9911796707
TMI Blog2022 (12) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... order for AY 2014-15 has been passed by Ld. Commissioner of Income Tax (Appeals)-1, Chennai [CIT(A)] on 17.02.2020 in the matter of an assessment framed by Ld. Assessing Officer u/s 143(3) on 22.12.2016. The first appellate order for AY 2015- 16 has been passed by Ld. Commissioner of Income Tax (Appeals)-4, Chennai [CIT(A)] on 10.10.2019 in the matter of an assessment framed by Ld. Assessing Officer u/s 143(3) on 25.12.2017. The grievance of the assessee in both the years is identical i.e. disallowance of expenses relating to Bio-technology R & D. Another issue that arises for AY 2015-16 is interest disallowance u/s 36(1)(iii). 2. The registry has noted delay of 66 days in assessee's appeal for AY 2014-15. Similar delay of 140 days has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the area of bio-technology products. For the same, it carried out research and incurred expenses during the year. For the same, the assessee obtained recognition for in-house R&D and started carrying out R&D activities of bio-tech products. The approval was given by DSIR vide approval letter dated 20.07.2012 (page 8 of paper book dated 25.11.2021). This approval has not been considered by lower authorities. As per this letter, the department has decided to accord recognition to the in-house R&D unit of the assessee up to 31.03.2015. The terms of the approval have also been mentioned in the letter. The assessee has been given another registration on the same date which is for the purpose of availment of custom duty exemption as per gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or expended on scientific research related to business. The explanation provide that where such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973) on payment of any salary (as defined) to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority to have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f course, be dealt with on the broad principles that have been accepted by the Courts. Finally, Hon'ble Court held that since the control over the two units is in the hands of the same management and administration and there was unity of control leading to an inter-connection, interdependence and inter-lacing of the two ventures such that it can be said that the fuel injection equipment project is only an extension of the existing business of the assessee and, therefore, the expenditure incurred by the assessee on this Project is a revenue expenditure. Considering this decision, the matching concept as invoked by Ld. AO would have no application. Further, the earning of income is not a requirement before an expenditure could be claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in AY 2015-16 is disallowance of interest u/s 36(1)(iii). The same stem from the fact that the assessee advanced interest free loan to director / relatives for Rs.635.78 Lacs whereas the assessee borrowed funds and debited interest of Rs.300 Lacs. No commercial expediency of advancing loan could be established by the assessee. Accordingly, Ld. AO computed proportionate interest disallowance u/s 36(1)(iii) for Rs.40.47 Lacs. The Ld. CIT(A) confirmed the same. Aggrieved, the assessee is in further appeal before us. The limited argument of Ld. AR is that own interest free funds far exceed the interest free advances granted by the assessee and therefore, it would be presumed that the loans were advanced out of own funds. Concurring ..... X X X X Extracts X X X X X X X X Extracts X X X X
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