2017 (8) TMI 841 - AT - Income Tax

Assessment of income - filing of revised return - Held that - For the correct computation of income, it is required to start from the income shown in the revised return of income, filed by the assessee, once it is acknowledged that such a return is on record. At the same time, it is also imperative for Assessing Officer to verify what were the differences between the declared income as per the original return and declared income as per the revised return and make enquiries as to what prompted such difference. He has to verify whether there are any items, which were missed out while doing the assessment, and if so, he has to consider it. In the interest of justice, we are of the opinion that the Assessing Officer shall ascertain the reasons for the difference in the income returned in between these two returns, and proceed in accordance with law. Ground no.2 raised by the assessee is allowed for statistical purpose. Disallowance of pre operative expenses - Held that - Though it has been allowed by this Tribunal in the preceding year, whether the expenditure incurred in relevant previous year was for expansion of existing business or stating a new business is not clear from the records. Though the ld Assessing Officer has mentioned that the expenditure was for setting up units at Chennai and Limda (Vadodara), there is no finding whether it was for expansion of existing line of business or starting a new business. No doubt, as held by the Tribunal, if it was for expansion of existing business the expenditure had to be considered as a business outgo. This aspect, in our opinion, requires a careful verification. We, therefore, set aside the order of the authorities below on this issue and remit it back to the Assessing Officer for consideration afresh Addition u/s 14A - Held that - If assessee had suo-motu disallowed ₹ 1,08,996/- u/s 14A of the Act in its own computation then the addition of ₹ 98,103/- made by Assessing Officer will be subsumed in it. However, whether such suo-motu disallowance was done by assessee in the original return or revised return has not been looked into by the lower authorities. Therefore, we are of the opinion that this issue also requires fresh consideration by Assessing Officer Disallowance of weighted deduction u/s 35(2AB) - clinical trial expenditure - Held that - Similar claim made by the assessee in assessment years 2010-11 and 2011-12 wherein the claim for weighted deduction for clinical trial expenditure is allowance. However, we are of the opinion that the amount which is eligible for such weighted deduction have to be computed considering Form 3CLand if the figures in Form 3CL is at variance with the claim the Assessing Officer has to carefully check whether each of the item included in such claim is coming within the purview of section 35(2AB) of the Act. Issue is remitted back to the Assessing Officer for this purpose. Weighted deduction u/s 35(2AB) for R&D expenses - Held that - Assessing Officer while making the disallowance of the claim u/s 35(2AB) in the impugned assessment year had specifically noted that the facts were similar to the earlier year. As per Assessing Officer the issue in the earlier year was also remuneration paid to Mr Peter Becker for research facility and payment made in earlier year outside India for in-house facility. Since coordinate bench had dealt with these issues in the earlier year and held that claim was within the parameters of section 35(2AB) of the Act, we are of the opinion that claim of weighted deduction could not have been prima-facie denied . However, verification has to be done with figures reported in Form 3CL. Assessee should be able to provide a reasonable justification or variation between its claim and what has been mentioned in Form 3CL. For this limited purpose we remit this issue back to the Assessing Officer. Assessee could not be denied deduction u/s 35(2AB) of the Act purely on the ground that prescribed authority did not furnish form 3CL in time to the department. No doubt, the figures as quantified in Form 3CL, may not be sacrosanct. However, once Form 3CL is received by the Department; we cannot say that it has to be given a go-bye. It can be a useful tool in determining the legitimacy of the claim of the assessee. This is the reason why we are remitting the issue of quantification of the claim of weighted deduction, back to the file of the ld Assessing Officer for consideration afresh Addition for mis-match in the claim of TDS - Held that - Addition in question is on account of difference in reconciliation of tax deducted at source as reflected in Form 26AS. As per ld AR, a sum of ₹ 32,68,459/- out of this has been booked as income in the subsequent year and taxes paid. Tribunal in assessee s own case for assessment year 2010-11 and 2011-12 had deleted the addition.Accordingly, we delete the addition to the extent of ₹ 32,68,459/- out of the total addition of ₹ 50,26,767/- . Ground no.8 is treated as partly allowed. Disallowance of provision for commission on which TDS was not deducted at source - Held that - Similar provision was disallowed by the Assessing Officer in preceding assessment year also and assessee s appeal before this Tribunal on this issue was unsuccessful. Facts and circumstances for the impugned assessment year also being similar; we are of the opinion that provision for commission on which TDS was not deducted was rightly disallowed by the lower authorities. We do not find any error in the orders of the lower authorities Disallowance of claim u/s 80IA - Held that - For preceding assessment tears 2010-11 and 2011-12 also assessee had made similar claims on the same windmills, through a letter filed during the course of the assessment proceedings, which was not considered by the lower authorities. In the current year as same occurred we direct the Assessing Officer to examine the claim afresh in accordance with law. TPA - comparability - Held that - We deem it appropriate to remit the issues relating Transfer Pricing adjustment, if any, required on corporate guarantee and IT enabled services back to the file of the TPO/Assessing Officer for consideration afresh, in line with the directions given by this Tribunal for the preceding assessment year, reproduced above Computing MAT - Held that - No disallowance was made while computing the income under the normal provision of the Act. This may have been an error committed by the Assessing Officer and, in our opinion, it will not stop the Assessing Officer from making an addition for MAT working, if this was an unascertained liability. No doubt, revenue is having other course open to it, if it is of the opinion that the allowance was erroneously given while computing the income under the normal provision of the Act. Considering the facts and circumstances, we are of the opinion that this issue also requires a fresh visit by the Assessing Officer. We, therefore, set aside the orders of the authorities below and remit the issue relating to MAT back to the Assessing Officer for consideration afresh.

