AI Insights
The case involves three appeals by the Department against Harsha Engineers Ltd. concerning the assessment years 2014-15, 2015-16, and 2016-17. The primary issues revolved around the deletion of additions made on account of R&D expenditures and disallowances under section 14A of the Income-tax Act, 1961. The CIT(A) had earlier allowed the appeals of the assessee, which the Department contested. The tribunal examined the precedents and legal provisions cited, including various High Court and Supreme Court judgments, and found that the CIT(A)'s decisions were well-founded and supported by judicial precedents.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 131549 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
8 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-04-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
D
Next Hearing Date
23-04-2023
Assessment Year
2014-2015
Appeal Filed On
04-08-2022
Judgement Text
THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e ACIT, Circle-2 (1 )(1), Ah medabad (Appellant) Vs Har sha Engineers Ltd., Sarkh ej-Bavla Road, Changod ar, Ah med abad-3822 13 PAN: AAA CH4828 C (Resp ondent) Asses see b y : Shri Moh it Balani, A. R. Revenue by : Shri S udhendu Das, CIT-D. R. Date of hearing : 24-04 -2 023 Date of pronouncement : 26-04 -2 023 आदेश /ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- These are three appeals filed by the Department against the order of ld. National Faceless Appeal Centre (NFAC), Delhi for assessment years 2014-15, 2015-16 & 2016-17 passed u/s. 250 of the Act. 2. The Department has taken the following grounds of appeal:- ITA Nos. 303, 304 & 306/Ahd/2022 A.Y. 2014-15 , 2015-16 & 2016-17 I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 2 ASSESSMENT YEAR 2015-16 “(1) "The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs 11,61,96,094/- made on account of R & D expenditure, without properly appreciating the facts of the case and the material brought on record?". 2) The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary 3) It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored.” ASSESSMENT YEAR 2016-17 “1) "The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs 25,02,096/- U/S.14A of the Act r.w.r. 8D of the IT Rules, 1962 made while computing income under normal provisions of the Act?. 2) "The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs 20,77,01,000/- made on account of R & D expenditure, without properly appreciating the facts of the case and the material brought on record?". 3) The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary 4) It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored.” ASSESSMENT YEAR 2017-18 “(1) The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.13,39,050/-under section 14A of the Income-tax Act r.w.r. 8D of the Income-tax Rules, 1962 made while computing income under normal provisions of the Act. (2) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.20,17,60,000/-made on account of R&D Expenditure I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 3 without properly appreciating the facts of the case and the material brought on record. (3) The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. (4) It is, therefore, prayed that the order of Ld.CIT(A) may be set- aside and that of the Assessing Officer be restored.” 3. Since common issues are involved for all the years, the appeals of the Department for all the years under consideration are being disposed of by way of a common order. 4. We shall first discuss the appeal of the Department for assessment year 2016-17 and the observations made therein would apply to the assessment years 2014-15 and 2017-18. Ground No 1 Disallowance of Rs. 25,02,096/- u/s. 14A of the Act 5. The brief facts in relation to this ground of appeal are that during the course of assessment proceedings, the Assessing Officer disallowed a sum of Rs. 25,02,096/- on account of investment in shares in different companies. The assessee filed appeal against the aforesaid addition made u/s. 14A of the Act r.w.r. 8D before the ld. CIT(A). In appeal, the ld. CIT(A) allowed the appeal of the assessee on the ground that the assessee has not derived any exempt income during the year under consideration. Therefore, the provisions of section 14A of the Act are not applicable to the case of the assessee. Further, the ld. CIT(A) also allowed the appeal of the assessee on the ground that on similar facts, his predecessor ld. CIT(A)-2, Ahmedabad has already given relief to the assessee for assessment year 2013-14 and I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 4 assessment year 2014-15. Accordingly, following the order of his predecessor CIT(A)-2 Ahmedabad, the ld. CIT(A) deleted the disallowance made by the Assessing Officer u/s. 14A r.w.r. 8D of Rs. 25,02,096/-. While allowing the appeal of the assessee, the ld. CIT(A) made the following observations:- “6.2 Ground 1 to 4: Disallowance of Rs.25,02,096/- u/s 14A r.w.r. 8D. During the course of assessment proceedings, the AO disallowed Rs. 25,02,096/- on account of investment in shares of different companies. On going through the facts of the case, it is