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TMI Blog2024 (10) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Accordingly, we estimate the profit @ 8% of the value of alleged bogus purchases - Decided partly in favour of assessee. Disallowance of R D expenses claimed u/s 35(2AB) - AO has disallowed the claim on the reasoning that the assessee has failed to substantiate the nature of expenses, genuineness of expenses and purpose of expenses - HELD THAT:- The above said observations of the AO, in our view, are beyond the scope of order passed by ITAT. We notice that Cadila Healthcare Limited. [ 2013 (3) TMI 539 - GUJARAT HIGH COURT ] has held in the above said case that the R D expenses incurred on clinical trials outside approved laboratory facility is eligible for weighted deduction. Accordingly, we hold that the expenses incurred on Clinical Trial expenses are eligible for weighted deduction. Expenses is Building repairs - In the case of USV Ltd [ 2012 (9) TMI 43 - ITAT MUMBAI ] the co-ordinate bench of Tribunal has held that the rent, repairs etc., incurred on the premises relating to R D activities is eligible for weighted deduction. Accordingly, we hold that the building repairs expenses incurred on the premises relating to R D activity is eligible for weighted deduction. Expenses i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having regard to the books of accounts and hence the AO could not have applied Rule 8D of I T Rules. The present assessment is set aside proceedings and the assessee had only requested before the Tribunal to set aside this issue to the file of the AO, meaning thereby, the assessee s case before the Tribunal was restricted to the computation of disallowance u/s 14A r.w Rule 8D. In the case of Vireet Investments P Ltd [ 2017 (6) TMI 1124 - ITAT DELHI ] has held that , for the purpose of computing average value of investments, only those investments which have yielded exempt income alone should be considered. We direct the AO to compute average value of investments by considering only those investments which have yielded exempt income and accordingly compute the disallowance u/r 8D(2)(iii) of I T Rules. Appeal of the assessee is treated as partly allowed. - Shri B.R. Baskaran, Accountant Member And Shri Sunil Kumar Singh, Judicial Member For the Appellant : Shri Yogesh Thar And Shri Deep Chauhan For the Respondent : Ms. Madhu Malati Ghosh ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER : The assessee has filed this appeal challenging the order dated 27-07-2021 passed by Ld CIT(A)-47, Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supplier M/s Globe Pharma had confessed before Government authorities that it has not supplied the materials, but provided only accommodation bills. But before the AO it has changed the stand and stated that the materials were actually supplied. Further, it has also furnished documents to show that those goods were actually imported by him. But the fact would remain that above said supplier M/s Globe Pharma has changed its stand before the AO. When the above said party changes its stand before different authorities, it may not be possible to ascertain which of his statement was right and hence, it would be difficult to rely upon his changed stand. We noticed that the assessing officer had placed reliance on certain investigation report and the tax authorities have also pointed out certain deficiencies in the documents. Since the assessee has submitted stock records to prove the receipt and consumption of materials, one possibility could be that the assessee might have purchased material from one source and could have obtained bill from other source. We are not meaning that the assessee has actually indulged in such kind of practices. Under these set of facts, we are of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the nature of expenses, genuineness of expenses and purpose of expenses. The above said observations of the AO, in our view, are beyond the scope of order passed by ITAT. We notice that the Hon ble Gujarat High Court has held in the above said case that the R D expenses incurred on clinical trials outside approved laboratory facility is eligible for weighted deduction. Accordingly, we hold that the expenses incurred on Clinical Trial expenses are eligible for weighted deduction. 4.4 The next item of expenses is Building repairs of Rs. 109.50 lakhs. In the case of USV Ltd vs. DCIT (2012)(24 taxmann.com 218)(Mum), the co-ordinate bench of Tribunal has held that the rent, repairs etc., incurred on the premises relating to R D activities is eligible for weighted deduction. Accordingly, we hold that the building repairs expenses incurred on the premises relating to R D activity is eligible for weighted deduction. 4.5 The next item of expenses is Foreign Consultancy expenses of Rs. 798.95 lakhs. In the case of USV Ltd (supra), the expenditure incurred on consultancy charges, patent filing charges in foreign countries is held to be eligible for weighted deduction u/s 35(2AB) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamination. Accordingly, we restore this issue to the file of the AO for examining it afresh in the light of principles discussed supra. 5. The next issue urged in ground no.5 related to the deduction claimed u/s 80IB/80IC/10B on scrap sales. The Ld A.R did not press this ground and hence the same is dismissed as not pressed. 6. The last issue relates to the disallowance made u/s 14A of the Act. The ITAT had restored this issue to the file of AO for examining it afresh. During the year under consideration, the assessee had earned exempt income of Rs. 10,74,61,024/-. The assessee had disallowed a sum of Rs. 10.48 lakhs. In the original assessment proceedings, the AO disallowed interest expenses of Rs. 23,26,505/- under Rule 8D(2)(ii) and expenses of Rs. 50,48,863/- u/r 8D(2)(iii) of I T Rules, both aggregating to Rs. 73,75,369/-. In the set aside proceedings also, the AO sustained disallowance of very same amount of Rs. 73,75,369/- u/s 14A of the Act and the Ld CIT(A) also confirmed the same. 6.1 The Ld A.R submitted that the own funds available with the assessee are more than the value of investments and hence no disallowance out of interest expenses is called for u/r 8D(2)(ii) of ..... 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