Summary

Issues Involved:

1. Disallowance of deduction u/s 80IA
2. Computation of income based on original vs. revised return
3. Disallowance of pre-operative expenses
4. Disallowance u/s 14A
5. Disallowance of weighted deduction u/s 35(2AB)
6. Addition due to mismatch in TDS claim
7. Disallowance for non-deduction of TDS on commission
8. Disallowance of deduction u/s 80IA for windmills
9. Transfer pricing adjustments
10. Computation of Minimum Alternative Tax (MAT)

Detailed Analysis:

1. Disallowance of Deduction u/s 80IA:
The assessee's grievance regarding the disallowance of a deduction of ?4,87,20,504/- claimed u/s 80IA was noted. The DRP had allowed this claim, but the Assessing Officer did not give effect to this direction. The Tribunal directed the Assessing Officer to follow the DRP's ruling and allow the claim.

2. Computation of Income Based on Original vs. Revised Return:
The assessee filed two returns on the same day, one declaring ?3,96,40,290/- and another declaring ?1,67,86,870/-. The Assessing Officer started with the income shown in the original return. The Tribunal directed the Assessing Officer to verify the differences between the original and revised returns and ascertain the reasons for the discrepancies, ensuring correct computation of income.

3. Disallowance of Pre-Operative Expenses:
The assessee claimed pre-operative expenses of ?21,67,95,249/- as revenue expenses. The Tribunal noted that similar expenses were allowed in earlier years and directed the Assessing Officer to verify whether the expenses were for the expansion of the existing business or for setting up a new business. The matter was remitted back for fresh consideration.

4. Disallowance u/s 14A:
The assessee had earned exempt dividend income and made a suo-motu disallowance of ?1,08,996/-. The Assessing Officer made an additional disallowance of ?98,103/-. The Tribunal directed the Assessing Officer to verify whether the suo-motu disallowance was done in the original or revised return and reconsider the issue afresh.

5. Disallowance of Weighted Deduction u/s 35(2AB):
The assessee claimed a weighted deduction for R&D expenses. The Tribunal noted that similar claims were allowed in earlier years and directed the Assessing Officer to verify the amounts eligible for deduction as per Form 3CL and ensure compliance with section 35(2AB). The issue was remitted back for fresh consideration.

6. Addition Due to Mismatch in TDS Claim:
The assessee faced an addition of ?50,26,767/- due to a mismatch in TDS claims. The Tribunal noted that a part of this amount was booked as income in the subsequent year and directed the deletion of ?32,68,459/- from the addition.

7. Disallowance for Non-Deduction of TDS on Commission:
The assessee's provision for commission of ?1,11,08,106/- was disallowed for non-deduction of TDS. The Tribunal upheld the disallowance, noting that similar disallowances were made in earlier years and the assessee's appeal was unsuccessful.

8. Disallowance of Deduction u/s 80IA for Windmills:
The assessee made a fresh claim for deduction u/s 80IA for two windmills during the assessment proceedings, which was not considered by the Assessing Officer. The Tribunal directed the Assessing Officer to examine the claim afresh in accordance with law.

9. Transfer Pricing Adjustments:
The Tribunal addressed three TP adjustments: reimbursement of expenses, corporate guarantee, and IT-enabled services. The Tribunal remitted the issues back to the TPO/Assessing Officer for fresh consideration, following directions given in earlier years.

10. Computation of Minimum Alternative Tax (MAT):
The Tribunal addressed various additions made while computing MAT, such as capital expenditure, proposed dividend, provision for salary, and wealth tax provision. The Tribunal directed the Assessing Officer to reconsider these items afresh, ensuring compliance with legal provisions and principles of consistency.

Conclusion:
The appeal filed by the assessee was partly allowed for statistical purposes, with several issues remitted back to the Assessing Officer for fresh consideration and verification.