TMI Blog2014 (7) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness expenditure, which was confirmed by the CIT(A). Taking over all view and in the interest of justice, we restrict the disallowance to ₹ 2 lacs. Disallowance of the claim u/s.80IB(3)(ii) - Held that:- CIT(A) was justified in rejecting the claim of the assessee following the decision of similar issue decided by the Tribunal in Samruddhi Industries Ltd. (2011 (3) TMI 696 - ITAT, PUNE) holding that the assessee is not entitled as it did not continue SSI during the assessment year under consideration. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same. Allowability of MAT Credit - Held that:- CIT(A) erred in not adjudicating the ground No.6 of the assessee. The learned Departmental Representative could not dispute the same. So in the interest of justice, we restore this issue to the file of CIT(A) with a direction to decide the same after providing due opportunity of being heard to the assessee. Allow the deduction u/s.80IA(4)(iv)(a) without deducting brought forward loss or unabsorbed depreciation prior to initial year on notional basis Disallowance of deduction u/s.35(2AB) - Held that:- The approval u/s.35(2AB) of the Act h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned A.O. erred in disallowing MAT CREDIT of ₹ 30,60,944/- (arising out of payment under MAT for A.Y. 2006-07) claimed by the assessee. (B) The learned CIT-A erred in not adjudicating the ground no. 6 of the Appellant [which reads as in sub ground (A) here above]. 6. The learned A.O. erred in not accepting the Income as per the Return of Income filed by the assessee. 7. The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case. 2.1 The assessee company is engaged in the manufacturing of Auto components such as lifters, Tensioner Assemblies, Oil Pumps, Fuel Pumps, etc. It has wind mills at Sangli and Dhule. 2.2 The first issue is with regard to treatment of ₹ 9,27,194/- being profit from purchase and sale of shares. The Assessing Officer has treated the same as income from business as against Short Term Capital Gain shown by the assessee. The Assessing Officer in earlier years treated the profit on purchase and sale of shares as business income which was confirmed by the CIT(A). The learned Authorized Representative has pointed out that a similar issue arose in assessee& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the CIT(A) has not given cogent reasoning while upholding the order of the Assessing Officer and he has simply stated that the amount in question being TDS cannot be said to be business expenditure of the assessee company and therefore, the same could not be allowed. According to us, the order of CIT(A) is non-speaking one as it contains no reasoning. In the absence of reasoning, the order cannot be upheld, so in the interest of justice, we restore this issue to the CIT(A) with a direction to decide the same as per fact and law after providing due opportunity of being heard to the assessee. Since we are restoring the issue on preliminary ground, we are refraining from commenting on the merit of the issue at hand. 4. The next issue is with regard to disallowance out of foreign travel expenses. The Assessing Officer had disallowed ₹ 4,00,000/- out of foreign travel expenses. During the assessment proceedings, the Assessing Officer noticed that the assessee company had incurred ₹ 20 lacs on account of foreign travel expenses. The expenses related to foreign travel of Shri Aditya Bhartia, his wife Payal Bhartia and his father Radhe Shyam Bhartia. Based upon the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the initial assessment year. We are in agreement with the position of the appellant that in so far as conditions prescribed in clauses (i) and (ii) are concerned, the same relate to a point of time which can only be examined in the course of the initial assessment year. Clause (i) requires an examination as to whether the industrial undertaking is formed by splitting up or reconstruction of a business already in existence. Clause (ii) relates to examining whether the industrial undertaking is formed by the transfer to a new business of machinery or plant already used in business. Evidently, the conditions in clauses (i) and (ii) can only be examined at the time of formation of a unit, which is the initial year. Clause (iii) which is under consideration does not imply any such interpretation. In our considered opinion, the import of the condition prescribed in clause (iii) is that the industrial undertaking ought to be a small scale undertaking in the year of claim of deduction, be it be the initial year or any of the subsequent years, so long as it manufactures products listed in the Eleventh Schedule. Quite clearly, in this case admittedly the assessee is manufacturing article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be no substance or justification in the Revenue's attempt to withdraw the claim under section 80J of the Act for the subsequent year, i.e. assessment year 1969-70. The Hon'ble High Court held that if the relief of tax holiday was granted to the assessee for the assessment year 1968-69, the assessee was entitled to continuance of that relief for the subsequent four years and the Assessing Officer would not be justified in