TMI Blog2012 (9) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred on in house Research Development Units set up at Vapi and Turbhe 1. Revenue expenditure Vapi Unit 39,59,744 Thane Unit 85,21,721 [I] 64,81,465 2. Capital Expenditure i.e., Fixed assets (except land bldg.) Vapi Unit Thane Unit 3,46,890 [II] 3,46,890 This expenditure is not debited to P L A/c But capitalized to relevant fixed assets. 1,02,42,533 Weighted deduction @ 1.5 times of above (I+II) 4. The Assessing Officer required the assessee to furnish the evidence to prove that the necessary conditions have been fulfilled for claiming the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (7A), and Form-3CK to 3CM, and observed that the procedure laid down has not been fulfilled. His observations regarding procedure for eligibility of weighted deduction are as under: 1) As per section 35(2AB)(1), the expenditure on scientific research, on articles or things approved by the Board, shall be approved by the prescribed authority i.e., DSIR. 2) Application for such approval shall be made in Form no.3CK. This application is to be made to Secretary, DSIR, along with a draft agreement to be entered into with that Department. 3) If the prescribed authority i.e., Secretary, DSIR, is satisfied that the conditions of the Rule and Section are fulfilled, then he shall pass a written order in writing in Form 3CM, which is as follows. 6. After analysing prescribed statutory forms, the Commissioner (Appeals) came to the conclusion that the required approval for claiming deduction under section 35(2AB), has to be given by the Secretary, DSIR, in form no.3CM. The evidences filed by the assessee like letter of DSIR, dated 6th July 2001, copies of auditor s certificate as prescribed by the DSIR and details of expenditure incurred in R D Centre qualified for production u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm-3CM, could not be filed by the Commissioner (Appeals) as the same was received after the date of passing of Commissioner (Appeals) s order and, therefore, it amounts to additional evidence which can be verified by the Assessing Officer. Based on these documents, he submitted that insofar as the assessee is concerned, all the requirements in section 35(2AB) r/w relevant rules, stands fulfilled in the assessee s case and insofar as Vapi Unit is concerned and, therefore, the assessee is eligible for weighted deduction under section 35(2AB) for Vapi unit. 8. The learned Departmental Representative relying upon the order of the Commissioner (Appeals) submitted that now in the wake of the order of approval in Form 3CM, the matter should be restored to the file of the Assessing Officer for verification and weighted deduction for Thane unit should be disallowed. 9. We have carefully considered the rival contentions of the parties, perused the findings of the Commissioner (Appeals) as well as the material available on record. We find that this issue of weighted deduction under section 35(2AB) has been considered by the Tribunal in assessment year 2001-02, in assessee s own case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, is partly allowed for statistical purposes. 11. Ground no.2, relates to disallowance of 50% depreciation of ₹ 34,59,308, claimed on energy saving plant and machinery. 12. Before us, the learned Counsel for the assessee submitted that he did not wish to press this ground. Learned Departmental Representative did not object to the submissions made by the learned Counsel for the assessee. Consequently, we dismiss this ground as not pressed . 13. Ground no.3, relates to disallowance of depreciation ₹ 1,36,889, on the asset purchased from Pravin Metal Corp. 14. Before us, both the parties agree that this issue has been considered by the Tribunal in assessee s own case for assessment year 2001-02, wherein the issue was restored to the file of the Assessing Officer. On perusal of the order of the Tribunal, we find that an identical issue had been decided by the Tribunal in an appeal preferred by the Revenue in assessee s own case. The relevant findings given in Paras-24 to 28, which are reproduced below for the sake of ready reference:- 24. The brief facts of the above issue are that during the course of block assessment proceedings, it was found that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceedings it was observed that assessee had debited sum of ₹ 41,44,000/- under the head administrative expenses which was incurred for computer software expenses. The details of such expenses are given in para 7 of the order. According to the assessee it had installed SAP accounting package in place of Tally used earlier and the amount of such expenses did not result in enduring advantage to the assessee company and therefore it was submitted before the AO that such expenses should be al lowed as revenue expenses. However, the AO taking clue from the decision of Hon ble Rajasthan High Court in case of CIT V/s Arawali Constructions Co. (P.) Ltd. (2003) 259 ITR 30 (Raj) treated such expenses as capital expenses. On appeal, the ld. CIT(A) following the decision of the Tribunal in Dancal (India) Private Limited in ITA No.5644/Mum/1997, directed the AO to treat the expenditure as revenue expenditure and al lowed the claim of the assessee. 