noticed that identical issue on similar facts has been decided by this office in immediately preceding years i.e. 2013-14 and 2014-15. For A.Y. 2013-14 vide appellate order No.CIT(A)-2/323/DC. Cir.2(1)(1)/2014-15 dated 26/04/2016 the relevant findings given in the order are reproduced hereunder:- “I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made the disallowance u/s. 14A of the I. T. Act, 1961 r.w. Rule 8D of I. T, Rules at Rs.89,19,604/- stating that the interest bearing borrowed funds have been utilized for the purpose of investment in the shares. The appellant has claimed the interest expenses at Rs.9,45,19,687/-. The AO observed that the appellant has not proved that the borrowed funds have not been used by the appellant towards investment in shares which was the onus upon the appellant. 2.4. The appellant submitted that the provisions of section 14A of I. T. Act are not applicable in the case in view of recent judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Corrtech Energy Pvt. Ltd. [(2014) 223 Taxmann. 130], since the appellant has not derived any exempted income on the investments so made in the form of share and not claimed any I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 5 income exempt. It was held by the Hon'ble Court that section 14(1) provides that for the purpose of computing total income under Chapter IV, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Since in the instant case, the appellant did not make any claim for exemption of any income form payment of tax. Thus, the provisions u/s. 14A of the Act are not applicable. Further, reliance was also made o the judgment of Hon’ble Punjab & Haryana Court in the case of CIT Vs. Winsom textile Industries Ltd. [ 2009) 319 ITR 204] & Hon’ble ITAT Chennai ‘B’ Bench in the case of L & T Infrastructure Projects Ltd. Vs. ITO [ (2015 Tax Pub (DT) 257], who have also endorsed the similar views. 2.5. The assessing officer on his part has not been able to bring out any evidence 'on records so as to indicate that the interest bearing borrowed funds were utilized for non - business purpose or to say for the purpose of making any investments in shares. It is a settled principle of law in matters concerning disallowance to be made under section 14A that the onus of establishing nexus between interest bearing borrowed funds and their deployment yielding exempt income also rests upon the assessing officer. 2.6. Similarly the Hon'ble ITAT, Kolkatta Bench in the case of REI Agro Ltd. Vs. ACIT in ITA No.1331/Kol/2011 has also held that if there is no dividend income, in that case the case was not fit to attract the provisions of Section 14A of I. T. Act, following the ratio as in appellant's case there was no dividend income and hence provisions of section 14A do not attract. 2.7. It is also found that the onus was upon the AO to establish the nexus of the interest bearing funds utilized for the purpose of investments as has been held by the Hon'ble ITAT, Ahmedabad in the case of Aakash Agro Industries Ltd. Vs. ACIT, Circle-1, Ahmedabad in ITA No.3247/Ahd/2011 for A.Y. 2008-09. However, in the instant case no such nexus have been established by the A.O. I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 6 2.8. In view of the aforesaid discussion, it is found that the appellant has no income towards dividend or otherwise on such investments, and therefore, the provisions of section 14A of !. T. Act, 1961 are not applicable in view of judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Corrtech (Supr,a) and other authorities. Further, it is apparent that the provisions of section 14A\of the I. T. Act are not applicable on the facts of the case for various reasons. Firstly, there was no dividend income and hence no income was derived by the appellant in the year under consideration, therefore, as per the judgment j of jurisdictional High Court, as discussed above, no disallowance could be made. Further, the circular No. 5 of 2014 issued by the CBDT is also not applicable as the same cannot overcome the judgment of jurisdictional High Court and other authorities as has been discussed in detail in the other paras of this order. 2.9. It has been noticed that the Hon'ble ITAT, Bangalore 'C' Bench in the case of M/s. Anriya Project Management Vs. assessee in ITA No,1799/Bang/2013 dated 20/02/2015 has held that even the Circular No. 5 of 2014 dated 11/02/2014 issued by the.-GBDT is not relevant for the reasons that it was contrary to the Hon'ble High Court's judgment .and the circular cannot prevail over the judgments of Hon'ble High Courts. The relevant para of the judgment is reproduced as under:- 19. We have given a careful consideration of the rival submissions. On the basis of the documents to which our attention was drawn it is clear that the assessee did not earn any exempt income during the previous year. In such circumstances, as laid down in the decision relied upon by the learned counsel for the assessee, provisions of section 14A could not be invoked. The Board circular which is contrary to the Hon’ble High Court’s decision cannot be therefore be the basis of sustain the disallowance made by the Revenue authorities. We, therefore, hold that the disallowance made u/s. 14A of I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 7 the Act should be deleted. Accordingly, the appeal of the assessee is allowed.” 