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TMI Blog2025 (2) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to administrative expenditure incurred or not by the assessee also needs verification. Thus, the issue is remanded back to the file of the AO for proper verification. Disallowance u/s 43B - AR submitted that the amount represent short payment out of amount of interest provided in respect of DBT Soft Loan 2 is accepted by the assessee while the residual amount represents amount of disallowances - HELD THAT:- AR submitted that in the return of income it is already disallowed. The auditor has certified net amount of payment and the remaining amount was to be paid, the same was brought forward from earlier years and this will amount to double disallowance. This fact and contentions of the assessee needs verification as that has not been dealt by the AO or by the CIT(A). Hence, the said issue is remanded back to the file of the Assessing Officer for proper verification and adjudication. The assessee be given opportunity of hearing by following principles of natural justice. Ground No. 3 is partly allowed for statistical purpose. Disallowing claim u/s.35 - expenditure is not incurred by the assessee company - the relevant expenditure recorded by the assessee company, having been net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the evidence and decide the same accordingly. The assessee be given opportunity of hearing. Ground No. 7 is partly allowed for statistical purpose. Disallowing exchange fluctuation debit considering the same to be of capitalized on account Capital WIP/Assets of the assessee company - HELD THAT:- Section 43A provides that any increase or decrease in liability due to foreign exchange fluctuation in respect of the acquisition of a capital asset is to be adjusted to the actual cost of the asset and depreciation shall be allowed from the year in which the asset is put to use, subject to actual settlement of the liability. Since the expenditure is of capital nature, it requires verification as to whether it pertains to Work-in-Progress (WIP) or an asset that has been put to use. Accordingly, the matter is restored to the file of the Assessing Officer (AO) for verification and adjudication in accordance with the provisions of Section 43A. The AO shall examine whether the fluctuation loss pertains to an asset that has been put to use, in which case depreciation shall be allowed from the date of put to use, or if it remains as WIP, in which case no depreciation shall be admissible. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred and the Ld. CIT A has erred in confirming in disallowing claim u/s. 35 to the extent of Rs. 337,73,000/- on flawed base that such expenditure is not incurred by the assessee company, whereas, as identified by the assessee company - the relevant expenditure recorded by the assessee company, having been netted by merger entries of excess of assets over liabilities representing reserves and surplus of erstwhile Indus Biotheraputics Ltd. The claim u/s.35 of the assessee company be allowed as claimed. 5. In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred and the Ld. CIT A has erred in confirming in the alleged excess deduction u/s.35(2AB) by Rs. 87,66,984/- considered @ 200% of the amount of expenditure on clinical trials etc. laid out for the in-house R&D. Without prejudice to the above, in law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred and the Ld. CIT A has erred in confirming in computing the quantum of disallowance at 200% i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Assessing Officer has grossly erred and the Ld. CIT A has erred in confirming in the alleged foreign commission expenditure of Rs. 90.39 lacs as ineligible expenditure under the provisions of the Section 40, when the appellant company has duly brought out that the said remittances did not attract TDS/WHT provisions of Sec. 195 of the IT Act. The same commission expenditure should be duly allowed to the appellant company 10. In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred and the Ld. CIT A has erred in confirming in denying deduction, which was made based on valid claim during the assessment proceedings, towards bad Debts expenses of Rs. 1,16,47,500/- being debts w/off during the year out of provision, both while computing normal income as well as book profit. The same should be duly allowed to the appellant company. 