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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 16.12.2022 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2016-17.
The assessee has raised the following grounds of appeal:- “On the facts and in the circumstances of the case and in law, the learned CIT(A) has: Non-adjudication of the grounds of appeal raised by the Appellant 1. erred in not adjudicating the grounds of appeal raised by the Appellant in relation to disallowance under section 14A r.w. Rule 80, Denial of claim under section 35(2AB) of the Act, non-grant of MAT credit and thereby the order passed by the Ld. CIT(A) is liable to be set-aside; 2. erred in passing an order under section 250 of the Act, by adjudicating the ground of appeal which is not related to the facts of the Appellant's current case; Without prejudice to the above grounds, the following grounds are raised on merits, arising out of the order of the Ld. AO
On the facts and in the circumstances of the case and in law, the learned AO has: General 3. erred in computing the total income at Rs. 21,73,07,237.00 by making certain additions/disallowances as against the returned income at Rs.21,55,70,180.00. Disallowance of Rs.5,12,450.00 under section 14A of the Act 4. erred in making disallowance of Rs.5,12,450.00 under section 14A r.w.r 8D of the Act against dividend income exempt under section 10(34) of the Act, without appreciating the facts and circumstances of the case; 5. erred in not appreciating the suo-moto disallowance of Rs.15,000.00 made by the Appellant under section 14A of the Act in the return of income and therefore no further expenditure could be attributed for the same; 6. without prejudice to the above, should have restricted the total disallowance under section 14A r.w.r 8D(2)(ii) to the extent of exempt income earned, without appreciating that disallowance u/s 14A cannot exceed the quantum of exempt income; Denial of claim of weighted deduction claimed under section 35(2AB) of the Act on expenditure incurred in Research & Development ('R&D') facility to the extent of Rs. 10,76,825.00 7. erred in denying the claim of weighted deduction of Rs.1 0,76,825.00 under section 35(2AB) of the Act on the revenue expenditure incurred in the R&D facility by contending that such expenditure is not approved by the DSIR Authority; 8. erred in not appreciating that the role of the DSIR Authority was just to approve the in-house R&D facility and not to approve the actual expenditure eligible for deduction; Non-grant of MAT credit under section 115JAA of the Act to the extent of Rs 1,58,91,322.00 9. erred in not granting MAT credit of Rs.1,58,91,322.00 being claimed under section 115JAA of the Act in the return of Income, while computing demand under section 156 of the Act; Levy of interest under section 234B of the Act 10. erred in levying interest of Rs.55,90,631.00 as interest under section 234B of the Act; Initiation of penalty under section 271(1)(c) of the Act 11. erred in initiating the levy of penalty under section 271(1)(C) of the Act.”
There is a delay in filing the appeal. The application for condonation of delay has been filed along with an affidavit sworn by the Managing Director of the assessee company containing the reasons for delay in filing the appeal. After hearing the Ld. Representative of the parties, we hereby condone the delay and proceed to hear the appeal.
Briefly stated, the assessee company is engaged in the business of manufacturing flange mounted on load tap changers (OLTC) and radiators for transformers. It filed its e-return for AY 2016-17 on 17.10.2016 declaring income of Rs.21,55,70,180/-. After initial processing of return u/s 143(1) of the Income Tax Act, 1961 (the “Act”), the case was selected for scrutiny. Statutory notice(s) u/s 143(2) and 142(1) of the Act along with questionnaire were issued/ served upon the assessee through e- proceedings module. The assessee submitted its reply electronically which the Ld. Assessing Officer (“AO”) examined.
4.1 The Ld. AO found that the assessee earned dividend of Rs.3,65,170/- during the year which is claimed as exempt. He further noticed that the assessee had made suo-moto disallowance of Rs.15,000/- only u/s 14A of the Act. The Ld. AO was not satisfied with the correctness of the assessee’s claim. He asked for the assessee’s explanation. The assessee e- filed its submission on 20.11.2018 stating therein, inter alia that the disallowance made by the assessee is commensurate with efforts incurred and no further disallowance is required u/s 14A. Rather, disallowance made is also on higher side. This was not acceptable to the Ld. AO who required the assessee to show cause why Rule 8D of the Income Tax Rules, 1962 (the “Rules”) be not applied for calculating the disallowance u/s 14A of the Act. Rejecting the assessee’s explanation, the Ld. AO by recording reasons in para 4.4 of the assessment order calculated the disallowance of Rs.5,27,450/- u/s 14A of the Act r.w. Rule 8D of the Rules and reducing therefrom Rs.15,000/- of suo-moto disallowance made by the assessee, disallowed Rs.5,12,450/- and added it to the income of the assessee.
4.2 The Ld. AO found that the assessee has claimed weighted deduction of Rs.2,74,77,825/- u/s 35(2AB) of the Act and gave justification therefor vide its letter dated 09.10.2018. The Department for Scientific and Industrial Research (“DSIR”) however gave approval for the expenditure of Rs.2,64,01,000/- resulting in shortfall in approval to the extent of Rs.10,76,825/-. Relying on judicial precedence, the assessee contended before the Ld. AO that the entire amount of revenue expenditure claimed by it qualifies for weighted deduction u/s. 35(2AB) of the Act but the Ld. AO restricted the assessee’s claim to the amount approved by DSIR and resultantly, disallowed Rs.10,76,825/- u/s 35(2AB) of the Act which he added to the income of the assessee.
4.3 The Ld. AO thus completed the assessment on 12.12.2018 u/s 143(3) of the Act on total income of Rs.21,73,07,240/- including therein the above disallowances and addition of Rs.1,47,782/- being excess claim offered to tax by the assessee in provision for superannuation fund.
Before the Ld. CIT(A)/NFAC, the assessee challenged the disallowances made by the Ld. AO u/s 14A and section 35(2AB) of the Act. Additionally, the assessee claimed that while computing the assessed income the Ld. AO did not give MAT credit of Rs.1,58,91,322/- claimed u/s 115JAA of the Act. The Ld. CIT(A)/NFAC, however, discussed all the grounds in the appellate order but recorded his finding and decision only on the issue of denial of eligible MAT credit. This has brought the assessee before the Tribunal.
The Ld. DR supported the order of the Ld. AO/CIT(A).
We have heard the Ld. Representatives of the parties and perused the records. The grounds taken by the assessee before us are discussed herein below:
(i) Ground Nos. 2 and 3 are general in nature, hence require no adjudication.
(ii) Ground Nos. 1, 4, 5, 6, 7 and 8 relate to disallowances u/s 14A and 35(2AB) of the Act.
(iii) Ground No. 9 relates to non-granting of MAT credit of Rs. Rs.1,58,91,322/- claimed u/s 115JAA of the Act. We observe that the Ld. CIT(A) in his appellate order has directed the Ld. AO to recompute the MAT credit allowable as claimed by the assessee. No grievance therefore arises to the assessee on this issue before us and hence this ground does not require adjudication. Accordingly, the Ld. AO is directed to allow the MAT credit to the assessee in accordance with law pursuant to the direction of the Ld. CIT(A).
(iv) Ground No. 10 relating to interest u/s 234B of the Act is consequential in nature.
(v) Ground No. 11 regarding initiation of penalty proceedings u/s 271(1)(c) of the Act is pre-mature at this stage.
Having regard to the facts and circumstances of the case, we are of the view that it would be, in the interest of justice, to restore the matter back to the file of the Ld. CIT(A)/NFAC with the direction to him to adjudicate other grounds (other than the ground relating to MAT credit) taken before him on merits and pass a speaking order in accordance with law after giving reasonable opportunity of being heard to the parties. We order accordingly.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 21st May, 2024.