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Eicher Motors Ltd. Versus Commissioner of Income-Tax-III

2017 (9) TMI 1043 - DELHI HIGH COURT

Claim 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 g .....

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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 .....

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orded `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 th .....

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ssee 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/D .....

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he Tribunal erred in law in not deleting the disallowance made under section 14A of the Act, despite holding that the assessing officer had failed to (i) record his satisfaction in terms of Section 14A(2)/(3) and (ii) establish direct/ proximate nexus of expenses with the earning of exempt dividend income? 4. The facts in brief are that the Assessee, which is engaged inter alia in the manufacture of motorcycles, filed its return of income for the AY in question on 29th September, 2009 declaring .....

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in accordance with Section 35 (2AB) of the Act. Accordingly, the Assessee claimed weighted deduction 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 respec .....

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the above disallowance as regards the exempt income was that the AO observed that Section 14A was straightaway attracted but no expenses were claimed. The AO then surmised that certain expenses ought to have been incurred for earning the dividend income like purchase of raw materials, salaries, etc. The AO proceeded to apply Rule 8D (2) and (3) of the Income Tax Rules as applicable at the relevant time and worked out the disallowance as ₹ 1,02,73,361/-. 9. In the appeal filed by the Asses .....

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,24,169/-. 10. Both the Revenue as well as the Assessee went in appeal before the ITAT. By the impugned order dated 4th January 2016, on the first issue regarding expenses incurred on the R&D centres, the ITAT concurred with the Assessee but paradoxically remanded the matter to the AO to decide the issue afresh on the ground that the 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 .....

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/s 14A read with Rule 8D of I.T. Rules. 12. The Court is unable to concur with the impugned order of the ITAT on both the aspects. 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 .....

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a Limited Vs. UOI & Anr, by its decision dated 4th August, 2017 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 decisi .....

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