TMI Blog2019 (8) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 to 28t h March, 2011 only for the purpose of capital expenditure incurred on research and development facilities - HELD THAT:- We find that this issue relating to the assessee s claim for weighted deduction under section 35(2AB) of the Act is squarely covered in favour of the assessee by the decision of the Hon ble Delhi High Court in the case of Sandan Vikas (India) Limited (supra), wherein it was held once a certificate by the DSIR is issued that would be sufficient to hold that the assessee fulfils the conditions laid down in the aforesaid provisions. Accordingly, we uphold the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for weighted deduction under section 35(2AB) in respect of revenue expenditure incurred on in-house research and development facility, which was duly approved by the competent authority. Grounds No. 2 to 5 of the Revenue s appeal are accordingly dismissed. Disallowance u/s 14A read with Rule 8D - assessee also made suo-moto disallowance - HELD THAT:- Keeping in view all the facts of the case including especially the fact that the disallowance of ₹ 1,02,481/- offered by the assessee u/s 14A was much more than the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom other sources - HELD THAT:- We find that the impugned addition was made by the AO without giving any sound or cogent reason and the amount of capital gain was treated by him as income from other sources on the basis of mere conjectures and surmises. On the other hand, the relevant facts pertaining to this issue were properly explained by the assessee before the ld. CIT(Appeals) and after having satisfied with the claim of the assessee, relief was allowed by the ld. CIT(Appeals) to the assessee on this issue. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and upholding the same, we dismiss Grounds No. 2 3 of the Revenue s appeal for A.Y. 2010-11. - I.T.A. No. 1739/KOL/2016 & I.T.A. No. 1071/KOL/2017 - - - Dated:- 26-7-2019 - Shri P.M. Jagtap, Vice-President (KZ) and Shri S.S. Viswanethra Ravi, Judicial Member Shri C.J. Singh, JCIT, Sr. D.R, for the Appellant Shri Manish Tiwari, FCA, for the Respondent ORDER These two appeals filed by the Revenue are directed against two separate orders passed by the ld. Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval in Form No. 3CM issued by the DS1R, which speaks volume that the approval of the scheme was only for the purpose of Capital Expenditure on research and development facility. 5. That the Ld. CIT(A) has erred in placing his reliance upon the judgement of the Hon'ble Gujrat High Court in CIT VS. Claris Life Science Ltd.[2010] 326 ITR 251 (Guj.), which speaks about the allowability of deduction of Expenditures u/s. 35(2AB) of the Act prior to the date of certificate of the DSIR dissuading from the core issue of allowability of the nature of expenditure . 5. The assessee in the present case is a Company, which is engaged in the business of manufacturing, export and import of silk fabrics. The return of income for the year under consideration, i.e. A.Y. 2011-12 was filed by it on 29.09.2011 declaring total income of ₹ 50,07,79,683/-. In the said return, weighted deduction at 200% was claimed by the assessee under section 35(2AB) of the Act in respect of capital expenditure of ₹ 16,57,628/- and Revenue expenditure of ₹ 2,59,90,238/- incurred on scientific research. From the perusal of the relevant details of the said expenditure furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Building for the following reasons given in paragraph no. 4.2 of his impugned order:- 4.2. I have considered the assessment order as well as the submissions made by the AR of the appellant. I find that the appellant s claim for weighted deduction within the meaning of section 35(2AB) of the Act has rightly been denied by AO. In view of the express condition specified in the said provision itself, I however, do not agree with the views expressed by AO to deny the appellant's alternative claim for deduction u/s 35(1)(iv) @ 100% on cost of land and building. Respectfully following the decision of the Hon'ble ITAT, Cochin Bench in the case of Merchem Ltd. supra, the AO is directed to allow deduction u/s 35(1 )(iv) on value of land and laboratory building of ₹ 8,06,080/-. This ground is accordingly allowed . 7. Keeping in view that its alternative claim for deduction under section 35(1)(iv) was allowed by the ld. CIT(Appeals) to the extent of ₹ 8,06,080/- being the expenditure incurred on the cost of Laboratory Building, the assessee revised its claim for deduction under section 35(2AB) only in respect of revenue expenditure incurred on scient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upto 31st March 2012. The said approval shows date of issue as 28t h October 2011 and date of application made as 23rd March 2011. The AO appears to have denied weighted deduction on revenue expenditure by referring to comments made by DSIR at the close of the said approval appearing under bracket [ ]. It is clearly manifested that the said authority granted approval u/s 35(2AB) w.e.f. 1st April 2009 upto 31st March 2012. Once the approval is granted till 31.03.2012 the so-called restriction appearing within bracket may be said as not applicable. I agree with the contentions of the appellant that the provisions contained in section 35(2AB) authorizes weighted deduction on any expenditure incurred for scientific research and Development on the line of business enumerated therein and subject to approval of prescribed authority. I also agree that prescribed authority has the power to grant or reject approval u/s 35(2AB). It cannot direct quantum of deduction u/s 35(2AB). I am fortified with the decision of Gujarat High Court in the case of Claris life Sciences Ltd. supra wherein it was, inter-alia, held that once the certificate by the DSIR is issued that would be sufficient to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Coordinate Bench of this Tribunal at Cochin in the case of ACIT vs.