11. In law and in the facts and circumstances of the appellant's case, the learned assessing officer has grossly erred and the Ld. CIT A has erred in confirming in making addition on account of Sec.14A addition made in the assessment to the book profit u/s.115JB, when no such addition can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.08.2014, the assessee was asked to furnish the details of investment in shares/securities with an explanation as to whether any expenses have been claimed in respect of exempt income, which is disallowable under Section 14A read with Rule 8D. In response to the same, the assessee filed reply on 21.11.2014. After taking the same into consideration, the Assessing Officer observed that as per the Circular No.5/2014 dated 11.02.2014, even where taxpayer in a particular year has not earned any exempt income, the provisions of Rule 8D read with Section 14A of the Act are applicable. The Assessing Officer observed that the assessee has given only general explanation that it has not incurred any expenses related to exempt income. The assessee has not given/submitted any proof of specific explanation other than this and, therefore, the Assessing Officer held that the assessee failed to prove that no interest-bearing funds were diverted for making any investment in the shares on which the income is exempt and, therefore, the disallowance under Section 14A read with rule 8D was made to the extent of Rs. 28,36,029/-. 3.2 The Assessing Officer further observed that the details of payment c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital assets amounting to Rs. 86,27,682/- as per the provisions of Section 37(1) of the Act. The Assessing Officer made disallowance of sales promotion amounting to Rs. 81,23,963/- under Section 37(1) of the Act. The Assessing Officer further made disallowance of commission paid to non-resident amounting to Rs. 90,39,000/- under Section 40(a)(ia) of the Act. The Assessing Officer also made disallowance of claim of write off of debts amounting to Rs. 1,18,15,926/- which was claimed as provision of bad debts. The Assessing Officer also made disallowance of tax credit wherein the assessee claimed foreign tax credit of Rs. 1,59,00,000/- less Rs. 21,43,693/- and thus disallowed the tax credit which was excessively claimed by the assessee amounting to Rs. 1,37,56,307/- Thus, the total assessed income was (-) Rs. 2,13,47,020/-. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. As regards to Ground No. 2 relating to addition on account of computation under Section 14A and applying Rule 8D, the Ld. AR submitted that the investment being specific and strategic there was no question of considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication as per the evidences and submissions of the assessee. Assessee be given opportunity of hearing by following principles of natural justice. Ground No. 2 is partly allowed for statistical purpose. 8. As regards to Ground No. 3 relating to disallowance of Rs. 34,40,536/- on account of Section 43B disallowance, the Ld. AR submitted that the amount of Rs. 2014/- represent short payment out of amount of interest provided in respect of DBT Soft Loan 2 is accepted by the assessee while the residual amount of Rs. 31,38,522/- represents amount of disallowances of A.Y. 2011-12 being offered as disallowances of unpaid interest as under: Interest on Buyer's credit : Rs. 1,56,402/- Interest on DBT Soft Loan 1 : Rs. 9,00,000/- Interest on DBT Soft Loan 2 : Rs. 1,65,411/- Rs. 12,21,813/- Out of Bonus payable (Rs. 21,02,913/-) Rs. 19,16,709/- i.e. Rs. 31,38,522/- Since, the assessee counted the entire unpaid amount including Rs. 41.58 lacs past years outstanding being disallowed, the said adjustment is to avoid double disallowance, therefore, relief of Rs. 31.38 lacs should have been given by the CIT(A). The Ld. AR submitted that the Assessing Officer and the CIT(A) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Assessing Officer and the CIT(A) has not taken cognisance that the base taken of Rs. 18.84 crores from Director's report is not enough as in this year Indus Biotherapeutics is merged into the assessee company. This merger resulted into negative goodwill which has reduced the value of intangibles. That is why the value seen is Rs. 18.84 crores but in fact R & D is Rs. 20.10 crores. The Ld. AR pointed out the reconciliation at pg. 210 of the paper book. 12. The Ld. DR submitted that the Ld. AR is filing reconciliation at this juncture which was not before the CIT(A) as well as before the Assessing Officer. The Ld. DR relied upon the assessment order and the order of the CIT(A). 13. We have heard both the parties and perused all the relevant material available on record. Since the assessee is filing reconciliation at this juncture and the contentions taken before us needs verification, we remand back this issue to the file of the Assessing Officer for proper verification of reconciliation and the submissions of the assessee as per the evidence and adjudicate the same as per the Income Tax Act. Assessee be given opportunity of hearing. Ground No. 4 is partly allowed for statis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting treatment thereof. The Ld. AR submitted that matching concept will apply and it is a liability until specific project is executed. 