DCIT CORPORATE CIRCLE 2(2), CHENNAI vs. HARITA SEATING SYSTEMS LTD., CHENNAI
Facts
The assessee filed two appeals against the orders of CIT(A) for AY 2009-10 and 2014-15, and the Revenue filed a cross-appeal for AY 2014-15. The appeals were decided ex-parte as the assessee's representative did not appear. The primary issues involved weighted deduction for R&D expenditure and disallowance under Section 14A.
Held
For AY 2009-10, the CIT(A) allowed weighted deduction under Section 35(2AB) to the extent of Rs. 507.63 Lakhs against a claim of Rs. 551 Lakhs, and also allowed 100% deduction for revenue expenditure under Section 37(1). The disallowance under Section 14A was restricted to Rs. 1.73 Lakhs. For AY 2014-15, the deduction under Section 80IC was not allowed due to issues with R&D expenditure allocation. The Revenue's appeal was dismissed as withdrawn/not maintainable due to low tax effect.
Key Issues
Whether the assessee is entitled to weighted deduction for R&D expenditure and whether disallowance under Section 14A is justified. Additionally, whether the deduction under Section 80IC was admissible considering R&D expenditure allocation.
Sections Cited
35(2AB), 37(1), 14A, Rule 8D, 80IC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R PER JAGADISH, A.M : Two appeals filed by the assessee for Assessment Years (AYs) 2009-10 & 2014-15 and one cross appeal for A.Y 2014-15 by Revenue
ITA No.996 & 997/Chny/2018 & ITA No.1060/Chny/2018 :- 2 -:
arise out of orders of Learned Commissioner of Income Tax
(Appeals)-6, Chennai [hereinafter “CIT(A)”] dated 29.12.2017.
These appeals were listed on 16.06.2024, 01.07.2024,
02.07.2024, 03.07.2024 31.07.2024, 09.08.2024, 21.08.2024 and
23.09.2024, but none appeared on behalf of the assessee. Therefore,
these appeals are decided on merit in the absence of assessee’s
representative.
ITA No.996/Chny/2018 for A.Y 2009-10:
Ground No.1 is against not allowing weighted deduction u/s.
35(2AB) of the Income-tax Act, 1961 (hereinafter “the Act”) on the
revenue expenditure of Rs. 28,91,706/-. The assessee has claimed
deduction u/s. 35(2AB) of the Act in respect of R&D expenditure, but
the same were not allowed by the A.O as the assessee has not
received Form-3CL from DSIR clarifying expenditure incurred in R&D
for the purpose of granting deduction u/s. 35(2AB) of the Act. On
appeal, the assessee has submitted Form-3CL before the Ld. CIT(A),
who called for remand report from the A.O and based on the remand
report allowed the claim u/s. 35(2AB) of the Act to the extent of
Rs.507.63 Lakhs. The Ld. CIT(A) has allowed deduction of Rs. 507.63
ITA No.996 & 997/Chny/2018 & ITA No.1060/Chny/2018 :- 3 -:
Lakhs against the claim of Rs. 551 Lakhs, as the DSIR has not
approved the revenue expenditure of Rs.28,91,706/-. The Ld. CIT(A)
therefore, allowed only 100% of the revenue expenditure u/s. 37(1) of
the Act in place of claim of 150% u/s. 35(2AB) of the Act. Assessee is
aggrieved against granting only 100% deduction of R & D revenue
expenditure.
We have gone through the material available on record with the
help of Ld. DR. The Ld. CIT(A) has allowed the claim u/s. 35(2AB) of
the Act to the extent of Rs. 507.63 Lakhs against the claim of Rs. 551
Lakhs. The Ld. CIT(A) has allowed the claim to the extent of capital
and revenue expenditure certified by DSIR in Form-3CL. As regard to
revenue expenditure of Rs.28,98,706/-, the Ld. CIT(A) has not allowed
the weighted deduction @150% as the same was not approved by
DSIR. However, the Ld. CIT(A) has allowed 100% deduction in respect
of revenue expenditure u/s.37 of the Act. We do not find any infirmity
in the order of Ld. CIT(A) and therefore, this ground of appeal of the
assessee is dismissed.
