2023 (7) TMI 23 - AT - Income Tax

Weighted deduction for expenditure towards Scientific Research u/s.35(2AB) - assessee has claimed a weighted deduction @ 200% - as per AO amount not approved by DSIR and therefore the weighted deduction cannot be allowed - contention of the assessee entire expenditure incurred by the assessee towards scientific research is eligible for weighted deduction since prior to 01/07/2016 there is no sanctity to the amount mentioned in Form 3CL certified by the DSIR - HELD THAT - As relying on case of Strides Arcolab Limited 2023 (5) TMI 1101 - ITAT MUMBAI hold that the assessee should be allowed the weighted deduction as has been claimed in the return of income and accordingly direct the assessing officer to delete the disallowance made in this regard. Since we have held the ground raised with regard to weighted deduction in favour of the assessee the alternate plea that if weighted deduction under section 35(2AB) is not allowed, then 100% of the expenditure should be allowed under section 37(1) has become academic. Accordingly the grounds raised in this regard do not warrant any adjudication. Weighted deduction for expenses incurred towards clinical trial expenses - HELD THAT - As already held that the approval by DSIR of the facility from which the scientific research expenditure are incurred is the deciding factor for allowing the expenditure, which in assessee s case is available on record. The section allows the expenditure incurred towards clinical trial by the approved entity and, therefore, we see no reason to deny the benefit of weighted deduction or the expenditure incurred by the assessee towards clinical trial. Accordingly, we direct the Assessing Officer to allow the additional 100% of the deduction since the assessee in the computation of income has already claimed 100%. Allowance of MAT credit - allowance of credit towards Minimum Alternate Tax (MAT) is inclusive of surcharge and education cess as per the normal provisions and the MAT provisions - HELD THAT - As relying on case of Tata Motors Ltd 2021 (7) TMI 207 - ITAT MUMBAI we direct the Assessing Officer to include surcharge and education cess for the purpose of giving credit under section 115JAA. Short Grant of TDS - AR submitted that the AO has not granted credit for the TDS claimed by the assessee in the return of Income and prayed for a direction in this regard - HELD THAT - We accordingly direct the Assessing Officer to verify and allow the claim of the assessee in accordance with law. Incorrect computation of interest u/s.234A - AR submitted that the assessee has filed the return of income for the assessment year before the due date for filing the return of income and therefore submitted that the levy of interest u/s.234A is not warranted - HELD THAT - AO has stated that the return of income of the assessee for the Assessment year 2014-15 has been filed on 29.11.2014 Therefore there is merit in the submission of the ld AR that the levy of interest u/s.234A is not warranted since the interest under section 234A is levied for delay in furnishing the return of income. We therefore direct the AO to verify and delete the interest after giving a reasonable opportunity of being heard to the assessee. Refund of DDT - as argued appointed date as per the sanction of the court is prior to the date of declaration of dividend. Pursuant to the amalgamation the 6 companies have merged with the assessee company and therefore they cannot be any payment of dividend to these companies by the assessee and accordingly DDT paid on this dividend should be refunded to the assessee - HELD THAT - As in the case of Torrents private limited 2013 (2) TMI 149 - GUJARAT HIGH COURT the assessee is entitled for refund of excess dividend tax paid along with statutory interest as applicable. The facts in assessee's case are similar to the above case and therefore in our view the ratio laid down by the Hon'ble High Court is applicable in assessee's case also. Accordingly we direct the assessing officer to examine the facts of assessee's case and process the refund along with statutory interest in accordance with law. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly. Incorrect consideration of interest u/s 234C - As submitted that AO there is no shortfall in payment of advance-tax based on the income returned by the assessee - AR further submitted that the interest under section 234C is charged for the shortfall in the payments of advance-tax on the income returned and not income assessed - HELD THAT - We direct the Assessing Officer to verify and allow the claim of the assessee in accordance with law after giving reasonable opportunity of being heard to the assessee.

Issues Involved:

1. Disallowance of Expenditure incurred on gifts & Sales promotion
2. Normal deduction for Research & Development expenditure
3. Allowability of education cess paid on Income Tax
4. Allowability of education cess paid on dividend distribution tax
5. Weighted deduction for expenditure on Research & Development u/s.35(2AB)
6. Short Grant of TDS
7. Weighted deduction u/s.35(2AB) for clinical Trial expenditure
8. Allowance of MAT credit to include surcharge & Education cess and Carry forward & set off of MAT credit accordingly
9. Incorrect computation of interest u/s.234A
10. Refund of DDT
11. Incorrect computation of interest u/s.234C

Summary:

Disallowance of Expenditure incurred on gifts & Sales promotion:
The assessee did not press the issue of disallowance of expenditure incurred on gifts and sales promotion. Accordingly, the grounds pertaining to these issues were dismissed as not pressed.

Normal deduction for Research & Development expenditure:
The issue of normal deduction for Research & Development expenditure was raised but not pressed for the assessment years under consideration.

Allowability of education cess paid on Income Tax:
The issue of allowability of education cess paid on income tax was not pressed by the assessee for the assessment years under consideration.

Allowability of education cess paid on dividend distribution tax:
The issue of allowability of education cess paid on dividend distribution tax was not pressed by the assessee for the assessment years under consideration.

Weighted deduction for expenditure on Research & Development u/s.35(2AB):
The Tribunal held that prior to the amendment effective from 01/07/2016, the weighted deduction under section 35(2AB) cannot be restricted to the amount as mentioned in Form 3CL certified by DSIR. The assessee should be allowed the weighted deduction as claimed in the return of income. This decision was applied mutatis mutandis for AY 2013-14 to 2015-16.

Short Grant of TDS:
For AY 2013-14 and AY 2015-16, the Tribunal directed the Assessing Officer to verify and allow the claim of the assessee for TDS credit in accordance with law.

Weighted deduction u/s.35(2AB) for clinical Trial expenditure:
The Tribunal allowed the additional 100% deduction for clinical trial expenses incurred by the assessee, as the amount is eligible for weighted deduction under section 35(2AB) and the approval by DSIR of the facility is available on record.

Allowance of MAT credit to include surcharge & Education cess and Carry forward & set off of MAT credit accordingly:
The Tribunal directed the Assessing Officer to include surcharge and education cess for the purpose of giving credit under section 115JAA, following the decision of the coordinate bench in the case of Tata Motors Ltd vs DCIT.

Incorrect computation of interest u/s.234A:
The Tribunal directed the Assessing Officer to verify and delete the interest under section 234A for AY 2014-15, as the assessee filed the return of income before the due date.

Refund of DDT:
The Tribunal directed the Assessing Officer to examine the facts of the assessee's case in light of the decision of the Hon'ble Gujarat High Court in the case of Torrent Pvt. Ltd. vs CIT and process the refund of DDT along with statutory interest in accordance with law.

Incorrect computation of interest u/s.234C:
The Tribunal directed the Assessing Officer to verify and delete the interest under section 234C erroneously charged, as the interest is charged for the shortfall in the payments of advance-tax on the income returned and not income assessed.

Conclusion:
The appeals of the assessee were partly allowed. The Tribunal provided detailed directions for each issue, ensuring fair consideration and adherence to legal precedents.

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