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2023 (12) TMI 876 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - disallowance suo moto computed by the appellant - HELD THAT - Disallowance offered u/s 14A as per Rule 8D in the return of income for AY 2018-19 was Rs. 14,19,009/-. Having regard to the above calculation, it is thus held that direct expenses disallowable under Rule 8D(2)(i) was Rs. 8,369/- and the AO had wrongly computed the same at Rs. 9,80,615/-. Coming to the disallowance as per Rule 8D(2)(ii), as noted that the disallowance suo moto computed by the appellant at Rs. 14,10,610/- exceeded the sum of Rs. 13,32,000/- worked out by the AO. AR fairly stated that the correct sum disallowable under Rule 8D(2)(ii) was Rs. 14,10,610/-. We thus hold that the aggregate sum disallowable u/s 14A read with Rule 8D for the relevant year was Rs. 14,19,009/- 8,399 14,10,610 which is noted to have already been offered by the appellant in the return of income. Hence, the plea of the assessee that no further disallowance u/s 14A is warranted on these given facts, is accepted. Accordingly, the excess disallowance of Rs. 8,93,606/- retained by Ld. CIT(A) is directed to be deleted. Ground Nos. 1 2 of the appeal are therefore allowed. Disallowance of the deduction claimed u/s 35(2AB) - appellant had incurred scientific research expenditure, both revenue and capital, at their approved in-house R D facility at Bengaluru - HELD THAT - It is noted that the DSIR has issued Form 3CL dated 31.08.2023, in terms of which, the appellant is entitled to weighted deduction of Rs. 25,89,66,000/- 17,26,44,000 X 150% u/s 35(2AB) of the Act. The balance sum of Rs. 55,00,605/- 17,81,44,605 17,26,44,000 however is only eligible for normal deduction, as rightly held by the Ld. CIT(A). Accordingly, the total deduction allowable u/s 35(2AB) and 35(1)(i)/(iv) of the Act works out to Rs. 26,44,66,605/- 25,89,66,000 55,00,605 as opposed to the deduction of Rs. 26,72,16,908/- claimed by the appellant in the return of income. Accordingly, the disallowance of Rs. 8,90,72,303/- confirmed by the Ld. CIT(A) stands restricted to Rs. 27,50,303/- 26,72,16,908 - 26,44,66,605 . These grounds are therefore partly allowed. Admissibility of claim not made in ROI - Computation of short term capital on sale of listed investments following FIFO Method - whether the claim made by the appellant regarding re-computation of STCG on sale of investments on FIFO basis in the course of assessment, is admissible in absence of such claim being raised in the return of income ? - HELD THAT - As in the appellant s own case which is reported in Commissioner of Income Tax, Kolkata Versus M/s Britannia Industries Ltd. 2017 (7) TMI 502 - CALCUTTA HIGH COURT . In the decided case the Hon ble Court after considering the decision of Goetze (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT and Gurjargravures (P.) Ltd. 1977 (11) TMI 1 - SUPREME COURT has held that the appellate authority has the power to entertain new claim if the grounds raised are bonafide. Thus, in principle, we agree that the appellant is legally entitled to raise this claim before us. Whether short term capital gain is to be worked out on FIFO Method and not weighted average cost method? - According to the appellant, the short term capital gain which was originally computed by following weighted average cost method shall stand rectified under the FIFO Method. The lower authorities have, however, observed that the appellant did not furnish any document / calculation in support of its claim. To this, the Ld. AR showed us that the complete statement giving scrip-wise break-up was furnished before the AO vide letter. Having regard to the same, we set aside this issue to the file of the AO to verify the calculation/computation submitted by the assessee and accordingly re-compute/quantify the correct taxable short term capital gain in terms of Section 45(2A) of the Act. This ground is therefore allowed for statistical purposes. Disallowance of deduction claimed u/s 80G - appellant had contributed sum towards its CSR obligations to Nowrosjee Wadia Maternity Hospital and Sir Ness Wadia Foundation - appellant had disallowed and added back the aforesaid expenditure in terms of Explanation 2 to Section 37(1) of the Act, while computing the taxable business income - HELD THAT - Explanation (2) to Section 37 of the Act