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TMI Blog2019 (10) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority being Department of Industrial and Scientific Research. 1.3 Your appellant Prays that, the order of the Honourable CIT (Appeals) be reversed and deduction as claimed by Your appellant u/s 35(2AB) be granted in full. Depreciation in respect of Opening W.D.V. of Building on account of depreciation disallowed by AO from AY 2004-05 onwards. 2.1 The Honourable CIT(Appeals) has not allowed the depreciation in respect of Building used for the purpose of business but disallowed by AO. From AY 2004- 05 onwards and effect for which was remained to be given. 2.3 Your appellant prays that the depreciation of the adjusted wdv of the opening block of the building on account of disallowance of depreciation in respect of user of building for business. Disallowance of expenditure u/s 14A of Rs. 64 Lakhs as per Rule 3.1 The Honouarble CIT(Appeals) has erred in confirming the disallowance in respect of Rule 8D(2)(iii) being one half percentage of average value of investments , the income from which does not form part of the Total Income . The Honourable CIT (Appeals) has confirmed the disallowance based on the inference that you're appellant has incurred the administrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or thing specified in the list of the Eleventh Schedule incurs any expenditure on 'Scientific Research' (not being expenditure in the nature of cost of any land or building) on in-house, research and development facility 'as approved by the prescribed authority/ such assessee would be entitled to a deduction of a sum equal to one and half times of the expenditure so-incurred.. Such expenditure incurred should be approved by the authority prescribed under section 35(2AB) read with rules framed thereunder. The authority prescribed to grant such approval under rule 6{1B) of the rules, 1961 is the Secretary, Department of Scientific and Industrial Research. As per DSIR regulation/ the Prescribed Authority would pass the order after verification of the expenditure. The appellant has not provided any details as to why the DSIR( ie Prescribed authority) has not allowed the expenditure and whether the appellant has raised any objection thereon. Therefore, I do not find any force in the submission of the appellant. Accordingly, ground no 2 of the appeal is dismissed. 4. The ld. Counsel of the assessee has contended that the ld. CIT(A) has erred in confirming the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : i. Revenue expenditure of Rs. 10,05,03,198/- @ 150% - Rs. 15,07,54,797/-. ii. Capital expenditure of Rs. 1,27,94,490/- @ 150% - Rs. 1,91,91,735/-. The assessee, thus, claimed deduction of a sum of Rs. 16,99,46,532/-. The details of this expenditure has been filed at Assessee's Paper Book (APB for short), pgs. 93 to 100. It is the claim of the assessee that this expenditure was deductible u/s.35(2AB) of the Act in computing the total income @ 150% of the actual expenditure. The expenditure was incurred for the Kanjurmarg unit of the company; rather, the unit stood approved by the DSIR, in Form No. 3CM, as on 28.08.2008 (APB, pg. 88), as per the requirements of section 35(2AB) of the Act for the period from 01.04.2007 to 31.03.2009. The assessee's Auditor duly certified the genuineness of such expenditure and its eligibility for weighted deduction u/s. 35(2)(AB), as available at APB pgs. 93 to 100, as also by the tax auditor, as evident from APB pgs. 91 ^92. 7. It was the action of the DSIR in issuing Form No. 3CL (APB pgs. 89 & 90), dated 24.08.2010, quantifying the eligible expenditure at Rs. 11,04,63,000/-, as against that of Rs. 11,32,97,688/-, resulting in a difference o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed. (4) The prescribed authority shall submit its report in relation to the approval of the said facility to the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General in such form and within such time as may be prescribed. (5) [***] (6) No deduction shall be allowed to a company approved under sub-clause (C) of clause (iia) of sub-section (1) in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2008. 