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2016 (11) TMI 382 - AT - Income TaxDisallowance u/s 14A - Held that:- We have observed that the assessee had made investments of ₹ 226.02 lacs as at 31-03-2007 ( ₹ 226.02 lacs as at 31-03-2006) which are stated to be strategic investment. The assessee’s own funds are to the tune of ₹ 5562.13 lacs as at 31-03- 2007 and ₹ 3902.04 lacs . The audited financial statements for financial year 1997-98 to 2006-07 are filed by the assessee and are placed in paper book page 47-106. It could be observed as detailed above that the assessee’s own funds are much higher than the investments made by the assessee which are capable of yielding exempt income. The assessee received dividend income of ₹ 1,15,64,882/- which was claimed as an exempt income u/s. 10(34) of the Act. The assessee has also submitted details of various loans raised by the assessee and interest paid to contend that none of the loans raised were deployed towards investments made and these are old investments and no fresh investment are made during the impugned assessment year. The assessee has placed details of loans raised, loan agreements and details of interest paid during the previous year relevant to the impugned assessment year to contend that none of the loans raised by the assessee were directed towards acquisition of investments. Nothing incriminating is brought on record by the Revenue to prove that interest bearing funds were specifically used for making investments and hence in our considered view , addition of ₹ 10,74,405/- made by the AO is not sustainable and is ordered to be deleted. With respect to disallowance of ₹ 1,13,010/- made by learned AO towards administrative and other indirect expenses attributable to the earning of exempt income being dividend of ₹ 1,15,64,882/- received by the assessee during the previous year relevant to the impugned assessment , which disallowance of ₹ 1,13,010/- in our considered view is very reasonable and fair which we upheld and sustain and do not intend to interfere with the orders of the authorities below keeping in view of fairness and reasonability of the disallowance keeping in view facts and circumstances of the case as emanating from the records before us. Claim for deduction u/s. 35(2AB) - claim not allowed by the authorities below as the approvals from prescribed authorities were not submitted as well genuineness of the research conducted was doubted by the authorities below as evidences of conducting research in the field of drugs and pharmaceuticals were not submitted by the assessee before the authorities below - Held that:- We are of the considered view that in the interest of substantial justice, this issue need to be set aside and restored to the file of the AO for de-novo examination of the issue on merits by the AO before granting weighted deduction u/s. 35(2AB) of the Act in accordance with law. We would like to clarify and place on record that we have not made any comments on merits of the claim of the assessee for weighted deduction u/s 35(2AB) of the Act and the AO shall adjudicate this issue on merits in accordance with law uninfluenced by observation, if any made by us on this issue of claim of deduction u/s 3(2AB) of the Act in this order. The provisions of Section 35(2AB) of the Act allows weighted deduction and is a beneficial provisions and hence the same is to be strictly construed at the first stage to determine the eligibility of the assessee under the beneficial provision and once the entitlement and eligibility of the assessee is established by strictly construing the same, then the provision is to be liberally construed so that full effect is given of the beneficial provision to achieve the intended objective for which the beneficial statutory provision is placed on the statute. Disallowance of deduction being towards sundry balances written off - assessee has falied to prove the conditions laid down u/s 36(1)(vii) r.w.s. 36(2) - Held that:- CIT(A) called for remand report from the AO which was confronted to the assessee but the assessee did not submitted any explanation before the learned CIT(A) in response to remand report of the AO. It is the contention of the assessee that the assessee was not given proper and adequate opportunity by the learned CIT(A) which prevented assessee from giving reply before learned CIT(A) in response to the remand report of the AO. It is the contentions of the assessee that if the matter/ issue is set aside to the file of the AO, then the entire details will be submitted to the AO and the AO can make necessary verifications, enquiries, examination and investigation before granting the benefit of claim of deduction on account of write off advances to the tune of ₹ 14,44,832/-. The assessee has placed all documents in connection thereof in paper book page 154-262. We are of the considered view that in the interest of substantial justice, this issue need to be set aside and restored to the file of the AO for de-novo examination of the issue on merits by the AO before granting deduction on account of write off of advance of ₹ 14,44,832/- u/s. 36(1)(vii) read with Section 36(2) of the Act in accordance with law.
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