Ground No.2 is relating to upholding the disallowance u/s. 14A
r/w. Rule 8D of the Income Tax Rules, 1963 (hereinafter “the Rules”)
ITA No.996 & 997/Chny/2018 & ITA No.1060/Chny/2018 :- 4 -:
of Rs. 1.73 Lakhs. The assessee has received dividend income of
Rs.40,000/- exempt from tax, but has not allocated any expenditure to
earn the exempt income. The AO therefore, disallowed sum of
Rs.16,52,903/- u/s. 14A as per Rule 8D of the Rules. On appeal, the
Ld. CIT(A) has confirmed the disallowances to the extent of Rs. 1.73
Lakhs as per request made by the Ld A.R before Ld. CIT(A). The
disallowance was computed on the basis of decision of ITAT, Chennai
in assessee’s own case in ITA No.1336/Mds/2016 for A.Y 2011-12 and
ITA No.3172/Mds/2016 for A.Y 2012-13. The Ld. CIT(A) accordingly
restricted the disallowance to Rs. 1.73 Lakhs. Assessee is aggrieved
by the order of Ld CIT(A) confirming 14A of the Act disallowances to
the extent of Rs 1.73 Lakh.
We have gone through the assessment order and order of Ld.
CIT(A) with the help of Ld. DR. The disallowance u/s. 14A of the Act
has been confirmed by Ld. CIT(A) as per request made by Ld. AR and
in accordance with the order of the Co-ordinate Bench, supra in
assessee’s own case. Therefore, we do not find any reason to
interfere with the order of Ld. CIT(A). Thus, the appeal in ITA
No.996/Chny/2018 for A.Y 2009-10 of the assessee is dismissed
accordingly.
ITA No.996 & 997/Chny/2018 & ITA No.1060/Chny/2018 :- 5 -:
ITA No.997/Chny/2018 for A.Y 2014-15:
The only ground of appeal in this appeal of assessee is against
not allowing of claim of deduction fully u/s. 80IC of the Act of
Rs.16,25,852/-.
The assessee is engaged in the manufacturing of seating
systems for automobiles and has claimed deduction u/s. 80IC of the
Act of Rs.16,25,852/-. The A.O during the assessment has noticed that
the assessee has not allocated R&D expenditure of 80IC unit and
therefore, allocated R&D expenditure between 80IC units and non-
80IC units in the ratio of 9.69% to 90.31%. The AO after allocating
R&D expenditure to 80IC unit found the profit from 80IC unit Nil,
therefore, has not allowed any deduction u/s.80IC of the Act. On
appeal, the Ld. CIT(A) has confirmed the apportionment of R&D
expenditure between 80IC unit and non-80IC unit, but directed A.O to
allocate real expenditure i.e., 100% of R & D expenditure rather than
allocating 200% weighted deduction of R & D expenditure, as was
directed by him in preceding year. We do not find any infirmity in the
order of Ld. CIT(A) in apportionment of R&D expenditure to 80IC. We,
therefore confirm the order of Ld. CIT(A). In view of the above, the
ITA No.996 & 997/Chny/2018 & ITA No.1060/Chny/2018 :- 6 -:
appeal of the assessee in ITA No.997/Chny/2018 for AY 2014-15 is
dismissed.
Revenue’s appeal in ITA No.1060/Chny/2018 for A.Y 2014-15:
We find that the tax effect involved in this appeal is less than
Rs.60 lakhs. The CBDT vide Circular No.09 of 2024 dated 17.09.2024
has increased the monetary limit for filing the appeal by the Revenue
before the ITAT to Rs. 60 Lakhs. In the said circular, it is stated that in
cases where the tax effect in the appeal to be filed before the
Appellate Tribunal does not exceed Rs. 60 lakhs appeals should not
be filed. Thus, taking note of CBDT Circular No. 09 of 2024 dated
17.09.2024 and considering the fact that the tax effect in the instant
appeal is less than Rs. 60 lakhs, the present appeal deserves to be
dismissed as withdrawn / not maintainable.
However, we make it clear that the issues raised in the instant
appeal is left open to be examined in the appropriate proceedings, if
arises, in future. At the same time, we also make it clear that if the
appeal fall in any of the exceptions referred to in the above said CBDT
Circular, the Revenue is at liberty to move an application for recalling
the order, if so advised. Accordingly, in the light of CBDT circular No.
09 of 2024 dated 17.09.2024, this appeal stands dismissed.
ITA No.996 & 997/Chny/2018 & ITA No.1060/Chny/2018 :- 7 -:
In the result, the appeals of assessee for A.Y 2009-10 & 2014-15 are dismissed and the appeal of Revenue for A.Y 2014-15 is also dismissed.
Order pronounced on 27th November, 2024.
Sd/- Sd/- (जगदीश) (यस यस िव�ने� रिव) (Jagadish) (SS Viswanethra Ravi) सद�य / Judicial Member लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य �याियक सद�य �याियक �याियक �याियक सद�य सद�य चे�नई/Chennai, �दनांक/Dated: 27th November, 2024. EDN/- आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Chennai 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF
