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2018 (4) TMI 253 - AT - Income TaxDisallowance u/s.35(2AB) - Held that - Assessee would be entitled to deduction u/s.35(2AB) in the year under consideration, even thought the registration/recognition is accorded by the DSIR in the subsequent assessment year. See CIT Vs Sandan Vikas India Ltd 2011 (2) TMI 66 - DELHI HIGH COURT - Decided against revenue Disallowance u/s 14A - Held that - Interest paid by the assessee was subsequently and assessee was having sufficient interest free fund to cover up the investment earning exempt income. Therefore, we are of the considered opinion that provisions of Section 14A are not attracted. However, as decided by the ld. CIT(A) that salary paid to C.S. Christian, which works out to ₹ 40,713/- is upheld. Therefore, we upheld the decision of the ld. CIT(A) and we are not incline to interfere in the order passed by the ld.CIT(A). Thus, this ground of revenue is dismissed. Disallowance of sales promotion expenses - Held that - Assessee had purchased gift items and gave as momentous to the customers of the clients; and expenditure incurred was insignificant as the turnover of the appellant is around ₹ 31 crores; majority of the payment were made through credit card and export turnover of the assessee had gone up from ₹ 10.8 crores in the previous year to ₹ 12.54 crores in the current year. Disallowance of Motor Car depreciation - Held that - It is not disputed that funds for purchases of the car were provided by the assessee company which is also reflected in the accounts of the assessee company. In our opinion, when the car is actually used for the purpose of business of the company depreciation thereon cannot be denied. - Decided against revenue
Issues involved:
1. Disallowance under section 35(2AB) of the Income Tax Act 2. Disallowance under section 14A of the Income Tax Act 3. Disallowance of excess depreciation on office equipment 4. Disallowance of sales promotion expenses 5. Disallowance of motor car depreciation Issue 1: Disallowance under section 35(2AB) of the Income Tax Act: The appeal was filed by the revenue against the CIT(A)'s order. The revenue contended that the disallowance of ?76,43,540 under section 35(2AB) was deleted by the CIT(A) despite the approval from DSIR being obtained in the subsequent year. The Delhi High Court's judgment in CIT Vs. Sandan Vikas India Ltd was cited, stating that approval granted during the relevant assessment year entitles the weighted deduction. The Tribunal dismissed the appeal, following the Delhi High Court's decision. Issue 2: Disallowance under section 14A of the Income Tax Act: The AO disallowed ?10,90,955 under section 14A, which was partly upheld by the CIT(A). The Tribunal found that the interest paid by the assessee was subsequently and there were sufficient interest-free funds to cover the exempt income. The Tribunal upheld the decision of the CIT(A) regarding the salary paid to an individual, amounting to ?40,713, and dismissed the revenue's appeal on this ground. Issue 3: Disallowance of excess depreciation on office equipment: The AO disallowed ?12,634 as excess depreciation on office equipment, which was discussed by both the AO and CIT(A). The Tribunal noted that the expenditure incurred was insignificant compared to the turnover of the appellant, and majority payments were made through credit cards. Considering these factors, the Tribunal upheld the CIT(A)'s decision and dismissed the revenue's appeal on this ground. Issue 4: Disallowance of sales promotion expenses: The AO disallowed ?82,255 as sales promotion expenses, which the CIT(A) held to be personal in nature and not related to business. The Tribunal agreed with the AO's decision, stating that the expenses were personal and made for non-business purposes. The revenue's appeal on this ground was dismissed. Issue 5: Disallowance of motor car depreciation: The AO disallowed ?8,38,246 as motor car depreciation, which was discussed by both the AO and CIT(A). The Tribunal noted that when the car is used for the business of the company, depreciation cannot be denied. Citing a previous case, the Tribunal upheld the CIT(A)'s decision and dismissed the revenue's appeal. In conclusion, the Tribunal dismissed the revenue's appeal on all grounds, upholding the decisions made by the CIT(A) in each case.
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