2.10. The A.O. has decided the issue on the basis of circular issued by the Board .Inst. No. 5/2014 dtd. 11/2/2014. However, the circular cannot override the decision of SC. In fact circular can only tone down the rigors of provision in favour of the assessee. In the latest decision of Apex Court it has been held that A.O. has to decide the matter based on his own understanding rather tnan circular. The Circular cannot interpret the provision in such a way so as to tone down the decision laid down by the Supreme Court, I. T.A. T. or High Court. 2.10.1. The circular cannot detract from the provisions of law. The law as Interpreted by judicial authority is considered as law settled. 2.10.2. The decision of five members bench of S.C..CCE V/s. Ratnam Melting & Wire Ind_ (SC) Civil Appeal No. 1469/2002 is cited. The observation is as "Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarification / circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive looked at from another angle, a circular which is contrary to the statutory has really no existence in law." 2.10.3. The crux of the matter is law declared by S.C. is binding in terms of Article 141 of the constitution. The A.O. cannot simply brush aside the interpretation by Courts. Thus the judicial authorities have explained that if the event has already I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 8 occurred and an out flow will be required in future to settle the obligation, the provision made to meet such an out flow is allowable. The same cannot be rejected considering it as notional. -Hindustan Aeronautics Ltd. Vs. CIT: Even if there is a circular, once the law is declared by the H.C./S.C. , the same is to be followed.-110 Taxmann 311 SC -All Gujarat Federation of Tax Con Vs. CBDT 76 TAXMANN 307 Guj. Interpretation by CBDT not binding on the assessing authority. -C.I.T.V/S. SIRPUR .PAPE/R MILLS LTD Circulars cannot direct the A.O. -He make particular assessment in particular way: SB EXIT OPTEES’ Association Vs. CBDT (26 taxmann.com 08) (Bom) The Circular was not quashed as it did not preclude the A.O. from deciding the matter in accordance with the law. If the existing circular is in conflict with the judicial decisions, the revenue authorities have to ignore the circular and decide the matter applying their discretion. -Bharatia Ind. Ltd. V/S. C.I.T. 12 TAXMANN.COM 409 Cal. 2. 10.4. The quasi-judicial functions cannot be controlled by CBDT. Only general instructions can be given. The circular cannot direct the quasi-judicial authority to take the view as dictated. It can give the guidelines (In this case to verify the nature of liability). Gujarat Gas Co. Ltd. v. JT. C.I.T.[2000] 111 Taxman 144 (GUJ). Section 143, read with section 119, of the Income-tax Act, 1961 - Assessment -General — Total income of assessee was less than income returned - Assessing however, held that assessee was liable to pay tax on returned income on ground that in accordance with Circular No. 549, dated 31-10-1989 assessed income shall not be less than returned income - Petitioner challenged assessment order by filing writ petition - Whether Assessing Officer has not passed order independently but in I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 9 fact, jurisdiction was exercised by CBDT by issuing Circular and, therefore, order was without jurisdiction - Held, yes ; - Whether, therefore, order had to be quashed with direction to Assessing Officer to make order without keeping in mind circular which he had referred to in assessment order - Held, yes - Whether, in the present case, appeal would not be proper remedy and as such writ petition was maintainable - Held, yes Section 119 of the Income-tax Act, 1961 - Central Board of Direct Taxes - Instructions to subordinate authorities - Whether quasi-judicial functions of an income-tax authority cannot be controlled by CBDT in a particular case, but they can be ^o controlled to extent that general directions are issued by CBDT - Held, yes\ -Whether CBDT can direct any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner - Held, no (Circulars and clarifications - Circular No. 549, dated 31-10-1989) 2.11. In view of the aforesaid discussion, the disallowance made by the AO invoking the provisions of section 14A of the Act is not correct and hence, same is deleted. Since the disallowance of 14A made by the AO is deleted as per discussions made in the preceding paras of this order, thus the other contentions/ground of appeal taken by the appellant are not separately decided as same become infructuous. The grounds of appeal are accordingly allowed. Since the disallowance made by the A.O. is held to be dismissed, no other contentions taken by the appellant are required to be adjudicated separately. 