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TMI Blog2019 (10) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... /- made by the Assessing Officer (AO) under section 14A of the Income-tax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962. 3. Succinctly, the facts of the case are that the assessee is engaged in the business of manufacture and development of software. Exempt income of odd Rs. 5.42 crore was declared on account of dividend. The assessee, in its computation of total income, attributed expenditure of Rs. 10.00 lakh to the exempt income and offered disallowance. The AO, not satisfied, computed the disallowance u/s 14A of the Act in two parts viz., under Rule 8D(2)(ii) at Rs. 85,45,330/- and under Rule 8D(2)(iii) at Rs. 59,95,150.-. After reducing the suo moto disallowance offered by the assessee, the AO made an addition of Rs. 1,35, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He simply noted that the assessee offered disallowance and then came to the conclusion that further disallowance was called for under Rule 8D. The Hon'ble Supreme Court in Maxopp Investments Ltd. VS. CIT (2018) 402 ITR 640 (SC) has held in para 41 that: "before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance u/s.14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect". In view of the above proposition laid down by the Hon'ble Supreme Court, it is evident that where the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated by the Special Bench of the Tribunal in ACIT Vs. Vireet Investments (P) Ltd. (2017) 165 ITD 27 (Del) (SB). We, therefore, hold that neither the disallowance can be made u/s.14A nor any addition on this score can be made in the computation of income u/s.115JB of the Act. These grounds are, therefore, allowed. 6. The only other issue which survives in this appeal is against the confirmation of disallowance of weighted deduction of Rs. 71,35,914/- u/s.35(2AB) of the Act. 7. Simply put, the facts of the ground are that the assessee claimed weighted deduction u/s.35(2AB) of the Act amounting to Rs. 3,67,88,233/-. The AO observed that the DSIR (Department of Scientific and Industrial Research), New Delhi, which is an approving autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being, the Report to be submitted by the prescribed authority to the Director General (IT Exemptions) u/s.35(2AB), talked of recognition granted by DSIR to the in-house Research and Development Centre of the company, the amended Form 3CL, pursuant to amendment in Rule 6(7A)(b), bifurcated the report into two parts, namely, Part-A containing one-time recognition by the DSIR and Part-B containing year-wise details of the expenditure incurred and approval. When we consider the position prevailing as per Rule 6(7A) and Form 3CL before and after the amendment w.e.f. 01-07-2016, it becomes manifest that in the pre-amendment period, the requirement was only for registration with DSIR and not to the grant of the year-to-year approval of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, both the sides adopted their arguments advanced for the A.Y. 2013-14 and no separate arguments were put forth for the A.Y. 2014-15, except for pointing out the amounts in question. 10. The first ground is against the confirmation of disallowance of Rs. 74,40,373/- u/s.14A of the Act. For this year, again the AO recorded satisfaction in the same manner despite the assessee's suo moto disallowance of Rs. 20.00 lakh as in his order for the immediately preceding year. Following the view taken hereinabove, we order to delete the disallowance made u/s.14A of the Act. 11. In so far as the addition of the amount disallowed u/s.14A to the amount of book-profit as per computation u/s.115JB of the Act is concerned, we hold that, primarily, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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