refusing to continue the allowance for the assessment year 1969-70, without disturbing the relief for the initial year. In the words of the Hon'ble High Court, - No doubt, the relief of tax holiday under section 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the ITO cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted. 11. As the aforesaid discussion shows, the matrix of the dispute in Cement Chemicals Ltd. (supra) stood on an altogether different footing. The assessment year in dispute was 1969-70, which was the second year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld, provided the relief granted in the initial year is disturbed or changed on valid ground. In the present case, it is quite clear that on account of events subsequent to the initial assessment year the assessee fails to fulfill the impugned condition and, therefore, it is ineligible for the claim of deduction in this year. In our considered opinion, the ratio of the judgment of the Hon'ble Gujarat High Court in the case of Saurashtra Cement Chemicals Ltd. (supra) does not help the assessee in the present case. 12 The next decision relied upon by the appellant is in the case of Paul Brothers (supra) wherein the facts were as follows. In the case of Paul Brothers (supra), the issue related to jurisdiction assumed by the Commissioner under section 263 of the Act for assessment years 1981-82 and 1982-83 which was quashed by the Tribunal, which was appealed by the Revenue before the Hon'ble High Court. The facts were that the assessee firm had branches in backward areas carrying on the business of construction of buildings, transportation and manufacture and supply of bricks. For the use in construction activity, assessee also manufactured windows, concrete slabs etc. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit stood allowed to the assessee and without any changed circumstances, the said claim was sought to be denied in a subsequent year, and such an attempt was negated by the Hon'ble High Court. In the instant case, as we have noted earlier the circumstances have changed after the initial assessment year and therefore, the claim is sought to be denied on valid grounds and without disturbing the claim in the initial year because the circumstances in the initial year have not undergone any change. Therefore, the decision is inapplicable to the instant case. 14. In the result, we hereby affirm the orders of the authorities below denying relief to the assessee under section 80-IB of the Act. The assessee fails'. 5.2 In view of above, the CIT(A) was justified in rejecting the claim of the assessee following the decision of similar issue decided by the Tribunal in Samruddhi Industries Ltd. (supra) holding that the assessee is not entitled as it did not continue SSI during the assessment year under consideration. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same. 6. The next issue is with regard to allowability of MAT Credit of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of the assessment proceedings, the assessee relied upon various decisions including Pune Tribunal's decision in the case of Poonawala Finvest Agro (P.) Ltd. v. Asstt. CIT [2009] 27 SOT 47 (URO). The Assessing Officer however relying upon Special Bench decision of Ahmedabad Tribunal reported in the case of Asstt. CIT v. Goldmine Shares Finance (P.) Ltd. [2008] 113 ITD 209 (SB), disallowed the claim of the assessee. While doing so, the Assessing Officer also held that initial assessment year has to be considered as the year in which power generation commences and not the year in which it chooses to make claim for deduction for the first time. The Assessing Officer held that in the current section 80IA(5), there is no option given to the assessee to choose initial assessment year. 9.1 The matter was carried before first appellate authority, wherein the various factual and legal contentions were raised on behalf of assessee and having considered the same, the CIT(A) had allowed the claim of the assessee on both accounts. The same has been opposed before us on behalf of Revenue, inter alia, submitted that the CIT(A) was not justified in holding that for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that the eligible business were the only source of income, during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercise option, the only losses of the years beginning from initial A.Y. alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. Fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created. 27. Thus, the Hon'ble Madras High Court has clearly held that where the depreciation and loss of earlier assessment years have already been set off against other busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A similar issue came up in Revenue's appeal in assessee's own case in ITA No.2041/PN/2012 for A.Y. 2009-10. Facts being similar, so following the same reasoning, we uphold the order of CIT(A) on this issue. 11. In ITA No.1744/PN/2012, the assessee has filed the appeal on the following grounds. 1. The learned A.O. erred in (and learned CIT-A erred in confirming) disallowing the claim of deduction u/s 80IB(3)(ii). The amount claimed is ₹ 2,504,534/- 2. The learned A.O. erred in (and learned CIT-A erred in confirming) disallowing the claim of weighted deduction of ₹ 85,39,848/- (In Assessment Order AO wrongly works out the disallowance of ₹ 1,09,26,167/-) u/s. 35 (2AB). 