18. The Ld. DR relied upon the assessment order and the order of the CIT(A). 19. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that it is signing amount for grant received and the contention of the Ld. AR that unless and until project is fully executed and delivered, the assessee is a custodian of that grant otherwise it has to be remitted back if the project is not executed which is a liability. This appears to be justifiable. Hence, Ground No. 6 is allowed. 20. As regards to Ground No. 7, the Ld. AR submitted that the CIT(A) has erred in confirming in disallowing interest expenses to the extent of Rs. 3,44,20,356/- considering the same to be of capitalized on account Tangible Assets Capital WIP of the assessee company. The CIT(A) has followed A.Y. 2011-12 and the Tribunal has allowed this ground in A.Y. 2011-12. The Ld. AR further submitted without prejudice that the quantum of the same should be net of the quantum of amount of Rs. 90 Lacs, identified by the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmann.com 244 (Pune Tri.). The Ld. AR further submitted without prejudice that, in the event, there is any amount finally determined to be of capital nature, the depreciation allowance in respect of the same be eligible to the assessee company commencing from the year of put to use of relevant assets. The Ld. AR relied upon the judgment of the Hon'ble Karnataka High Court in case of Bangalore International Airport Ltd. 459 ITR 158. 24. The Ld. DR relied upon the order of the CIT(A) and the Assessment Order. The Ld. DR submitted that the claim of foreign exchange loss was not the ascertained liability and it was just the notional loss worked out by the assessee as on 31.03.2012. As per Section 43A of the Act, the loss could have been worked out on the date of actual settlement of payment which did not happen and also did not fall in year under consideration. 25. We have considered the submissions of both parties and examined the material on record. The finding of the CIT(A) that the exchange fluctuation loss claimed by the assessee was merely a notional loss is not correct. As per the applicable Accounting Standards, a liability arising on account of foreign exchange fluctuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealt with these non-resident and rendered service outside India in A.Y. 2013-14, there was no distinguishing facts established by the Revenue that the services was rendered in India by the non-residents. Hence, following the decision of the Tribunal in assessee's own case for A.Y. 2013-14, this issue is allowed in favour of the assessee. Ground No. 9 is allowed. 29. As regards to Ground No. 10, the Ld. AR submitted that the CIT(A) has erred in confirming in denying deduction, which was made based on valid claim during the assessment proceedings, towards bad Debts expenses of Rs. 1,16,47,500/- being debts written off during the year out of provision, both while computing normal income as well as book profit. The same should be duly allowed to the assessee company. This year the assessee has written off the reserve against debts. In fact, claims have been made in A.Y. 2011-12 and was not allowed. The Ld. AR submitted that the Misc. Application has been filed in A.Y. 2011-12 before the Tribunal. 30. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 31. We have heard both the parties and perused all the relevant material available on record. Since the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. AR submitted that the tax authorities have not examined whether Section 90 of the Act will apply or Section 91 of the Act or Rule 128 of the Rules. Therefore, Ld. AR requested that this needs to be remanded back to the file of the Assessing Officer. 39. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 40. We have heard both the parties and perused all the relevant material available on record. Since, both the parties agree that this issue needs verification and examination, the issue is remanded back to the file of the Assessing Officer for proper examination and adjudication as per Income Tax Act and Rules. Ground No. 13 is partly allowed for statistical purpose. 41. As regards to Ground No. 14, the Ld. AR submitted that the CIT(A) has erred in confirming in giving short credit, under the provisions of Income Tax Act for TDS and taxes paid. Since this ground is general, the Ld. AR submitted that this is not pressed. 42. The Ld. DR relied upon the Assessing Officer and the order of the CIT(A). 43. We have heard both the parties and perused all the relevant material available on record. Since this ground is not pressed and general, hence Ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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