which denies deduction for the expenses incurred on CSR initiative by way of deduction from computation of Business Income cannot be read into Chapter VI of the Act, which is applicable for arriving at taxable income from the Gross Total Income. It is also noted that wherever the Legislature intended that CSR contributions to any specific charitable trusts should be denied deduction, necessary provisions were incorporated in the specified subclauses, viz. sub-clauses (iiihk) and (iiihi). It is noted that no such debar has been set out by the Legislature in any other sub-clauses of Section 80G of the Act. As far as the reasoning given by the AO to deny the deduction is concerned, we find the same to be of no relevance as the same is not borne out from the provisions contained in Section 80G of the Act. As decided in JMS Mining Pvt. Ltd. 2021 (7) TMI 907 - ITAT KOLKATA specific prohibition/restriction has been made for CSR contributions only to two eligible charitable organizations, then it automatically implies that there is no prohibition/restriction in respect of claim of CSR expenses, in any other cases, which are otherwise eligible under Section 80G of the Act. Following the same, this Tribunal in the case of Acme Chem Ltd Vs ACIT 2023 (3) TMI 1434 - ITAT KOLKATA has deleted similar disallowance made by the AO u/s 80G of the Act in relation to the CSR donations made to registered charitable trusts. Thus we are inclined to hold that the assessee is eligible for deduction claimed u/s 80G of the Act.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Disallowance of deduction claimed under Section 35(2AB) of the Income Tax Act. 3. Computation of short-term capital gain under Section 45(2A) of the Income Tax Act. 4. Disallowance of deduction claimed under Section 80G of the Income Tax Act. 5. Non-granting of credit for dividend distribution tax paid under Section 115-O and levy of interest under Section 115P of the Income Tax Act. Summary: 1. Disallowance under Section 14A: The appellant had originally disallowed Rs. 14,19,009 under Section 14A, which included Rs. 8,399 as direct expenses and Rs. 14,10,610 as 1% of tax-free investments. The AO erroneously considered the disallowance to be Rs. 9,80,615 and computed an additional disallowance of Rs. 13,32,000. The CIT(A) restricted the disallowance to Rs. 8,93,606. The Tribunal held that the correct disallowance was Rs. 14,19,009 as offered by the appellant and directed the deletion of the excess disallowance of Rs. 8,93,606. 2. Disallowance of Deduction under Section 35(2AB): The appellant claimed a weighted deduction of Rs. 26,72,16,908 for scientific research expenditure. The AO disallowed this due to the absence of Form 3CL from DSIR but allowed for rectification upon receipt of the form. The CIT(A) upheld this but allowed normal deduction for the actual expenditure. The Tribunal noted that Form 3CL was issued, approving Rs. 17,26,44,000 for weighted deduction. Consequently, the Tribunal allowed a total deduction of Rs. 26,44,66,605 and restricted the disallowance to Rs. 27,50,303. 3. Computation of Short-term Capital Gain: The appellant sought to recompute short-term capital gains on listed investments using the FIFO method instead of the weighted average cost method. The Tribunal, referencing Section 45(2A) and relevant case law, agreed that the FIFO method should be used. The Tribunal set aside the issue to the AO to verify and recompute the gains accordingly. 4. Disallowance of Deduction under Section 80G: The appellant claimed a deduction of Rs. 11,06,85,217 under Section 80G for donations made towards CSR obligations. The AO and CIT(A) disallowed this, questioning the voluntariness and relatedness of the donations. The Tribunal held that the provisions of Section 80G do not require donations to be voluntary or unrelated to claim deductions. Following precedent, the Tribunal allowed the deduction claimed by the appellant. 5. Non-granting of Credit for Dividend Distribution Tax and Levy of Interest: The appellant's grievance regarding non-granting of credit for DDT paid and levy of interest was rendered infructuous as the JAO had rectified the error through a rectification order. Conclusion: The appeal of the assessee is partly allowed for statistical purposes, with specific directions for each issue as detailed above.
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