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2018 (5) TMI 801 - AT - Income TaxDisallowance u/s 14A - as per assessee he has not earned any dividend income and has not claimed any exemption - Held that - Hon ble Madras High Court in the case of Redington (India) Ltd., Vs. Addl. CIT 2017 (1) TMI 318 - MADRAS HIGH COURT have held that the disallowance u/s. 14A cannot be made where there is no exempt income during the relevant assessment year. Therefore, we set aside the order of Ld.CIT(A) and direct the AO to delete the addition made by him. Ground is allowed. Weighted deduction of expenditure u/s. 35(2AB) - Held that - CIT(A) directed the entire amount to be allowed without noticing the said difference. Since there is a mistake in the direction of CIT(A), we modify the same and direct the AO to allow the amount to the extent of 100% u/s. 35(1) as directed in AY. 2008-09 and balance of the claim is to be disallowed. AO can modify the order accordingly. No reason to interfere with the direction to allow the amount which was not certified by the DSIR to be considered for allowance u/s. 35(1). With reference to weighted deduction, we have already modified the direction of the CIT(A) in assessee s appeal. In view of that, ground of Revenue is partially allowed. In nut shell, assessee is entitled to claim uncertified amount at 100% u/s 35(1) and the excess claim of weighted deduction to that extent is to be disallowed. AO is ordered accordingly. Disallowance of 25% amounting on WDV - Held that - As fairly admitted that the order of CIT(A) is in compliance to the order of the ITAT in earlier year and the matter is pending before the Hon ble High Court as far as this claim is concerned. Since the order is in compliance to the order of ITAT in earlier year, we do not find any reason to interfere with the direction of CIT(A). In view of that Ground No. 4 is rejected. Claim u/s. 10B - Held that - The claim of 10B will be considered allowed and the demand if any cannot be claimed from assessee. Since the order of CIT(A) is in tune with the findings of the ITAT in earlier year, there is no need to interfere with the said order. Ground of Revenue on this issue stands rejected.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Deduction under Section 10B of the Income Tax Act. 3. Depreciation on non-compete fee. 4. Deduction under Section 35(2AB) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The Assessee argued that no disallowance under Section 14A should be made as no exempt income was earned during the relevant assessment year. The CIT(A) had directed a disallowance of ?8.6 lakhs, which was contested by the Assessee. The Tribunal found that since the Assessee had not earned any dividend income during the assessment year, the disallowance under Section 14A was not applicable. The Tribunal cited the Delhi High Court's decision in Cheminvest Ltd. and the Madras High Court's decision in Redington (India) Ltd., which held that disallowance under Section 14A cannot be made where there is no exempt income. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition. The Revenue's appeal on this issue was dismissed as there was no merit in contesting the disallowance. 2. Deduction under Section 10B of the Income Tax Act: The Assessee claimed a deduction of ?24,68,47,978/- under Section 10B for its Export Oriented Undertaking at Jeedimetla, which was disallowed by the AO following proceedings under Section 263 for AY 2005-06. The CIT(A) allowed the claim, following the ITAT's order for AY 2008-09. The Tribunal upheld the CIT(A)'s decision, noting that the matter was subjudice before the Hon'ble High Court. The AO was directed to follow the High Court's decision when rendered, and until then, the claim under Section 10B would be considered allowed, and any demand on this account could not be enforced against the Assessee. 3. Depreciation on Non-compete Fee: The Assessee claimed depreciation of ?4,92,188/- on the written down value of ?19,68,750/- for a non-compete fee paid in AY 2007-08. The CIT(A) allowed the claim in compliance with the ITAT's order for the earlier year, which was pending before the Hon'ble High Court. The Tribunal found no reason to interfere with the CIT(A)'s direction, as it was consistent with the ITAT's earlier orders. Consequently, the Revenue's ground on this issue was dismissed. 4. Deduction under Section 35(2AB) of the Income Tax Act: The Assessee claimed a weighted deduction of ?65,73,09,000/- under Section 35(2AB) for R&D expenditure, but the AO allowed only the amount certified by DSIR, disallowing ?1,78,71,547/-. The CIT(A) allowed the Assessee's claim, following the ITAT's order for AY 2008-09, which permitted the uncertified expenditure as a deduction under Section 35(1). The Tribunal modified the CIT(A)'s direction, allowing the uncertified amount at 100% under Section 35(1) and disallowing the weighted deduction of the balance 50%. The Revenue's appeal on this issue was partly allowed, as the Tribunal upheld the CIT(A)'s decision to allow the uncertified amount under Section 35(1), while modifying the direction regarding the weighted deduction. Conclusion: Both the Assessee's and the Revenue's appeals were partly allowed. The Tribunal provided clear directions for each issue, ensuring compliance with legal precedents and pending higher judicial decisions. The order was pronounced on 9th May 2018.
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