HARITA SEATING SYSTEMS LIMITED,CHENNAI vs. ACIT CORPORATE CIRCLE 2(2), CHENNAI

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ITA 997/CHNY/2018Status: DisposedITAT Chennai27 November 2024AY 2014-157 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the assessee's appeal for AY 2009-10. Regarding the weighted deduction under Section 35(2AB), the Tribunal found no infirmity in the CIT(A)'s order, which allowed deduction to the extent certified by DSIR in Form-3CL. The weighted deduction was not allowed on revenue expenditure of Rs. 28,91,706/- as it was not approved by DSIR, but 100% deduction under Section 37(1) was allowed. For the disallowance under Section 14A, the Tribunal upheld the CIT(A)'s order, which confirmed the disallowance to the extent of Rs. 1.73 Lakhs as per the assessee's request and in line with the co-ordinate bench's decision in the assessee's own case. The assessee's appeal for AY 2014-15 was also dismissed. The Tribunal confirmed the CIT(A)'s order regarding the apportionment of R&D expenditure to the 80IC unit, finding no infirmity. The Revenue's appeal for AY 2014-15 was dismissed as withdrawn/not maintainable due to the tax effect being below the monetary limit specified in CBDT Circular No. 09 of 2024. The issues raised in the Revenue's appeal were left open for future proceedings. No issue was expressly left undecided.

What were the facts?

The assessee, M/s. Harita Seating Systems Ltd., filed appeals for Assessment Years (AYs) 2009-10 and 2014-15. The Revenue filed a cross-appeal for AY 2014-15. All appeals arose from orders of the Commissioner of Income Tax (Appeals)-6, Chennai, dated 29.12.2017. The assessee's representative did not appear for hearings, leading the Tribunal to decide the appeals on merit. For AY 2009-10, the assessee contested the denial of weighted deduction under Section 35(2AB) on revenue expenditure. For AY 2014-15, the assessee challenged the partial disallowance of deduction under Section 80IC. The Revenue's appeal for AY 2014-15 was based on a tax effect below the revised monetary limit set by CBDT Circular No. 09 of 2024.

What were the issues?

1. Whether the assessee is eligible for weighted deduction under Section 35(2AB) of the Income-tax Act, 1961, on revenue expenditure of Rs. 28,91,706/- for AY 2009-10, when such expenditure was not approved by DSIR in Form-3CL, and if not, whether 100% deduction under Section 37(1) is permissible. - Assessee's contention: Not recorded as the assessee's representative did not appear. - Revenue's contention: Not recorded as the assessee's representative did not appear. 2. Whether the disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1963, to the extent of Rs. 1.73 Lakhs for AY 2009-10 is justified, considering the dividend income received and the assessee's own request for such disallowance. - Assessee's contention: Not recorded as the assessee's representative did not appear. - Revenue's contention: Not recorded as the assessee's representative did not appear. 3. Whether the apportionment of R&D expenditure between the 80IC unit and non-80IC units for AY 2014-15, leading to a Nil profit for the 80IC unit and consequently no deduction under Section 80IC, is correct. - Assessee's contention: Not recorded as the assessee's representative did not appear. - Revenue's contention: Not recorded as the assessee's representative did not appear. 4. Whether the Revenue's appeal for AY 2014-15 is maintainable given the tax effect is below the monetary limit prescribed by CBDT Circular No. 09 of 2024.

Which sections of the Income-tax Act were involved?

Section 35(2AB),Section 37(1),Section 14A,Section 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

2.

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:

3.

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 & 997/Chny/2018 & :- 3 -:

1.

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.

4.

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.

5. 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”)

& 997/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 for A.Y 2011-12 and 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.

6.

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 for A.Y 2009-10 of the assessee is dismissed accordingly. & 997/Chny/2018 & :- 5 -:

7.

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/-.

8. 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 & 997/Chny/2018 & :- 6 -: dismissed. for A.Y 2014-15:

9.

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.

10.

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. & 997/Chny/2018 & :- 7 -:

11.

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.

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