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TMI Blog2016 (10) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... that:- In this case, the assessee has not explained any efforts stated to have been made for recovery of the advances. Further, in view of the provisions of section 36(2)(i) of the Act, no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money - lending which is carried on by the assessee. In the appellate order, the ld. CIT(A) has given detailed findings, which have been reproduced hereinabove, and we find no infirmity in the order passed by the ld. CIT(A) on this issue. Thus, the ground raised by the assessee is dismissed. Restriction of the claim of R & D expenditure under section 35(2AB) - Held that:- In view of the specific provisions laid out under section 35(2AB)(2) of the Act that no deduction shall be allowed in respect of the expenditure mentioned in clause (1) of section 35(2AB) of the Act, under any other provisions of the Income Tax Act. Therefore, once the assessee claimed the R&D expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee filed its return of income on 30.09.2008 admitting total income at ₹.221,00,60,262/-. The return filed by the assessee was processed under section 143(1) of the Act on 20.08.2009. Subsequently, the case of the assessee was selected for scrutiny and notice under section 143(2) of the Act on 24.08.2009. Notice under section 142(1) of the Act along with questionnaire was issued to the assessee on 02.11.2011. In response thereto, the assessee has filed all details as called for. After considering the submissions of the assessee and also in view of the order of the TPO determining the arms length price under section 92CA of the Act, the Assessing Officer has completed the assessment under section 143(3) r.w.s. 144C(3) of the Act by assessing the total income of the assessee at ₹.240,30,47,571/- after making various disallowances/ additions. 3.2 The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee as well as facts of the case, the ld. CIT(A) partly allowed the appeal filed by the assessee. 3.3 On being aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR has submitted that it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of appellate proceedings, the assessee has submitted before the ld. CIT(A) that Rule 8D was notified on 24.03.2008 and therefore, it is not applicable to the assessment year 2008-09. The different stands taken by the assessee during the assessment proceedings and appellate proceedings are not correct. With regard to application of Rule 8D, the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. v. DCIT (supra) has held as under: . However, unless expressly or by necessary implication, a contrary provision is made, no retrospective effect is to be given to any rule so as to prejudicially affect the interests of the assessee. The rules were notified to come into force on March 24, 2008. It is a trite principle of law that the law which would apply to an assessment year is the law prevailing on the first day of April. Consequently, rule 8D which has been notified on March 24, 2008, would apply with effect from assessment year 2008-09. In view of the above law laid down by of the Hon ble Mumbai High Court that the application of provisions of Rule 8D notified with effect from 24.03.2008 would apply with effect from assessment year 2008-09, which was not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has held that section 14A(1) declares the law that the expenditure incurred by the assessee in relation to the income which does not form part of the total income under the Act shall not be allowed as a deduction in computing the taxable income of the assessee. Section 14A(2) provides for determining the quantum of such expenditure which shall not be allowed as a deduction. That is the machinery provision as far as section 14A is concerned. In that provision, it has been provided that if the Assessing Officer is not satisfied with the correctness of the computations made by an assessee, he shall compute the quantum in accordance with the method that may be prescribed. For this matter, Rule 8D has already been prescribed. Sub-sec.(3) further provides that even in a case where an assessee claims that no expenditure was incurred, the assessing authority has to presume the incurring of such expenditure as provided under sub-sec.(2) read with Rule prescribed. Therefore, it becomes clear that even in a case where the assessee claims that no expenditure was so incurred, the statute has provided for a presumptive expenditure which has to be disallowed by force of the statute. In a dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the advance against future supplies. Based on the request the company provided advance from time to time. The vendor could not supply the required quantity with quality specification as required by the company. The vendor informed that the money has been invested in enhancing the capacity and since the company was not accepting the components supplied they are not in a position to repay the advances. The board considering that the advance was paid to cater to the needs of the company and since the company is not accepting the supplies decided to write off the advances as the recoverability seemed very remote. However the Assessing Officer has not accepted the submissions of the assessee and made the disallowance of ₹. 16,73,43,000/- and added to the total income of the assessee by holding that the advances given by the assessee to the sister concern cannot be treated as given in normal course of business and there was no business exigency. 6.2 The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee as well as considering the provisions of section 36(1)(vii) and section 36(2) of the Act, the ld. CIT(A) confirmed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Alpump Limited is not any outside party to say that advances are irrecoverable for various reasons like bankruptcy or not traceable etc. Further, the Assessing Officer has observed from the Ledger account that these advances are mainly in the nature of Short term loans and opined that these advances cannot be treated as given in normal course of business. Therefore, by relying on the decision in the case of DCM Limited Vs. DCIT 317 ITR 261 and also Madhya Pradesh High Court in the case of M/s. Binodiram Balchand Co., Vs. CIT 251 ITR 819, wherein, it was held that advances given to the sister concerns which were not in the course of business of money lending is not allowable as expenditure, the Assessing Officer has held that the above circumstances does not warrants write off of these advances. Thus, the Assessing Officer disallowed the advances given to assessee's sister concern M/s. Alpump Limited of ₹. 16,73,43,000/- and added to the total income of the assessee. On appeal, the ld. CIT(A) has observed as under: 5.4.3 I have perused the decision of the Hon'ble High Court of Madhya Pradesh in the case of Binodiram Balchand Co Vs CIT (251 ITR 819) (MP)(2001) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; (iii) any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year), but the Assessing Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year; (iv) where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year) and the Assessing Officer is satisfied that such debt or part became a bad debit in any earlier previous year not falling beyond a period of four previous years immediately preceding the previous year in which such debt or part is written off, the provisions of sub-section (6) of section 155 shall apply; (v) where such debt or part of debt relates to advances made by an assessee to which cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing taxable income by reducing profit and resultant reduction in capital. In this case, the assessee has not explained any efforts stated to have been made for recovery of the advances. Further, in view of the provisions of section 36(2)(i) of the Act, no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money - lending which is carried on by the assessee. In the appellate order, the ld. CIT(A) has given detailed findings, which have been reproduced hereinabove, and we find no infirmity in the order passed by the ld. CIT(A) on this issue. Thus, the ground raised by the assessee is dismissed. 7. The assessee has raised similar common ground on an identical facts against the confirmation of disallowance of bad debt written off amounting to ₹.6,42,23,108/- for the assessment year 2009-10 as well as ₹.1,15,00,000/- for the assessment year 2010-11. In view of the above findings in the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹.26,70,95,840/-. Before the ld. CIT(A), the assessee has claimed to allow the balance expenditure incurred towards R D activities under section 35(2) of the Act @ 100%. The provisions of section 35(2) of the Act is meant for the purposes of clause (iv) of sub-section (1) to section 35 of the Act, which is in respect of any expenditure of capital in nature on scientific research related to the business carried on by the assessee. Whereas, the deduction under section 35(2AB)(1) of the Act is provided in respect of any expenditure on scientific research on in-house research and development activity as approved by the prescribed authority [not being expenditure in the nature of cost of any land or building]. In this case, the prescribed authority, being DSIR, who has restricted the expenditure to the extent of ₹.25,95,58,340/-, the same was allowed by the Assessing Officer. Over and above, before the ld. CIT(A), the assessee has claimed deduction under section 35(2) of the Act @ 100%. In view of the specific provisions laid out under section 35(2AB)(2) of the Act that no deduction shall be allowed in respect of the expenditure mentioned in clause (1) of section 35(2AB) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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