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TMI Blog2016 (4) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IB and non 80IB units in the ratio of turnover and the second ground relates to confirmation of disallowance made under section 14A r.w.r. 8D of the Income Tax Act, 1961 ["Act" in short]. 2. The assessee is engaged in the business of manufacture of electronic ignition system and filed its return declaring an income of Rs. 7,64,267,970/-. The return filed by the assessee was processed under section 143(1) of the Act. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued and accordingly, the assessee has filed all details. The assessee has its units in Hosur, Puducherry and Rewari. The Assessing Officer has observed that the Puducherry unit of the assessee qualifies for deduction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that since all the units manufactured the same product, i.e., electronic ignition system, the benefits of the R&D are accruing to all the units and hence, the R&D expenses have to be apportioned among all the manufacturing units. Thus, the Assessing Officer apportioned the proportionate R&D expenses to Pondicherry unit proportionate to its turnover and reduced from the eligible profit while computing the deduction under section 80IB of the unit. Before the ld. CIT(A), the assessee has submitted that the benefits under section 35(2AB) of the act are special deduction granted to the assessee in order to encourage the research and development in the country and hence, no portion of the weighted deduction under section 35(2AB) on R&D can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) confirmed the action of the Assessing Officer in apportioning the R&D expenses to various units proportionate to their turnover. 6. The Department of Scientific and Industrial Research, in order to promote research and development, identifies various institutions/companies and offers various rebates to boost the R&D activities. To claim R&D expenses as allowable deduction under section 35(2AB) of the Act, first of all, the DSIR has to recognize the in-house R&D of the company. After obtaining recognition from DSIR, the company has to submit complete report of the R&D activities and expenditure incurred for the same in the prescribed format to the Prescribed Authority i.e., Secretary, DSIR and after assessment of the report furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter to the Assessing Officer to call for (1) submission of report in the prescribed format [Form 3CM/3CK] to the Secretary, DSIR and (2) approval in Form 3CL communicated by the Secretary, DSIR to DGIT[E] and after verification of the same, the Assessing Officer should allow the claim of deduction under section 35(2AB) of the Act, if the assessee produces approval in Form 3CL communicated by the Secretary, DSIR to DGIT[E] to the unit(s), which was recognized by the DSIR, otherwise, no claim of deduction under section 35(2AB) of the Act could be allowed. Further, we make it clear that the DSIR is the only authority to recognize the in-house R&D facility and once the DSIR recognized the Hosur unit alone, the Assessing Officer has no jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed up and utilized for various activities from a common kitty. Therefore, the Assessing Officer has segregated the probable expenses by way of financial charges and other overhead expenses between the investment activity and manufacturing and export activities. Accordingly, by invoking the provisions of section 14A of the Act and applying Rule 8D, the Assessing Officer apportioned the expenses against the income generated from the investment activity. The ld. CIT(A), by considering various decisions and submissions of the assessee, confirmed the disallowance made by the Assessing Officer. From the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd v. DCIT (320 ITR 81), it is very clear that the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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