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2016 (2) TMI 418 - AT - Income TaxDisallowance of deduction claimed under S.35(2AB) - disallowance on the ground as approval granted is by a Scientist of DSIR and not the Secretary - Held that:- It is observed that for claiming deduction under S.35(2AB), assessee has relied on two letters issued by Scientist G, referred to hereinabove. It is seen that one letter, as placed at page 13 of the paper-book, relates to Certificate of Registration for availing customs duty exemption. Second letter, placed at page 14 of the paper-book, is in respect of renewal of recognition granted to the Inhouse R & D facility till 31.3.2015. The assessee neither before the departmental authorities nor before us has produced any approval in Form 3CM, even from a Scientist of DSIR. Therefore, in our view, only on the basis of either the letter issued for renewal of recognition of In-House R&D unit or certificate granted for customs duty exemption, assessee would not be entitled to claim deduction under S.35(2AB). therefore, we are inclined to remit the matter back to the Assessing Officer for giving an opportunity to the assessee to furnish the report in prescribed form, of the prescribed authority, i.e. either Scientist G of DSIR or any other authority from DSIR, as required in S.35(2AB) of the Act, and redecide the matter in accordance with law, and after giving reasonable opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance made under S.36(1)(iii) out of bank interest and financial charges - Held that:- Hon'ble Bombay High Court in the case of C.I.T. vs. Reliance Utilities & Power Ltd., (2009 (1) TMI 4 - BOMBAY HIGH COURT ) has held that when the assessee has mixed funds, i.e. both interest free and interest bearing funds, presumption would be interest free advances are from interest free funds available with the assessee. Applying the same principle, it has to be held that the investment in equity shares were made from out of surplus interest free funds available with the assessee. Further, it is a fact on record that investments in equity shares have been made during the period from 8.10.2005 to 21.1.2007 and not in the previous year relevant to the assessment year under dispute. The Department also has not controverted the contention of the assessee that no disallowance out of interest expenditure was made during the assessment year in which the investment was actually made. In view of the aforesaid factual position, we hold that the disallowance of interest expenditure is not sustainable. - Decided in favour of assessee. Disallowance of interest on Foreign Currency Convertible Bonds(FCCB) - Held that:- It is well settled principle of law that if the payments on which tax is sought to be deducted is not chargeable to tax in India, provisions of S.195 would not apply. In the present case, it is not controverted by the Learned Departmental Representative with cogent evidence that not only the bonds were raised outside India, but the interest payments were also made to non-resident Indians outside India from a bank account held by the assessee outside India. Therefore, since no part of the transaction relating to payment of interest has taken place in India, it cannot be said that interest payment made to non-residents has accrued or arisen in India in terms of S.9 of the Act. In our view, therefore, the provisions of S.195 would not apply to such payments, thereby requiring the assessee to deduct tax at source. We are supported in our view by the decisions cited by the learned counsel for the assessee. Accordingly, we direct the Assessing Officer to delete the disallowance made in this behalf - Decided in favour of assessee Levy of interest under S.234B and S.234C - Held that:- On a perusal of the material available on record, it is seen that in the computation of income filed alongwith the return of income, assessee itself has calculated interest under S.234B and S.234C, which is more than the interest computed by the Assessing Officer. - Decided against assessee
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