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2010 (11) TMI 147 - AT - Income TaxScientific Research u/s 35(2AB) - Disallowance of weighted deduction - expenditure included an amount of Rs. 29.73 lakhs incurred on building and a sum of Rs. 14.89 lakhs incurred outside the in-house R & D set up -The Assessing Officer observed that section 35(2AB) was concerned only about in-house R & D - Held that: - The expenditure on clinical trial though the same is an integral part of scientific research will be eligible for weighted deduction under section 35(2AB) only if the expenditure is incurred on an in-house research and development facility. The expenditure incurred on trial conducted outside the in-house R & D facility will not be eligible for weighted deduction under section 35(2AB) – Decided against the assessee Disallowance of expenses in relation to the exempt income under section 14A - Rule 8D was not retrospective and that the same would apply only from assessment year 2008-09- Hon’ble High Court held that the Assessing Officer was duty bound to determine the expenditure, whether direct or indirect, incurred in relation to exempt income and for this purpose the Assessing Officer must adopt a reasonable basis consistent with all the relevant facts and circumstances and after allowing opportunity of hearing to the assessee - issue remanded back to CIT(A) Addition of Rs. 55,36,200 made by Assessing Officer on account of estimated net profit - Held that: The Assessing Officer has rejected the accounts and made the estimated addition on the ground that income declared in the original return did not match with the audited accounts for assessment year 2005-06. The approach adopted by the Assessing Officer is not correct. The assessee had revised the return suo motu on the ground that the original return had been filed on the basis of audit report of assessment year 2004-05. Therefore the income declared in the revised return has to be matched with the audited accounts for assessment year 2005-06. - Addition made by AO is not sustainable.
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