134. At the time of hearing, the ld. DR supports the order of the AO. 135. On the other hand, the ld. Counsel for the assessee submits that the expenditure on computer software was on account of SAP accounting package, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the assessee as business expenditure was rightly al lowed by the ld.CIT(A). The ground taken by the Revenue is, therefore, rejected. 18. In view of the aforesaid findings of the Tribunal in assessee s own case for assessment year 2001-02, and following the precedence, ground raised by the assessee stands allowed. 19. With regard to Ground no.5, the learned Counsel for the assessee admitted before us that this ground being general in nature, which relates to over all deduction under section 80HHC, therefore, the same is not being adjudicated. 20. Ground no.6, relates to disallowance of deduction of ₹ 4,23,18,518, on account of DEPB credit under section 80HHC of the Act. 21. Both parties agree before us that an identical issue had been decided by a co-ordinate bench of the Tribunal in assessee s own case for assessment year 2001-02, wherein the Tribunal, vide Paras-53 to 55, observed and held as follows:- 53. Brief facts of the above issue are that the Assessing Officer noted that the assessee company has claimed deduction u/s 80HHC as per proviso to subsection 3 of section 80HHC on sale of DEPB licences claiming that same are export incentives cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, vide Paras-96 to 102, observed and held as follows:- 96. Ground No.7 taken by the assessee reads as under : 7.1 The learned CIT (A) erred in upholding the contention of the Assessing Officer by considering gross interest amounting to ₹ 29,98,048/- for computing profits of the business for the purpose of S. 80HHC. The CIT(A) ought to have considered only the net interest income for the said purpose. 7.2 The learned CIT (A) erred in upholding the contention of the Assessing Officer by considering gross rent income amounting to ₹ 9,00,000/- for computing profits of the business for the purpose of S. 8OHHC. The CIT(A) ought to have considered only the net rent income for the said purpose. 97. The brief facts of the above issue are that the AO observed that the assessee excluded 90% of interest income of ₹ 29,98,048/- while computing the profit of business as per Explanation (baa) to sub ITA No. 8387/Mum/2004 ITA No.8554 /Mum/2004 ITA No.2662 /Mum/2006 ITA No. 3334 /Mum/2006, section (4B) of section 80HHC. However, the AO, in view of the Explanation (baa) of sub-section (4B) of section 80HHC and the decision of the Hon ble Supreme Court in CIT V/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order for the assessment year 1997-98 has decided the issue in favour of the assessee vide paragraph 60 of its order dated 25.1.2008 (supra). 102. After considering the ratio of the above decisions to the facts of the present case, we find that the ld. CIT(A) has disallowed the claim of the assessee of netting of interest and netting of the rent on the ground that the assessee has failed to prove the nexus. However, on the issue of netting of interest, recently the Hon ble Jurisdictional High Court in the case of CIT V/s Asian Star Co.Ltd. (2010) 326 ITR 56 (Bom) has distinguished the decision in Shri Ram Honda Power Equip (supra) and disapproved the decision of the Special Bench of the Tribunal in Lalsons Enterprises (supra) and held as under (headnote): .Hence for the purpose of Explanation (baa) to section 80HHC the gross interest on fixed deposits in the bank received by the assessee should be considered for the purposes of working out the deduction under section 80HHC and not the net interest. Since in the earlier assessment years, the issue has been set aside by the Tribunal to the AO, therefore, keeping in view the rule of consistency, we set aside the orders pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