9. The operative phrase here is "on in-house research and development facility as approved by the prescribed authority .......", the word "facility" has been hereby show us to emphasis the point that it is the unit which requires approval of the prescribed authority under this provision. Further, in the memorandum, explaining the provision of section and the notes on the clauses issued at the time of insertion of section 35(2AB) in the Act, copies of both of which have been filed on record before us by the assessee, it has been clearly provided that the deduction would be available t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in by the amendment effective from 01.07.2016 as above: "The prescribed authority shall furnish electronically its report,- (i) in relation to the approval of the in-house research and development facility in Part A of Room No. 3CL; (ii) quantifying the expenditure incurred on in-house research and development facility by the company during the previous year and eligible for weighted deduction under sub-section (2AB) of section 35 of the Income Tax Act, 1961 in Part B of Form No. 3CL." 13. Hitherto, the provision was as follows: "The prescribed authority shall submit its report in relation to the approval of in-house facility and development facility in Form No. 3CL to the Director General (Income-tax Exemptions) within sixty days of its granting approval." The above also makes it amply clear that prior to the amendment, i.e., upto 30.06.2016, it was not required to quantify the expenditure and it was only w.e.f. 01.07.2016 that this mandate has been put in place. 14. The year under consideration is A.Y. 2009-10 and, for this year, the amendment was not applicable. Therefore, the assessee is right in contending that the non approval of the expenditure claimed by CSIR did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not allow the deprecation to the assessee on higher revised opening WDV of the building, which, as per the assessee was required to be increased, by revising it on account of disallowance of depreciation in the past, particularly for A.Ys. 2004-05 to 2008-09, aggregating to Rs. 1,90,42,120/- which stands allowed by the tribunal vide order (APB pgs. 109 to 111) passed in ITA No. 5295/Mum/2017. 19. The ld. CIT(A), by virtue of the impugned order, directed the A.O. to allow the claim for the depreciation on revised opening WDV, rather than, granting the relief to the assessee himself. 20. The grievance of the assessee is that the A.O. disputed the directions of the ld. CIT(A), while passing the order (APB pg. 286) dated 08.02.2018, for giving effect to the ld. CIT(A)'s order, failed to upwardly revise the opening WDV and to allow the higher depreciation to the assessee. The department, per contra, has placed strong reliance on the A.O.'s order dated 08.02.2018, besides relying on the assessment order. 21. Here, it is seen that the assessee claimed deprecation on a part of the building, i.e., 84%, which become disallowable for the period from A.Y's 2004-05 to 2007-08. Since suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income itself. 24. The fact that the tribunal order for A.Ys. 2004-05 to 2007-08 confirming the assessment orders for these years, is dated 28.03.2012, which falls much later within the date of the filing of the return by the assessee, i.e., on 28.09.2009, cannot be disputed. That being so obviously, the assessee was not in a position to claim higher depreciation in the return of income by adjusting the opening WDV. There is no provision in law pointed out to us for habiting the assessee from making the claim of such like the present one in the assessment proceedings. Rather, it stands well settled that the claims of depreciation need must be allowed by the A.O. irrespective of whether the assessee has himself made such claim or not. However, there is no dispute about the entitlement of the assessee to claim of the depreciation. The A.O. ought to have allowed the higher depreciation on the direction issued by the ld. CIT(A), which, unfortunately, has not come about. Accordingly, the A.O. is now directed to upwardly revise the opening WDV and to allow the higher deprecation to the assessee on the part of the building CG house, which part was utilized by the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D(2)(iii) being one half percentage of average value of investments, the income from which does not form part of the total income of the assessee; that the ld. CIT(A) has confirmed the disallowance based on the inference that the assessee has incurred administrative expenses which were composite and divisible and that, hence, the provision of Rule 8D(2)(iii) were applicable; that the assessee had submitted the amount of actual expenditure incurred for earning the exempt income, and that the disallowance ought to be restricted to the same in terms of section 14(1) of the Act, without referring to the provisions of Rule 8D(2)(iii) of the Rules. It has further been contended