M/S. ELIN ELECTRONICS LTD.,KOLKATA vs. D.C.I.T., CIRCLE - 7(1), KOLKATA, KOLKATA

PDF · subscribers
ITA 436/KOL/2022Status: HeardITAT Kolkata16 November 2022AY 2017-20183 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the excess R&D expenditure, even if not eligible for weighted deduction, should be allowed as a normal business expense. The Tribunal noted that similar claims were accepted in subsequent assessment years.

What were the facts?

The assessee claimed a weighted deduction of Rs. 10,30,324/- under Section 35(2AB) on R&D expenses. The Assessing Officer (AO) disallowed the excess expenditure of Rs. 5,15,162/- over the amount approved by the prescribed authority, leading to an addition to income. The CIT(A) confirmed the AO's action.

What were the issues?

Whether R&D expenses exceeding the approved amount for weighted deduction under Section 35(2AB) can be allowed as normal business expenditure.

Which sections of the Income-tax Act were involved?

Section 35(2AB)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH: KOLKATA

Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]

ORDER / आदेश Per Rajesh Kumar, AM: This is the appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)”] dated 24.06.2022 for the AY 2017-18.

2.

Issue raised in ground no.1 is reproduced as under:

1.

For that the Ld. CIT(A) erred in confirming the action of AO in disallowing the entire claim of Rs. 10,30,324/- being deduction @ 200% of Rs. 5,15,162/- u/s 35(2AB) when 100% being actual expenses incurred was not disputed and should have been allowed as normal expenses.

2 Assessment Year: 2017-18 M/s Elin Electronics Ltd.

3.

Facts in brief are that the assessee filed return of income on 15.09.2017 declaring total income of Rs. 9,51,60,840/-. The case of the assessee was selected for limited scrutiny and statutory notices were issued and duly served on the assessee. The assessee company is engaged in the business of manufacturing and dealing in electronics and allied products and also doing contractual job work. The AO observed on the basis of detailed computation of income filed by the assessee that it had claimed deduction u/s 35(2AB) to the tune of Rs. 11,04,78,324/- being 200% of Rs. 5,52,39,162/- te amount of expenditure incurred during the year.The assessee claimed the total expenditure in R & D to the tune of Rs. 5,52,39,162/- in the profit and loss account but as per Form 3CL received from SC-C, Department of Scientific Industrial Research, Govt. of India, the total R&D eligible expenditure was only to the tune of Rs. 5,47,24,000/- and accordingly the AO has held excess expenditure to the tune of Rs. 5,15,162 is not allowable and accordingly Rs. 10,30,324/- being the difference claim u/s 35(2AB) and the claim as was allowed by the Department of Scientific Industrial Research, Govt. of India as per Form 3CL was added to the income of the assessee.

4.

The appeal of the assessee was also dismissed by the Ld. CIT(A) and the assessee is in appeal before us.

5.

We have heard the rival submissions and perused the material on record. We find that as against the expenditure incurred of Rs. 5,52,39,162/- under the head R & D and charged in the profit and loss account, the prescribed authority approved Rs. 5,47,24,000/- only resulting into addition of Rs. 10,30,324/- which was also confirmed by the ld CIT(A). The arguments of the Ld. A.R. was that since he has incurred the expenses on R & D even if these are not approved in respect of weighted deduction, then the said expenditure may kindly be allowed to the assesse as expenses incurred for the prupose of business. The Ld. A.R submitted that even in the subsequent assessment years in AY 2018-19 and 2020-21 the AO has accepted the claim of the assessee in the assessment framed u/s 143(3) and the copies of the assessment orders

3 Assessment Year: 2017-18 M/s Elin Electronics Ltd. are filed at page 63 to 67 and 68 to 75 respectively. Since the AO has accepted the claim of the assessee during the assessment proceedings as stated hereinabove as genuine and being incurred in accordance with the provisions of the Act as the assessee has incurred the expenditure for the purpose of business only. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to allow the deduction of Rs. 5,15,162/-. Accordingly the appeal of the assessee is allowed.

6.

In the result, the appeal of the assessee is allowed.

Order is pronounced in the open court on 16th November, 2022

More judgments on Section 35(2AB)

All 842 judgments and leading authorities on Section 35(2AB) →

Recent GST High Court judgments

Search GST case law →