3. The learned A.O. erred in (and learned CIT-A erred in confirming) disallowing foreign travel expenses ₹ 5,43,641/- incurred by the assessee in the course of business. 4. The learned A.O. erred in not accepting the Income as per the Return of income filed by the assessee. 5. The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case. 12. The first issue is with regard to the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 01. 04. 2009 to 31. 03. 2012. The reliance was placed upon the decision of Hon'ble Delhi High Court in the case of CIT v. Sandan Vikas (India) Ltd. [2011] 335 ITR 117/[2012] 207 Taxman 216/22 taxmann.com 19 (Delhi) which followed the decision of Hon'ble Gujarat High Court in the case of CIT v. Claris Life Sciences Ltd. [2010] 326 ITR 251/[2008] 174 Taxman 113. Accordingly, claimed that the CIT(A) was not justified in confirming the disallowance of claim of weighted deduction of ₹ 85,39,848/-. Accordingly, the same should be allowed. On the other hand, the learned Departmental Representative has supported the order of CIT(A). 13.2 After going through the rival submissions and material on record we find that the deduction u/s.35(2AB) of the Act is allowed to certain companies engaged in the scientific research. For the sake of clarity sec. 35(2AB) is reproduced as under: '(2AB)(1) Where a company engaged in the business of bio-technology or in the business of manufacture or production of any drugs, Pharmaceuticals, electronic equipments, computers, telecommunication equipments, chemicals or any other article or thing notified by the Board incurs any expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date Remarks 24.09.2008 Application for recognition of In house R D Unit is filed with the prescribed authority vide letter dated 23.09.2008 11.02.2009 Recognition granted to the R D Unit upto 31.03.2011 vide order dated 11.02.2009. 03.10.2009 Application for 35(2AB) made. 10.10.2011 Approval granted in Form No. 3CM from 01.04.2009 to 31.03.2012 It shows that approval u/s. 35(2AB) of Act has been granted by the prescribed authority vide order dated 10.10.2011. The above approved order reads as under : The above research development facility is approved for the purpose of Sec. 35(2AB) from 01.04.2009 to 31.03.2012, subject to the conditions underlined therein . From the approval order, it is evident that the assessee company is entitled for deduction u/s 35(2AB) of the Act from A.Y. 2009-10. The assessee has claimed deduction u/s. 35(2AB) of the Act in A.Y. 2009-10 on the basis of the fact that it's R D unit was recognized on 11.02.2009 on the basis of it's appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm No.3CM. According to CIT(A), this view has been given without considering sec.35(2AB) in entirety and conditions stipulated therein. The Hon'ble Delhi High Court in the case of Apollo Tyres Ltd. v. UOI [2010-279-HC-Del-IT] in W.P(C) No.13338 of 2009 has held that the weighted deduction on in-house R D expenditure u/s. 35(2AB) of the Act is allowed only from the year in which the petitioner has made an application and entered into an agreement with DSIR. In the said case the Hon'ble Delhi High Court rejected the Writ Petition filed by the assessee company wherein it was pleaded that it was entitled to benefit from A.Y. 2004-05 w.e.f first year of recognition. While DSIR had given approval from A.Y. 2007-08 on the basis of Form 3CK filed by the assessee company. The assessee filed Writ Petition before High Court contending that DSIR ought to have granted approval with effect from A.Y. 2004-05 as sought by it. The Hon'ble Delhi High Court dismissing the Writ Petition observed as under. Entering into an agreement for co-operation and audits of accounts of the in-house R D facility as prescribed in Form No. 3CK, is a statutory pre-requisite for the purpose of qual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble High Court has discussed the issue in detail and held that the procedure is part of statutory compliance stipulated in clause (3) of sec. 35(2AB) of the Act, it provides valuable guidance. Therefore, in view of the above ratio of W.P. in the case of Apollo Tyres Ltd. (supra), the CIT(A) rightly held that the approval u/s.35(2AB) of the Act has been accorded to R D unit of assessee company from 01.04.2009 to 31.03.2012 which entitles the assessee to claim weighted deduction u/s 35(2AB) from A.Y. 2010-11. Thus, relying upon clear cut finding of Hon'ble Delhi High Court in the case of Apollo Tyres Ltd. (supra) the action of the Assessing Officer denying the deduction u/s. 35(2AB) of the Act was rightly upheld by the CIT(A). Regarding the quantification of disallowance, the assessee submitted that computation at ₹ 1,09,26,167/- was not correct and it should be ₹ 85,39,848/-. In this regard, a letter was filed on 20.06.2012 which reads as under: Disallowance of Weighted Deduction amounting to ₹ 1,09,26,167/- u/s 35(2AB) Further, to our submission, it is clarified that the Ld. A.O.'s order has stated the total disallowance at ₹ 1,09,26,167 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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