that the assessee company has not incurred any expenditure for earning the exempt income which is directly credited electronically to the bank account of the company and the investment is managed by the Managers of Mutual Funds, to whom the payment is made by the fund and not by the company; that the expenditure debited to the profit and loss account has been directly incurred for the purpose of earning taxable income in relation to that in the alternative, the disallowance should be restricted to the amount of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e states that the average investments of Rs. 128.54 crores, adopted by the A.O./ld. CIT(A) should be reduced by following: a) The investments of Rs. 163.62 crores in Indian and Foreign Subsidiaries, as stands accepted by the ITAT in its order (APB pg. 147) dated 17.10.2014, passed for A.Y. 2008-09, in the assessee's case, in ITA Nos. 6277 & 6167/Mum/2012. b) The investment of Rs. 30.14 crores in units of debt funds, the income whereof was otherwise liable to taxation under the head of capital gains, which income was not exempt, either u/s.10(38) or section 10(35), or otherwise. 28. As a further alternative, the assessee averse that the average investments of Rs. 128.54 crores adopted by the A.O. for applying sub clause (iii) of Rule 8D(2) should be reduced by, firstly, investments aggregating to Rs. 18.89 crores, on which no exempt income was received during the year (reliance placed on Maxopp Investment Ltd. 402 ITR 640 (SC), Vineet Investments Private Ltd. 188 ITD 1 (Del.)(SB), Reliance Natural Resources Ltd. 166 ITD 385 (Mum.)); then, it has been requested that the investments should be reduced by those in subsidiaries, aggregating to Rs. 163.62 crores including the investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. The ld. Counsel of the assessee has contended that last but not the least, without prejudice, the disallowance ought to be, if at all, sustained to the expenditure actually incurred, which is an amount of Rs. 7,91,181/- paid as salary to the treasury Manager. For this, reliance has been placed on Gillette Group India (P.) Ltd. (supra). 32. On the other hand, the ld. DR placing heavy reliance on the order under appeal on this issue, has contended that it has not been disputed that the assessee has claimed various administrative expenditure, or that the assessee has not maintained separate books of account, due to which, it does stand substantiated that no expenditure whatsoever was infact incurred; that the administrative expenses incurred by the assessee are composite and indivisible and interlinked. That the A.O. invoked the provisions of section 14A(ii) of the Act r/w Rule 8D(iii) of the Rules, which action cannot be faulted; that the disallowance so worked out at the amount of Rs. 64 lacs and as confirmed by the ld. CIT(A), therefore, required to be upheld; there being no merit in the grievance sought to be raised by the assessee in this regard. 33. Here it is seen that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have been raised: "On the facts and circumstances of case and in law, the Ld.CIT(A) erred in' deleting the addition without appreciating the facts that the Company has been showing rent income from "CG House" as business income and claiming depreciation on part of that building utilised by the assessee which was not claimed in the return of income." 2. "On the facts and. circumstances of case and in law, the Ld.CIT(A) erred in entertaining the fresh claim of depreciation on CG House which was not claimed by the assessee while filing its Return of Income when the CIT(A) has no power to do so in light of Hon'ble Supreme Court decision in the case of Goetze (India) Ltd reported in 284 1TR 323(SQ." 3. "On the facts and circumstances of case and in law, the Ld.CIT(A) erred, inthe disallowance computed by the AO under Rule 8D(2}{ii] of the Income Tax Rules holding that provisions of Rule 8D(2)(ii) are not applicable in the present case without appreciating the fact that the assessee failed to -(i) substantiate before the AO that no interest-bearing funds were utilised and (ii) that the Investments are made exclusively out of reserve fund." 4. "On the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on the impugned order in this regard also, the tribunal order (APB pgs. 152-163). The assessee's case for A.Y. 2008-09 has been pressed into service. 