2.12. With regard to Ground No. 3, it is worth here to mention that the appellant’s objection that the A.O. has not drawn satisfaction before invoking the provision of Rule 8D is found not correct for the reason that the assessment order, the issue has been elaborately discussed by the A.O. drawing the inference from the facts and submissions of the appellant available on record. So, in substance, he was statisfied and after recording the reasons, it has invoked the provisions of section 14A r.w. Rule 8D. Thus, this ground is dismissed. I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 10 The grounds of appeal are partly allowed." From the submissions made by the appellant, it is seen that the appellant had not derived any exempt income during the year under consideration. Therefore, the provisions of the section 14A of the Act are not applicable. Also, since the facts of the case are similar to those of AY 2013-14 and 014-15, following the decision taken by the CIT(A)-2, Ahmedabad, the disallowance made by the A.O. u/s. 14A r.w.r. 8D of Rs. 25,02,096/- is hereby deleted.” 6. The Department is in appeal before us against the order passed by ld. CIT(A). In appeal before us, the ld. counsel for the assessee invited our attention to the recent ruling passed by the Delhi High Court in the case of Era Infrastructure India Ltd. 141 taxman.com 289 (Delhi High Court) which has held that the amendment brought in by the Finance Act, 2022, to section 14A by inserting a non-obstante clause and Explanation will take effect from 01-04-2022 and cannot be presumed to have retrospective effect. Therefore, for assessment year 2013-14, no disallowance could be made u/s. 14A if no exempt income was earned by the assessee. The counsel for the assessee submitted that the facts of the assessee’s case are fully covered by ratio of the aforesaid decision and hence, since during the year under consideration, no exempt income was earned by the assessee, there is no scope of disallowance u/s. 14A of the Act. Further, even otherwise, the counsel for the assessee submitted that the position of the assessee is also covered by order passed by the earlier CIT(A) in the assessee’s own case for assessment year 2013-14. Accordingly, it was submitted that ld. CIT(A) has not erred in facts and in law in deleting the disallowance made u/s. 14A of the Act r.w.r. 8D. In response, the ld. Departmental Representative placed reliance on the order passed by the ld. Assessing Officer. I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 11 7. We have heard the rival contention and perused the material on record. We are of the considered view that there is no infirmity in the order of ld. CIT(A) as during the year under consideration, as held by the Delhi High Court in the case of Era Infrastructure supra and also various high courts and tribunals decisions on similar facts, wherein it has been held that no disallowance could be made u/s. 14A r.w.r. 8 if no exempt income was earned by the assessee. We are of the considered view that it is a well- settled law on the subject that no disallowance can be made under section 14A in case the assessee has not earned any exempt income or in excess of income claimed to be exempt. The Hon'ble Supreme Court in the case of State Bank of Patiala [2018] 99 taxmann.com 286 (SC) held that where High Court took a view that amount of disallowance under section 14A could be restricted to amount of exempt income only, SLP filed against said order was to be dismissed. The Hon'ble Supreme Court in the case of Chettinad Logistics (P.) Ltd.[2018] 95 taxmann.com 250 (SC)dismissed SLP against High Court ruling that section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year. The Gujarat High Court in the case of Dipesh Lalchand Shah [2022] 143 taxmann.com 419 (Gujarat) held that where in relevant assessment year, assessee-individual earned profits from partnership firm and made investments in shares of a company, since its income from partnership was negative and no exempt income was earned, in such case disallowance under section 14A could not be made. In the case of Corrtech Energy (P.) Ltd. [2014] 45 taxmann.com 116 (Gujarat), the Gujarat High Court held that where assessee did not make any claim for exemption of any income from payment of tax, disallowance under section 14A could not be made. The I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 12 Delhi High Court in the case of Delhi International Airport (P.) Ltd. [2022] 144 taxmann.com 80 (Delhi) held that section 14A would not be applicable if no exempt income was received or receivable during relevant previous year. The Delhi High Court in the case of Amadeus India (P.) Ltd.[2022] 145 taxmann.com 311 (Delhi), held that section 14A envisages that there should be an actual receipt of income which is not includible in total income; hence, section 14A will not apply where no exempt income is received or receivable during relevant previous year. The Ahmedabad ITAT in the case of Edelweiss Financial Advisors Ltd. [2021] 124 taxmann.com 361 (Ahmedabad - Trib.) held that disallowance of expenses under section 14A read with rule 8D could not exceed amount of exempted income. The Ahmedabad ITAT in the case of Addlife Investments (P.) Ltd.