- Merchem Limited [46 Taxmann.com 185]. At the time of hearing before us, even the ld. D.R. has not raised any contention to dispute this position. We, therefore, uphold the impugned order of the ld. CIT(Appeals) allowing alternative claim of the assessee for deduction under section 35(1)(iv) and dismiss Ground No. 1 of the Revenue s appeal. 9. As regards the common issue raised in Grounds No. 2 to 5 of the Revenue s appeal relating to the deletion by the ld. CIT(Appeals) of the disallowance made by the Assessing Officer on account of assessee s claim for weighted deduction under section 35(2AB), the ld. D.R. has invited our attention to the copy of approval given in Form No. 3CM by the competent authority for in-house research and development facilities of the assessee to point out that the said approval was given for the period 1s t April, 2009 to 28t h March, 2011 only for the purpose of capital expenditure incurred on research and development facilities. He has contended that the assessee-company as per the said approval thus was not entitled to claim weighted deduction in respect of revenue exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the submissions made on behalf of the assessee and took the view that section speaks of: (i) Development of facility; (ii) Incurring of expenditure by the assessee for development of such facility; (iii) Approval of the facility by the prescribed authority, which is DSIR; and (iv) Allowance of weighted deduction on the expenditure so incurred by the assessee. A plain reading clearly manifests that the assessee has to develop facility, which presupposes incurring expenditure in this behalf, application to the prescribed authority, who after following proper procedure will approve the facility of otherwise and the assessee will be entitled to weighted deduction of any and all expenditure so incurred. A plain and harmonious reading of rule and Form clearly suggests that once facility is approved, the entire expenditure so incurred on development of research and development facility has to be allowed for weighted deduction as provided by section 35(2AB). The legislative intention behind the above enactment is to boost the research and development facility in India and to encourage the development of the facility by providing de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned and claimed as deduction was to the extent of ₹ 1,850/- only. It is also a fact on record that the appellant offered disallowance u/s 14A at ₹ 1,02,481/- in its return. Keeping in view the judicial decision that application of Rule 80(2) is not automatic but subjected to satisfaction as well as the decision of the Delhi High Court in ITA No. 117/2015, the AO is directed to restrict disallowance to ₹ 1,02,481/- as offered in the return. The balance disallowance of ₹ 4,19,614/- i.e. (5,22,095 - 1,02,481) is deleted . 14. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Keeping in view all the facts of the case including especially the fact that the disallowance of ₹ 1,02,481/- offered by the assessee under section 14A was much more than the exempt income in the form of dividend of ₹ 1,850/- only earned by the assessee during the year under consideration, we are of the view that the further disallowance of ₹ 4,19,614/- made by the Assessing Officer under section 14A by applying Rule 8D was not sustainable and the ld. CIT(Appeals) was fully justified in deleti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls Pvt. Limited vs.- ITO [17 TTJ 550]. The ld. CIT(Appeals) held that business expediency of the expenditure incurred at Clubs was established by the assessee and the claim of the assessee was not rebutted by the Assessing Officer with any tenable or cogent material. 18. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As rightly held by the ld. CIT(Appeals), the nexus of the expenditure incurred at Clubs with its business was established by the assessee and in the absence of any tenable or cogent material to rebut or controvert the same, the disallowance made by the Assessing Officer on account of Club expenses was not tenable. Judicial pronouncements relied upon by the ld. CIT(Appeals) also support the case of the assessee on this issue. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appals) giving relief to the assessee on this issue and upholding the same, we dismiss Ground No. 8 of the Revenue s appeal for A.Y. 2011-12. 19. Now we shall take up the Revenue s appeal for A.Y. 2010-11 being ITA No. 1071/KOL/2017 , which is directed against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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