40. A sum of Rs. 72 lacs was disallowed by the A.O. under the provisions of section 14A of the Act read with Rule 8D(2)(ii) of the Rules. The ld. CIT(A) deleted the disallowance, observing as under: 10.2 I have carefully perused the assessment order and the submission of the appellant. It is seen that there was sufficient capital and reserve at the disposal of the appellant and this fact was not disputed by the AO. But in view of the decision of Hon'ble Jurisdictional High Court in the case of SBI DHRL Ltd ( 376 ITR 296) and HDFC Bank Ltd ( 366 ITR 505) it is seen that the Jurisdictional High Court held that if there is sufficient capital and reserve at the disposal of the appellant then presumption can be taken that the investment has been made out of the non interest bearing fund. Therefore, in view of the Hon'ble Jurisdictional High Court decision, is directed to delete the addition u/s 14A r w Rule 8D (2)(ii) of Rs. 72 lacs. 41. Before us, the decisions of the Hon'ble Jurisdictional High Court in the case of SB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of facts was the prerequisite for such allowance; that on account of such allowing the assessee's claim concerning the debt compensation, again the ld. CIT(A) has erroneously violated the provisions of section 46A of the Income Tax Act, 1961. 44. On this issue, at the outset, it would be appropriate to record the observations made by the ld. CIT(A), as under : 12.1 I have carefully perused the assessment order and the submission of the appellant. The appellant has relied on the decision of Hon'ble juridication 1TAT in the case of APL India(L) Ltd 58 SOT 41 (URO) Mumbai) and also referred to the decision of Hon'ble ITAT Cochin in the case of Apollo Tyres 60 SOT 1. The decision was found favourable to the appellant in the case of APL India (P) Limited it is held that appellant authorities is not barred to entertain the fresh claim as observed by the Apex Court in the case of Goetze (India) Ltd (284 ITR 323). Further, it is found that the Hon'ble Mumbai ITAI, in the case of Jay Bharat Coop. Housing Society Ltd reported at 125 ITD 90 (MUM.), wherein it is held as under :- Through Goetze (India) Ltd.'s case (supra) the Apex Court had made emphatically clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the assessee with regard to doctrine of mutuality, could not be entertained at the instant stage. In the light of these facts, there was no infirmity in the order of the Commissioner (Appeals) and the same was to be confirmed. [Para 14],". Also in the case of Orissa Rural Housing Development Corpn. Ltd. reported at 17 taxmann.com 186 (Orissa), wherein it is held that "Whether an assessee can revise his return of income by way of filing a revised statement of income after filing original return other than by way of filing revised return as contemplated under section 139(5)? it is quite possible and natural that in submitting a return, some bona fide omission or wrong statement may have occurred. In order to obviate this possibility the legislature has made provisions in section 139(5) enabling an assessee to furnish a revised return. Thus, the assessee has a right to file revised return if he discovers any omission or any wrong statement in the original filed return. Such a revised return can be furnished at any time before the expiry of one year from the end of the relevant assessment year or the completion of the assessment, whichever is earlier. Thus, the statute provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly verifiable and does not require any in depth verification , investigation, then the claim should be entertained. In the instant case the AO has not verified the claim of the appellant, the appellant has submitted the copy of mutual fund statement from which it s apparently verifiable that the dividend earned from mutual funds are exempt income. Therefore, AO is directed to allow the claim of the appellant. With respect to the claim of death compensation, the claim is verifiable relating to Rs. 12,25,000/- and not Rs. Rs. 13,40,080/- as claimed. The copy of bank account is submitted wherein Rs. 12,25,000/- has been debited to Medicare Services Club on 13.2.2009. So, Rs. 12,25,000/- is deleted. The balance addition of Rs. l,15,080/- (Rs. 13,40,080-Rs. 12,25,000) is confirmed. Therefore, the claim of death compensation is partly allowed. Accordingly, ground nos 7 & 8 are partly allowed. 13. Ground no 9 of the appeal: The ground no 9 of the appeal relates to the non granting of credit to the TDS certificate to the extent of Rs. 70,33,561. The assessment order is silent on the issue of granting of TDS certificate. Therefore, AO is directed to verify the claim of TDS and allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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