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2021 (8) TMI 655 - ITAT MUMBAIDisallowance made u/s.14A of the Act r.w.r. 8D(2) of the Rules both under normal provisions of the Act as well as in the computation of book profits u/s. 115JB - HELD THAT:- From perusal of the audited balance sheet of the assessee that it has sufficient interest free funds in its kitty which is much more than the investments made by it and hence, it could be safely presumed that the investments were made by the assessee out of own funds and not with the borrowed funds. Hence, by respectfully following the decision of HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT] we direct the ld. AO to delete the disallowance of interest under Rule 8D(2)(ii) of the Rules. With regard to disallowance of administrative expenses under Rule 8D(2)(iii) of the Rules, we direct the ld. AO to consider only those investments which had actually yielded dividend during the year and apply 0.5% on the average value of such investments alone for the purpose of disallowance under Rule 8D(2)(iii) of the Rules. This would be in consonance with the decision of Special Bench of Delhi Tribunal in the case of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI]. From the disallowance figures so arrived, the ld. AO is hereby directed to reduce the voluntary disallowance made by the assessee in the return of income under normal provisions of the Act. Disallowance of expenses u/s.14A in the computation of book profits u/s.115JB - We find that the Special Bench of Delhi Tribunal had already held that the computation mechanism provided in Rule 8D(2) of the Rules cannot be imputed for the purpose of making disallowance in terms of Clause (f) of Explanation-2 to Section 115JB(2) of the Act. Hence, only actual expenses incurred by the assessee for the purpose of earning exempt income would be liable for disallowance in terms of Clause (f) referred to thereon. Since, assessee itself, has voluntarily disallowed by identifying actual expenses in the sum of ₹ 3,78,562/- in the computation of book profits u/s.115JB of the Act, the same is hereby directed to be adopted and no further disallowance is warranted thereon. Accordingly, the ground No.2 raised by the assessee is partly allowed and ground No.5 raised by the assessee is allowed. Disallowance made u/s.35(2AB) - assessee had claimed weighted deduction @200% - HELD THAT:- There is no dispute that during the year under consideration, that assessee company was involved in the activities of in-house research and development disallowed and is eligible for deduction u/s.35(2AB) of the Act. The research and development activity carried out by the assessee is duly approved by the Department of Scientific and Industrial Research (DSIR), New Delhi. The assessee also submitted a report in Form 3CL approved by the DSIR, New Delhi. We find that once an expenditure is approved as incurred for development of R & D facility (both Revenue and capital expenditure) and such R & D facility is also approved by DSIR, New Delhi, the assessee would be entitled for weighted deduction u/s.35(2AB) of the Act. Considering the plain reading of the said Section, coupled with its intention of granting weighted deduction to the assessee for encouraging development of R & D facility, we hold that assessee would be entitled for weighted deduction u/s.35(2AB) of the Act in the facts and circumstances of the instant case. - Decided in favour of assessee.
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