2024 (2) TMI 267 - AT - Income Tax

Weighted deduction u/s 35(2AB) - claim for deduction denied on the ground that Form No. 3CL was not furnished by the assessee before completion of assessment approving the R D expenditure by DSIR - CIT(A) decided in favor of assessee - Allowability of Revenue expenditure partly as not approved for weighted deduction by DSIR as Revenue expenditure u/s 37 - HELD THAT - We observe that in the appellate proceedings the assessee furnished Form No. 3CL issued by DSIR quantifying the expenditure allowable for weighted deduction u/s 35(2AB) based on which the ld. CIT (Appeals) allowed the claim for weighted deduction. We further observe that the Revenue expenditure which was not approved for weighted deduction by DSIR was directed to be allowable as Revenue expenditure under section 37 of the Act while computing the income of the assessee by the ld. CIT (Appeals) - AO has not questioned the genuineness and allowability of these expenses. Moreover, during the course of appellate proceedings, on being asked, the AR has furnished these details and it is observed that these expenses have been incurred for the purposes of the business and therefore the same are allowable as revenue expenditure. In view of this, the balance expenses are allowable as revenue expenses and the AO is directed accordingly. Thus we sustain the order of the ld. CIT (Appeals) and reject this ground of appeal of the Revenue. Addition made u/s 68 - assessee company received un-secured loan - report sent by DDIT (Investigation Wing) Kolkata proves that the loan creditor though submitted some of the documents the principal officer of the said company was not present for deposition - AO disbelieved the documents furnished by the assessee and added the loan as unexplained credit - CIT(A) deleted addition - HELD THAT - As loan creditor has filed its return of income for the year under consideration declaring net income of Rs. 29,63,710/- and has paid taxes on the same. On perusal of the balance sheet of the loan creditor it is clear that the capital account and reserves of the company stood at Rs. 15,65,58,169/- as on 31st March, 2014. The loans and advances of the creditor company stood at Rs. 10,62,64,984/-. On the date of loan i.e. 3.10.2013, before disbursement of loan to the assessee company the balance of bank account of creditor company stood at Rs. 8,83,089/- (credit and the bank statement reveals that an amount of Rs. 2.20 crores was advanced as loan to the assessee company through RTGS making its balance at Rs. 2,11,16,910/- (debit). It is clear from the bank statement that the balance remained at over draft. This fact was also confirmed by the Karnataka Bank Ltd. in its certificate dated 22.05.2017 wherein it has been clearly stated that the creditor company was enjoying over-draft limit of Rs. 7 crores and an amount of Rs. 2.20 crores has been remitted on 3.10.2013 in favour of the assessee by debiting the over-draft account of the creditor company. We further observe that the evidences furnished by the loan creditor before the DDIT, Investigation Wing, Kolkata, clearly proves that the identity, creditworthiness and genuineness of the transaction. We further observe that all these evidences and submissions of the assessee were considered by the ld. CIT (Appeals) and deleted the addition correctly. Appeal of revenue dismissed.

Summary

Issues Involved:
1. Deletion of addition made under section 35(2AB) of the Income Tax Act, 1961.
2. Deletion of addition made under section 68 of the Income Tax Act, 1961.

Issue 1: Deletion of Addition Under Section 35(2AB)
The Revenue contested the deletion of an addition of Rs. 7,49,88,607/- made by the Assessing Officer (AO) under section 35(2AB) of the Income Tax Act, 1961. The AO had denied the claim for deduction as the prescribed authority had not issued approval in Form No. 3CL by the assessment completion date. The CIT (Appeals) allowed the claim based on the Form No. 3CL issued by DSIR on 24.01.2017, approving capital and revenue expenditure totaling Rs. 307.32 lakhs. The CIT (Appeals) allowed the weighted deduction to the extent of Rs. 6,14,64,000/- and also permitted Rs. 1,35,24,607/- as allowable Revenue expenditure under section 37(1) of the Act. The Tribunal upheld the CIT (Appeals)'s decision, noting that the delay in issuing Form No. 3CL was procedural and beyond the assessee's control. The Tribunal cited a similar decision in the assessee's own case for the assessment year 2013-14, where the weighted deduction was allowed under similar circumstances.

Issue 2: Deletion of Addition Under Section 68
The Revenue also contested the deletion of an addition of Rs. 2,20,00,000/- made under section 68 of the Act. The AO had added the amount as unexplained credit, questioning the identity, creditworthiness, and genuineness of a loan transaction with M/s. B. D. Vanijya Udyog Pvt. Ltd. The assessee provided various documents, including the loan creditor's Income Tax Return, confirmation, balance sheet, and bank statements. The AO disbelieved the documents due to the absence of the principal officer for deposition. The CIT (Appeals) deleted the addition, stating that the identity, creditworthiness, and genuineness of the transaction were established through the furnished documents and the Karnataka Bank certificate confirming the loan transaction. The Tribunal agreed with the CIT (Appeals), emphasizing that the creditor's financial statements and bank transactions substantiated the loan's legitimacy.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT (Appeals)'s decisions on both issues. The weighted deduction under section 35(2AB) and the loan transaction under section 68 were both deemed justified based on the evidence provided. The appeal was dismissed in its entirety.