rules should be deleted as the Hon'ble Bombay High Court in Reliance Utilities & Power Ltd.(2009 (1) TMI 4 - BOMBAY HIGH COURT ) has held that where the interest free funds far exceed the value of investments, it should be considered that investments have been made out of interest free funds and no disallowance u/s. 14A towards any interest expenditure can be made. This view was again confirmed by the Hon'ble Bombay High Court in CIT v. HDFC Bank Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT ] wherein it was held that when investments are made out of common pool of funds and non-interest bearing funds were more than the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made.