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2017 (9) TMI 1043 - HC - Income TaxClaim of weighted deduction under Section 35 (2AB) - Held that:- Having held that the R&D expenditure as claimed by the Assessee ought to have been allowed, there was no question of remanding the matter to the AO for returning a finding on whether the expenditure was of revenue or capital nature. This is because, under Section 35 (2AB) of the Act, both revenue and capital expenditure are allowable in their entirety, excluding expenditure in the nature of cost of any land or building. There was going to be no purpose served in analysing whether the expenditure was of revenue or capital nature. In fact, the AO himself had allowed 100% of the expenditure both of revenue and capital nature and the disallowance was only the additional 50% amount which, again, the CIT (A) had found and correctly so, in the opinion of this Court, ought not to have been disallowed. Recently, in Maruti Suzuki India Limited Vs. UOI & Anr case [2017 (9) TMI 387 - DELHI HIGH COURT] has held "The legislative intent behind this provision is to encourage innovation, research and development in India and non-grant of the benefit under Section 35 (2AB) defeats the legislative intent." In that view of the matter, the Court has no hesitation in holding that the Assessee is entitled to the full benefit of Section 35 (2AB) and that the ITAT was in error in remanding this issue to the AO for a fresh decision. Disallowance made under section 14A - assessing officer failure to record his satisfaction in terms of Section 14A(2)/(3) and establish direct/ proximate nexus of expenses with the earning of exempt dividend income? - Held that:- In this case, a perusal of the AO's reasoning shows that the AO has merely conjectured that there is an inbuilt cost even in passive investment as also incidental expenditure like collection, telephone, follow up etc., The AO thus concludes that the expenses are embedded as indirect expenses. This is not as per the requirements of Rule 8D. There is no satisfaction recorded `based on the accounts of the assessee'. The AO simply presumes that since the exempt income exists and is being claimed by the Assessee, some portion of the expenses ought to be added back. This is not sufficient as per the law. Once this mandatory requirement is itself not fulfilled, in terms of the law explained by this Court in Maxopp Investment Ltd. v. CIT, [2011 (11) TMI 267 - Delhi High Court] the question of remanding the matter to the CIT(A) and to call for a remand report from the AO for the purposes of rectifying this jurisdictional defect simply did not arise. In this context, the Court also notices that in the order passed by the AO on 28/30th December 2016 pursuant to the impugned order of the ITAT on remand, the AO had simply repeated his entire assessment order passed in the first instance. Be that as it may, the Court is of the view that the ITAT erred in overlooking the correct legal position in remanding the matter to CIT (A). Appeal in favour of the Assessee and against the Revenue
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