TMI Blog2017 (9) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... owed 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 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in overlooking the correct legal position in remanding the matter to CIT (A). Appeal in favour of the Assessee and against the Revenue - ITA No. 136/2017 - - - Dated:- 15-9-2017 - S. MURALIDHAR PRATHIBA M. SINGH JJ. Appellant Through: Mr. Ajay Vohra, Sr. Advocate with Mr. Gaurav Jain, Mr. Aniket D. Agrawal, Advocates. Respondent Through: Mr. Zoheb Hossain, Sr. Standing Counsel. O R D E R 1. This is an appeal by the Assessee under Section 260A of the Income Tax Act, 1961 ( Act ) against an order dated 4th January 2016 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 2561 2386/Del/2013 for the Assessment Year ( AY ) 2009-10. 2. Admit . 3. The following questions are framed for conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction of ₹ 19,57,26,863/- being 150% of all the research expenses incurred in the in-house R D facilities under Section 35 (2AB) of the Act. 6. The Assessee had also earned dividend income of ₹ 6.39 crores from investments in subsidiary companies and mutual funds that were exempt under Section 10 (33) and (34) of the Act. The Assessee, however, did not disallow any expenditure in respect of the earnings of the above exempt income. 7. The return was picked up for scrutiny. The Assessing Officer ( AO ) in the assessment order dated 28th December 2011 granted 100% deduction on both capital and revenue expenditure incurred on the two R D centres but disallowed the additional weighted deduction of 50% amount of ₹ 6,52, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had not returned a finding on the revenue and capital nature of the said expenditure. 11. As regards the issue concerning disallowance under Section 14A for earning exempt income, the ITAT again concurred with the Assessee that the AO had failed to record reasons for disagreeing with the Assessee that it had not incurred any expenditure in relation to earning of exempt income. Nevertheless, on this issue again, the ITAT remanded the matter to the CIT (A) to decide the issue afresh. A direction was issued to the CIT (A) to call for a remand report from the AO and to record his satisfaction and cogent reasons before invoking the provisions contained u/s 14A read with Rule 8D of I.T. Rules. 12. The Court is unable to concur with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14A of the Act, the settled legal position is that the AO had to record reasons for disagreeing with the submission of the Assessee that it had incurred no expenditure for earning such exempt income. This is plain even from Rule 8D (1) which requires the AO to mandatorily record his satisfaction that the claim made by the Assessee that no expenditure has been incurred is incorrect having regard to the accounts of the assessee. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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