[2021] 124 taxmann.com 572 (Ahmedabad - Trib.) held that disallowances made under section 14A read with rule 8D could not exceed amount of exempt income earned by assessee during year. In the case of Asian Grantio India Ltd [2020] 113 taxmann.com 445 (Ahmedabad - Trib.), the Ahmedabad ITAT held that Disallowance of expenses under section 14A read with rule 8D of 1962 Rules cannot be made in absence of exempt income. Further, as observed by the Delhi High Court in the case of Era Infrastructure supra amendment made by the Finance Act, 2022 to section 14A by inserting a non-obstante clause and Explanation will take effect from 01-04-2022 and cannot be presumed to have retrospective effect and therefore will not apply to the impugned assessment year under consideration. 8. In the light of the above observations, ground no. 1 of Department’s appeal is dismissed. I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 13 Ground No. 2 CIT(A) erred in deleting addition of Rs. 20,77,01,000/- made on account of R& D expenditure 9. The brief facts in relation to this ground of appeal are that the assessee, in his statement of income had shown expenditure of R&D of Rs. 20,77,01,000/- out of which Rs. 20,77,01,000/- was claimed as revenue expenditure. The Assessing Officer held that entire R&D expenditure is of capital nature and disallowed the sum of Rs. 20,77,01,000/- and added the same to the total income of the assessee. 10. The assessee filed appeal before ld. CIT(A) and contended that it is engaged in manufacturing of customized cages and R & D expenditure incurred towards product developed in accordance with the specifications of the customers and its benefits are endured only till such time the assessee delivers the cages to the customer and therefore such R & D expenditure cannot be termed as capital expenditure. The assessee further submitted that identical issue was decided in favour of the assessee in assessee’s own case for assessment year 2013-14 by ITAT, Ahmedabad vide order no. 1735/Ahd/2019 dated 05-10-2020. In the light of the above submissions of the assessee, the ld. CIT(A) allowed the appeal of the assessee following the judgment of ITAT Ahmedabad in assessee’s own case for assessment year 2013-14. While allowing the assessee’s appeal, the ld. CIT(A) made the following observations:- “The assessing officer has made disallowance of R & D expenditure of Rs. 20, 77, 01,000/- on ground that the expenditure is of capital nature. The appellant in his statement of income had shown expenditure on R & D of Rs. 20,77, 01,000/-, out of which I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 14 Rs.20,77,01,000/- was claimed as revenue expenditure. The assessing officer held that entire R & D expenditure is of capital nature and disallowed the sum of Rs.20,77, 01 ,000/-. The appellant contended that it is engaged in manufacturing of customized bearing cages and R&D expenditure towards the product developed in accordance with the specification of the customers and its benefits are endured till the time the appellant delivers the cages to the customer and therefore, cannot be termed as capital expenditure. In this connection, the appellant also submitted that identical issue was decided in the appellant's case for A.Y. 2013-14 by Hon'ble ITAT, Ahmedabad vide order No. 1735/Ahd/2019 dated 05.10.2020. The relevant part of the above judgment is reproduced as under: "16. If we analysis the nature of expenditure noted by the AO in the reply of the assesses reproduced on page no. 5 and extracted (supra) then it would indicate that these are the expenditure which were incurred by the assesses for preparing pro-type or preparing a product specifically required by its customers. In other words, it has incurred certain expenditure for development on a mechanism which can help it to produce a product, specifically demanded by a specific customer, and according to the needs of that customer. If any amount is being incurred towards R&D for the purpose of business for manufacturing customized products, then that can be considered under R&D which can be allowed under section 35(1)(iv) r.w.s. 35(2)(ia) of the Act. In view of the above discussion, we are of the view that the claim of the assessee deserves to be allowed, and delete the disallowance of Rs. 10,42,41,078/-. The facts and circumstances of the present appeal is similar to the order mentioned above, hence, following the judgment of Hon'ble ITAT Ahmadabad, the disallowance of Rs.20,77, 01, 000/- made by the assessing officer is deleted. Hence, this ground is allowed.” 11. The Department is in appeal before us against the order passed by ld. CIT(A), allowing the appeal of the assessee with respect to this ground of appeal. Before us, the ld. Departmental Representative placed reliance on I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 15 the observations made in order passed by the Assessing Officer for the impugned assessment year. In response, the counsel for the assessee submitted that the case of the assessee is covered in its favour in view of the decision of Ahmedabad ITAT in assessee’s own case for assessment year 2013-14, which was rendered on identical set of facts. Further, the counsel for the assessee submitted that ld. CIT(A) allowed the appeal of the assessee with respect to this ground of appeal by placing reliance on the aforesaid decision of ITAT Ahmedabad for assessment year 2013-14. He further submitted that the relevant extracts of the ITAT ruling is reproduced as part of the CIT(A) order, while allowing the relief to the assessee. 