NIPPO BATTERIES COMPANY LTD(NOW INDO NATIONAL LTD),CHENNAI vs. ACIT, CC 4(2), CHENNAI

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ITA 927/CHNY/2019Status: DisposedITAT Chennai19 October 2022AY 2013-144 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal confirmed the disallowance under Section 40A(3). For R&D expenditure, the plea for deduction under Section 37(1) was remitted to the AO for examination. The depreciation issue was also remitted to the AO for re-adjudication.

What were the facts?

The assessee claimed additional depreciation, disallowance under Section 40A(3), and weighted deduction for R&D expenditure. The Assessing Officer disallowed these claims due to lack of evidence and proper documentation.

What were the issues?

Whether the assessee is eligible for additional depreciation, disallowance under Section 40A(3), and weighted deduction for R&D expenditure due to insufficient evidence.

Which sections of the Income-tax Act were involved?

Section 32(1)(iia),Section 40A(3),Section 35(2AB),Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2013-14 arises out of the order of learned Commissioner of Income Tax (Appeals)-8, Chennai [CIT(A)] dated 15-10-2018 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143 r/w s. 92CA of the Act on 29-12-2016. The grounds taken by the assessee as under: The order of the learned ACIT fixing the total income of the Appellant at Rs.3,67,25,9107- is not legally correct and proper.

1.

The appellant objects to the following disallowances:- a) Disallowance of depreciation of Rs.8,434/-: The appellant objects to the disallowance of depreciation of Rs.8,434/- claimed towards deficit of the additional depreciation of previous year as not correct and proper. 32 (1) (iia) b) Disallowance u/s 40 (a)(3) of Rs.47.000/-: A The appellant objects to the disallowance of Rs.47,000/- applying the provisions of Section 40AB of the Act u/s 40 (a)(3). c) The weighted deduction claimed at 200% under the provisions of Section 35 (2)(A)(B) -Rs.21.89.730/-: The appellant objects to the disallowance of Rs.21,89,730/- being 200% deduction and is eligible division towards Research and Expenditure allowable under the provisions of Section 35 (2)(A)(B). The learned Officers below ought to have seen that the appellant is having Research & Development^ Division at its factory at Nellore. The appellant submits that the learned assessing officer erred in disallowing the basic expenditure of Rs.l0,94,865/-incurred by the appellant towards Research & Development expenses. The learned AO erred in observing "However, assessee has failed to furnish any evidence for existence of in Research & Development Wing and its eligibilities to claim such deduction in the form of Certificate of quantum of expenditure ratified by the Director General of Income Tax as required under the provisions of the Act. Hence, the entire expenditure of Rs.21,89,730/- is disallowed and added to the income returned". The learned Officers below ought to have seen that Research & Development activities of the appellant have been approved by the Concerned Department of the Central Government. The learned Officers below ought to have seen that the details of expenses relating to Research & Development have been furnished during the scrutiny assessment proceedings. The learned officers below have not properly appreciated the various facts and circumstances relating to the claim of Research & Development and its weighted deduction. The observations and inferences of the learned Officers below are not correct both in law and on facts. The appellant objects to the levy of interest u/s 234B of Rs.35,44,311/-. The appellant craves leaves to file any additional grounds of appeal, if necessary.

As is evident three issues arises out of this appeal i.e., i) Disallowance u/s. 32(1)(iia) of the Act; ii) Disallowance u/s. 40(A)(3) for Rs.47,000/-; iii) Weighted deduction u/s. 35(2)(A)(B) for Rs. 21.89 Lacs. Having heard the rival submissions and after due consideration of relevant material on record, our adjudication would be as under.

3 - 2.1 The assessee being resident corporate assessee is stated to be engaged in manufacturing of Alkaline & Lithium Dry Cells and trading in Torch lights etc. 2.2 The assessee claimed additional depreciation for Rs.8,434/- towards deficit of additional depreciation of previous year. The Ld. AO held that the same did not pertain to this year and accordingly, the same was disallowed. 2.3 The Tax Auditor reported disallowance u/s. 40A(3) for Rs.47,000/-, which was not considered in the computation statement. Accordingly, the same was disallowed. 2.4 The assessee claimed weighted deduction u/s 35(2AB) at 200% towards Research and Development expenditure. However, the assessee could not furnish adequate evidences to show that it was eligible to claim such expenditure. Accordingly, the entire amount was disallowed and added to the income of the assessee. 2.5 During appellate proceedings, the assessee could not make any submissions. Accordingly, the additions were confirmed and the appeal was dismissed. Aggrieved, the assessee is further appeal before us.

3.

So far as the disallowance u/s 40A(3) is concerned, the same stand confirmed since the same has been reported by Tax Auditor and no new material has been placed before us. Regarding R & D expenditure, the limited submission of Ld. AR is that the deduction of actual expenditure should be allowed u/s 37(1). Considering the same, we remit the alternative plea of Ld. AR to the file of Ld. AO. The Ld. AO is directed to examine the claim u/s 37(1) with a direction to the assessee to substantiate the same. The depreciation is stated to be an additional depreciation of earlier year and covered by the provisions of 4 - Sec. 32(1)(iia). Reliance has been placed on the decision of Hon’ble High Court of Madras in Brakes India Ltd. vs. DCIT (TCA No.551 of 2013 dated 14.03.2017). Considering the same, we direct Ld. AO to bring on record factual matrix of the same and re-adjudicate this issue.

4.

The appeal stand partly allowed for statistical purposes. Order pronounced on 19th October, 2022.

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