TRACTORS AND FARM EQUIPMENT LIMITED,CHENNAI vs. COMMISSIONER OF INCOME TAX, NAFAC

Having heard rival submissions, the same are disposed-off as under. The assessee is stated to be engaged in manufacture and sale of tractors, agricultural implements, automobile batteries, injection molded engineering plastic components and moulds.

Disallowance of R & D expenditure 3.1 The assessee claimed deduction u/s 35(1)(iv) for Rs.269.34 Lacs which was denied since the assessee failed to furnish supporting documents. 3.2 During appellate proceedings, the assessee sought more time to file the documents. However, Ld. CIT(A) confirmed the denial of deduction against which the assessee is in further appeal before us. 3.3 The Ld. AR has pleaded for admission of additional evidences. The Ld. AR submitted that the assessee is in a position to substantiate its claim. Accepting the same, we restore this issue back to the file of Ld. AO to re-consider the claim of the assessee. The assessee is directed to substantiate the same. The corresponding grounds stand allowed for statistical purposes.

Disallowance u/s 14A 4.1 The assessee earned exempt dividend income of Rs.40.07 Crores. Against the same, the assessee offered disallowance u/s 14A for Rs.22.31 Lacs in the computation of income. The Ld. AO, holding the disallowance offered by the assessee was very less, proceeded to invoke Rule 8D and computed disallowance of Rs.199.21 Lacs. After adjusting suo-motu disallowance as already offered by the assessee, the differential of Rs.176.89 Lacs was further added to the income of the assessee. The disallowance was computed by taking 1% of monthly average of opening and closing investments. 4.2 During appellate proceedings, the assessee submitted that no effort was made to earn the dividend income and investments were strategic in nature. However, rejecting the same, Ld. CIT(A) upheld the disallowance against which the assessee is in further appeal before us. 4.3 The Ld. AR reiterated that the disallowance as offered by the assessee was on scientific basis and Ld. AO has not recorded any objective satisfaction before rejecting assessee’s methodology. We are of the opinion that Rule 8D could not be invoked in a mechanical manner. Therefore, we direct Ld. AO to examine the suo-motu disallowance as offered by the assessee and if not satisfied, only then proceed to invoke the provisions of Rule 8D. The corresponding grounds stand allowed for statistical purposes.

ICDS adjustments 5.1 The Tax Auditor reported that there was loss of Rs.38.29 Crores from ICDS calculations. However, the assessee made adjustments u/s 145(2) for Rs.41.86 Crores. The difference between the two was Rs.3.57 Crores. The assessee only mentioned adjustments of Rs.3.17 Crores and accordingly, difference of the two being Rs.39.33 Lacs was further added to the income of the assessee. 5.2 During appellate proceedings, the assessee submitted that it inadvertently gave first draft of working instead of final one. These adjustments were stated to be correctly made in memo. However, Ld. CIT(A) confirmed the stand of Ld. AO against which the assessee is in further appeal before us. 5.3 From the facts, it would appear that the disallowance has happened due to an inadvertent error. The Ld. AR has stated that correct adjustment has been offered in the memo. Considering the same, we direct Ld. AO to examine the claim of the assessee and re-decide this issue. The corresponding grounds stand allowed for statistical purposes. Conclusion 6. The appeal stand allowed for statistical purposes. Order pronounced on 3rd June, 2024 Sd/- Sd/- (MANU KUMAR GIRI) (MANOJ KUMAR AGGARWAL) �ाियक सद4 / JUDICIAL MEMBER लेखा सद4 / ACCOUNTANT MEMBER चे5ई Chennai; िदनांक Dated : 03-06-2024 DS आदेशकीNितिलिपअ/ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु>/CIT Chennai 4. िवभागीय�ितिनिध/DR 5. गाडCफाईल/GF