12. We have heard the rival contentions and perused the material on record. On looking into the facts of the case, we observe that the ld. CIT(A) has allowed the assessee’s appeal by placing reliance on the order of ITAT Ahmedabad in assessee’s own appeal for assessment year 2013-14 vide order dated 05-10-2020 and the relevant extracts of the order have been reproduced in the order of ld. CIT(A) at the time of affording relief to the assessee. Accordingly, in the light of the above facts, we find no infirmity in the order of ld. CIT(A) in allowing the assessee’s appeal with respect to this ground of appeal, so as to call for any interference. In the result, ground no. 2 of the Department’s appeal is dismissed. 13. Ground Nos. 3 and 4 of the Department’s appeal are general in nature and do not require any specific adjudication. I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 16 Now we shall discuss the Department’s Appeal for assessment year 2014-15 and assessment year 2017-18 The Department’s Appeal for assessment year 2014-15 Ground No. 1: CIT(A) erred in deleting the addition of Rs. 11,61,96,094/- made on account of R&D expenditure 14. We observe that the facts of this ground no. 1 of Department’s appeal is identical to ground no. 2 of Department’s appeal for assessment year 2016-17. In view of our observations made with respect to ground no. 2 of Department’s appeal on identical set of facts for assessment year 2016-17, ground no.1 of Department’s appeal for assessment year 2014-15 relating to deletion of disallowance of R&D expenditure, is hereby dismissed. 15. In the result, the ground no. 1 of Department’s appeal for assessment year 2014-15 is hereby dismissed. 16. Ground Nos. 2 and 3 of Department’s appeal for assessment year 2014-15 are general in nature and do not require any specific adjudication. Department’s Appeal for assessment year 2017-18 Ground No. 1 CIT(A) erred in deleting the disallowance of Rs. 13,39,050/- u/s. 14A of the Act r.w.r. 8D I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 17 17. We observe that the facts relating to this ground of appeal by the Department is identical to the ground no. 1 of Department’s appeal for assessment year 2016-17. Since on identical set of facts, we have dismissed the Department’s ground of appeal for assessment year 2016-17 in the preceding part of the judgment, ground no. 1 of Department’s appeal for assessment year 2017-18 is hereby dismissed. 18. In the result, ground no.1 of Department’s appeal for assessment year 2017-18 is hereby dismissed. Ground No. 2: CIT(A) erred in deleting addition of Rs. 20,17,60,000/- on account of R&D expenditure 19. We observe that similar ground of appeal raised by the Department on identical set of facts for assessment year 2016-17 has been dismissed by us in the preceding part of the judgment. Accordingly, in the light of the observations made by us with respect to this ground of appeal filed by the Department for assessment year 2016-17, ground no. 2 of the Department’s appeal for assessment year 2017-18 is hereby dismissed. 20. In the result, ground no. 2 of the Department’s appeal is hereby dismissed. 21. Ground Nos. 3 and 4 of the Department’s appeal for assessment year 2017-18 being general in nature, do not require any specific adjudication. I.T.A Nos. 303,304 & 306/Ahd/2022 A.Y. 2014-15 to 2016-17 Page No. ACIT vs. Harsha Engineers Ltd. 18 22. In the combined result, the appeals of the Department are dismissed for assessment years 2014-15, 2015-16 & 2016-17. Order pronounced in the open court on 26-04-2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 26/04/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद
Other Referred Cases
CIT Vs. Corrtech Energy Pvt. Ltd., CIT Vs. Winsom Textile Industries Ltd., L & T Infrastructure Projects Ltd. Vs. ITO, REI Agro Ltd. Vs. ACIT, Aakash Agro Industries Ltd. Vs. ACIT, M/s. Anriya Project Management Vs. Assessee, Hindustan Aeronautics Ltd. Vs. CIT, All Gujarat Federation of Tax Con Vs. CBDT, C.I.T. Vs. SIRPUR PAPER MILLS LTD, SB EXIT OPTEES' Association Vs. CBDT, Bharatia Ind. Ltd. Vs. CIT, Dipesh Lalchand Shah, Delhi International Airport (P.) Ltd., Amadeus India (P.) Ltd., Edelweiss Financial Advisors Ltd., Addlife Investments (P.) Ltd., Asian Granito India Ltd.
Laws Referred To
Income-tax Act, 1961
Tax Holiday Secrets for Startups
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1:1 Consultation on Salary Structuring
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Guide to Charitable Trusts: Formation, Benefits, and Compliance
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Research Collaboration Agreement
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Affidavit - Application for condonation of delay in filing the appeal before ITAT - Type 2
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