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TMI Blog2014 (6) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... In these circumstances, in our considered opinion, interest of justice will be served if the matter is remitted to the file of the AO. The AO is directed to examine the issue of allowabilty of R&D expenses, after giving the assessee proper opportunity of being heard. - I.T.A. Nos. 2177, 2178 & 2179/DEL/2011 - - - Dated:- 13-6-2014 - Shri Shamim Yahya, Accountant Member And Shri C.M. Garg, Judicial Member For the Appellant : Sh. Salil Kapoor, Vikas Jain, Ms. Neha Virmani Shruti Kohli For the Respondent : Sh. Sanjeev Sharma Sh. Vivek Kumar, Sr. DR ORDER PER SHAMIM YAHYA: AM These Appeals by the Revenue are directed against the common order of the Ld. CIT(A) pertaining to assessment years 2003-04, 2004- 05 2005- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted a PE in India and profits from supply of hardware were taxable in India. The AO attributed 100% of the business profits resulting from these supplies to the appellant s PE in India. While calculating the business profits, the AO applied gross profit margin from these supplies and allowed a deduction from the same in respect of selling and administrative expenses in terms of section 44C of the Act. The appellant filed an appeal against the orders of the AO. CIT(A) vide his order dated 22.12.2009 upheld the existence of the appellant s PE and attributed 50% of the appellant s profits to its PE in India. Further the CIT(A) directed the AO to allow deduction for all expenses incurred inside and outside India relatable to the PE of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- Profit attributable to Indian PE (As per direction of CIT(A)) ₹ 3,65,16,890/- Ld. CIT(A) further noted that at the time of passing of the appeal effect order the assessee had filed the revised computation of income in which the assessee effectively claimed two types of expenses i.e. selling and administrative expenses and R D expenses. In the said order AO allowed selling and administrative expenses, but did not allow R D expenses. No reason was given for this by the AO. In this regard, assessee s submissions were remanded by the Ld. CIT(A to the AO. The AO in response submitted as under:- The main grounds of appeal are: (a) Non allowance of R D expenses In this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make any variation in the assessable income to that extent. Hence, the assessee s argument is not based on correct appreciation of law. 5. Ld. CIT(A) was not satisfied with the above. He noted that AO has not ever asked the assessee to explain the R D expenses were incurred for wholly for the purpose of its business. Ld. CIT(A) found the AO s order was neither speaking nor reasoned. Ld. CIT(A) proceeded as under:- In view of the discussion and observations made above it is held that the AO was not justified in not allowing R D expense to the appellant for the following reasons: (i) No reason for disallowance of R D expenses has been mentioned either in the assessment order passed u/s. 143(3) or at the time of passing of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nokia Corporation, a foreign company engaged in the same line of business net profit ratio has been adopted from global accounts of the appellant for the purpose of attribution of profits which means R D expenses have been allowed in that case on the basis of the global accounts. Therefore, there is no reason to disallow these expenses in the case of the appellant in the absence of any adverse finding or evidence. Accordingly, the AO is directed to allow R D expenses to the appellant on proportionate basis keeping in view the directions of this office vide appellate order dated 22.12.2009 in the appellant s own case. 6. Against the above order the Revenue is in appeal before us. 7. We have heard both the counsel and perused t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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