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2015 (1) TMI 1348 - HC - Income TaxDisallowance of the expenses for scientific research u/s.35(2AB) - Held that - Appellate tribunal has not erred in law in holding that the expenses incurred outside the approved R & D facility are also eligible for weighted deduction u/s 35(2AB). See CIT vs. Cadila Healthcare Limited 2013 (3) TMI 539 - GUJARAT HIGH COURT Disallowance of interest u/s 36(1)(iii) - interest free advances given - ITAT deleted the addition - Held that - Tribunal has relied upon the decision of this Court in the case of CIT vs. Raghuvir Synthetics Limited (2013 (7) TMI 806 - GUJARAT HIGH COURT) and has allowed the appeal to that extent in favour of the Assessee. When the question is already covered by the above referred decision of this Court, we do not find that any substantial question would arise for consideration, as canvassed. Disallowance of depreciation on building and plant and machinery - the Assessee has not produced any cogent evidence regarding use of the said plant purchased - ITAT allowed claim - Held that - The question is already covered by the decision of this Court in the case of ACIT vs. Ashima Syntex Limited 2000 (8) TMI 22 - GUJARAT High Court we do not find that such question can be considered as substantial question of law, which may arise in the present appeal, as canvassed. Appeal admitted on (D), (E), (F) &(G) being substantial questions of law. (D) Whether the Appellate tribunal has substantially erred in law in deleting the addition of ₹ 52,59,803/- in calculation of adjusted book profit for the purpose of MAT considered as towards provision for doubtful debt and diminution in the value of investment relying on the decision of coordinate Bench in the case of ACIT vs. Vodafone Essar Gujarat Limited ? (E) Whether the Appellate tribunal has substantially erred in law in deleting the addition of the provision for diminution in value of asset despite amended provisions of Clause (i) inserted in Explanation-I by Finance Act, 2009 w.e.f. 1.4.2001 under which the provisions for diminution in the value of any assets needs to be added back ? (F) Whether the Appellate tribunal has substantially erred in law in directing to reduce the prior period expenses of ₹ 23,27,520/- for the computation of book profits u/s 115JB of the Act ? (G) Whether the Appellate Tribunal has substantially erred in law in deleting the addition of ₹ 64,13,532/- quantified as disallowance expenditure u/s 14A, despite the specific provisions of Clause (f) of Explanation- I to Section 115JB and when the issue of disallowance u/s 14A under regular computation was restored to the CIT(A) ?
Issues Involved:
- Eligibility for weighted deduction on expenses incurred outside the approved R&D facility under Section 35(2AB). - Disallowance of interest expenses under Section 36(1)(iii). - Disallowance of depreciation on building and plant and machinery. - Addition in the calculation of adjusted book profit for MAT concerning provision for doubtful debt and diminution in the value of investment. - Addition of provision for diminution in value of assets under amended provisions. - Reduction of prior period expenses for the computation of book profits under Section 115JB. - Disallowance of expenditure under Section 14A for the computation of book profits under Section 115JB. Detailed Analysis: Issue (A): Eligibility for Weighted Deduction on Expenses Incurred Outside the Approved R&D Facility: The Tribunal allowed the expenses incurred outside the approved R&D facility for weighted deduction, relying on the Gujarat High Court decision in CIT vs. Cadila Healthcare Ltd. The Tribunal concluded that the expenses for scientific research, even if incurred outside the in-house facility, are eligible for deduction under Section 35(2AB). The High Court upheld this decision, stating that the question is already covered by the Cadila Healthcare case and does not constitute a substantial question of law. Issue (B): Disallowance of Interest Expenses: The Tribunal deleted the disallowance of Rs. 17.06 lac interest expenses, referencing the Gujarat High Court's decision in CIT vs. Raghuvir Synthetics Ltd. The Tribunal found that the advances to the sister concern were for business purposes and that the assessee had sufficient interest-free funds. The High Court agreed, noting that the question was already covered by Raghuvir Synthetics and did not warrant further consideration as a substantial question of law. Issue (C): Disallowance of Depreciation on Building and Plant and Machinery: The Tribunal allowed the depreciation claim of Rs. 28,77,600, citing the Gujarat High Court's decision in ACIT vs. Ashima Syntex Ltd. The Tribunal noted that the assessee had provided evidence of the plant's installation and commencement of production, including electricity consumption and staff salaries. The High Court upheld this decision, stating that the question was already covered by Ashima Syntex and did not constitute a substantial question of law. Issue (D): Addition in Calculation of Adjusted Book Profit for MAT: The Tribunal deleted the addition of Rs. 52,59,803 in the calculation of adjusted book profit for MAT, considering it a provision for doubtful debt and diminution in the value of investment. The High Court admitted this question for further consideration, indicating it as a substantial question of law. Issue (E): Addition of Provision for Diminution in Value of Assets: The Tribunal deleted the addition of the provision for diminution in the value of assets, despite the amended provisions of Clause (i) in Explanation-I by the Finance Act, 2009. The High Court admitted this question for further consideration, recognizing it as a substantial question of law. Issue (F): Reduction of Prior Period Expenses for Computation of Book Profits: The Tribunal directed the reduction of prior period expenses amounting to Rs. 23,27,520 for the computation of book profits under Section 115JB. The High Court admitted this question for further consideration, identifying it as a substantial question of law. Issue (G): Disallowance of Expenditure under Section 14A for Computation of Book Profits: The Tribunal deleted the addition of Rs. 64,13,532 quantified as disallowance expenditure under Section 14A, despite specific provisions in Clause (f) of Explanation-I to Section 115JB. The High Court admitted this question for further consideration, acknowledging it as a substantial question of law. Conclusion: The High Court did not admit the appeal on questions (A), (B), and (C) as they were already covered by existing decisions, but admitted the appeal on questions (D), (E), (F), and (G) for further consideration, recognizing them as substantial questions of law.
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