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2014 (8) TMI 1161 - AT - Income TaxAllowable busniss expenditure - research and development expenditure - Held that - Since no evidence has been filed regarding expenditure on research and development, therefore we decide this issue against the assessee. Addition u/s 40(a)(ia) - Held that - Section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of a particular year but also which are payable at any time during the year. Of course, as long as the other requirements of the said provision exist. In that context, in our opinion the decision of the Special Bench of the Tribunal in the case of M/s. Merilyn Shipping & Transports vs. ACIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM does not lay down correct law. Previous year Expenses allowable in current year - Held that - Previous year expenses could be allowed only if it is proved that such expenditure crystallized during the year. This fact has not been proved and therefore there is nothing wrong with the order of the CIT(A) and accordingly we confirm the same. Deduction u/s. 80IB on its Parwanoo Unit No. 2 - interest and other items cannot be said to have been derived from industrial undertaking Profits eligible for deduction u/s. 80IB - R & D expenses should be allocated on the basis of actual expenditure incurred. We therefore set aside the order of Ld. CIT(A) and direct the Assessing Officer to allocate the expenses actually incurred by the assessee on R & D in the eligible unit. Proportionate interest has to be disallowed because the assessee had admittedly diverted interest bearing funds to the sister concern Variations for deduction to be allowed u/s. 80IB - Held that - after per using the order of the income tax authorities, we do not find that such burden has been discharged by the Assessing Officer so as to reject the profits declared by the assessee in the respective units. Therefore we are not inclined to uphold the order of assessment as made by the Assessing Officer. Quite clearly, the assessee brought out before the Assessing Officer as well as before the Ld. CIT(A) that the manner of maintenance of the records and the system of apportionment of impugned expenditure on the basis of the proportionate turnover of various units was accepted in the past and there no cogent reasons have been brought out by the revenue which would require departure from the same. Addition u/r 8D - Held that - Rule 8D is not applicable in this year. Reasonable disallowance in this year is held to be ₹ 3 lakh and therefore we set aside the order of the CIT(A) and direct the Assessing Officer to disallow a sum of ₹ 3 lakhs. Disallowance u/s 14A - Held that - We find that Hon ble Bombay High Court in case of Godrej & Boycee 2010 (8) TMI 77 - BOMBAY HIGH COURT has clearly held that rule 8D would be applicable from assessment year 2008-09, Therefore in this year rule 8D has to be applied and disallowance has to be made as per calculation of Rule 8D. Therefore we find nothing wrong with the order of Ld. CIT(A) and confirm his order. Addition invoking the provisions of section 145A - Held that - Similar issue has been decided in favour of the assessee by the Hon ble High Court of Punjab & Haryana in case of Nahar Spinning Mills Ltd. 2008 (2) TMI 316 - PUNJAB AND HARYANA HIGH COURT . The Ld. CIT(A) following that decision decided the issue in favour of the assessee.
Issues Involved:
1. Adjournment Requests 2. Disallowance of Weighted Deduction on R&D Expenditure 3. Disallowance of Seed Marketing Expenses 4. Disallowance under Section 40(a)(ia) 5. Disallowance under Section 14A 6. Disallowance of Hire Charges 7. Disallowance of Petty Repair Expenses 8. Disallowance of Interest on Funds Invested in Other Companies 9. Disallowance of Previous Year Expenses 10. Disallowance of Deduction under Section 80IB 11. Allocation of R&D Expenditure for Section 80IB Deduction 12. Addition under Section 145A 13. Disallowance of Provident Fund Dues Issue-wise Detailed Analysis: 1. Adjournment Requests: The tribunal rejected the adjournment request by the assessee due to the history of multiple adjournments (over 22 times) and the final opportunity given on 17.4.2014. The tribunal emphasized that adjournments should not lead to wastage of judicial time. 2. Disallowance of Weighted Deduction on R&D Expenditure: The assessee's claim for weighted deduction under Section 35(2AB) was disallowed due to the failure to furnish the order of the prescribed authority in Form No. 3CM. The tribunal upheld the disallowance, referencing the assessee's inability to provide necessary evidence. 3. Disallowance of Seed Marketing Expenses: The tribunal found that the nature of expenditure should determine its allowability. It directed the Assessing Officer to verify the genuineness and nature of the seed marketing expenses and allow them if they are of a revenue nature. 4. Disallowance under Section 40(a)(ia): The tribunal upheld the disallowance of Rs. 37,50,152 under Section 40(a)(ia) for non-deduction of TDS, following the Gujarat High Court's decision in CIT v. Sikandarkhan N. Tunvar, which held that Section 40(a)(ia) applies to amounts paid or payable. 5. Disallowance under Section 14A: The tribunal noted that Rule 8D is applicable from AY 2008-09. For earlier years, a reasonable disallowance should be made. It restricted the disallowance to Rs. 5 lakhs for the relevant assessment year. 6. Disallowance of Hire Charges: The tribunal upheld the disallowance of Rs. 37,977 paid to Kotak Mahindra Primus Ltd. for vehicle loan interest, citing Section 2(28A) which includes any service fee or other charge in respect of borrowed money. 7. Disallowance of Petty Repair Expenses: The tribunal upheld the disallowance of Rs. 55,275 for petty repair expenses due to the assessee's failure to provide evidence of TDS deduction. 8. Disallowance of Interest on Funds Invested in Other Companies: The tribunal upheld the disallowance of Rs. 7,90,400 for interest on funds invested in sister concerns, as the assessee failed to prove commercial expediency for the advances. 9. Disallowance of Previous Year Expenses: The tribunal upheld the disallowance of Rs. 10,71,907 for previous year expenses, as the assessee could not prove that these expenses crystallized during the relevant assessment year. 10. Disallowance of Deduction under Section 80IB: The tribunal upheld the disallowance of Rs. 10,98,682 related to other income, as these amounts were not derived from the industrial undertaking, referencing the Supreme Court's decision in Pandian Chemicals Ltd. v. CIT. 11. Allocation of R&D Expenditure for Section 80IB Deduction: The tribunal directed the Assessing Officer to allocate R&D expenses based on actual expenditure incurred by the eligible unit, following the method consistently used by the assessee in previous years. 12. Addition under Section 145A: The tribunal upheld the CIT(A)'s decision to delete the addition made by the Assessing Officer under Section 145A, following the Punjab & Haryana High Court's decision in Nahar Spinning Mills Ltd. 13. Disallowance of Provident Fund Dues: The tribunal upheld the CIT(A)'s decision to allow the deduction of employees' share of PF if payments were made before the due date of filing the return, following the Punjab & Haryana High Court's decision in CIT v. Nuchem Ltd. Conclusion: The tribunal's judgment addressed multiple issues, emphasizing the importance of evidence and adherence to legal provisions. The tribunal upheld several disallowances due to the assessee's failure to provide necessary documentation and justified the rejection of repeated adjournment requests to prevent judicial time wastage.
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