TaxTMI 
TaxTMI 
2006 (12) TMI 445
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....from trading exports under section 80HHC." 2. Brief facts of the case regarding ground No. 1 are during the year in question, the assessee received fixed deposits from more than 70 individuals majority of whom were employees of the assessee-company, aggregating to Rs. 47,83,000. It shall be pertinent here to mention that all fixed deposits applications were made by the depositors with the company for making the said FDRs. These applications, in addition to other particulars, inter alia, contained signatures, PA numbers of the Assessing Officer, telephone numbers of the depositors. In the course of assessment proceedings, in addition to the applications, the Assessing Officer asked the assessee to produce confirmations of depositors. The assessee produced these confirmations except for some depositors. In explanation, it was contended that deposits were received by these applications from the employees of the company who were drawing sufficiently good salary either from the assessee-company or from earlier employers from whom they were transferred and employed by the assessee-company. These persons had received good settlement amounts from ex-company and thereafter opted to join as....
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.... creditworthiness of the depositors. Therefore, since the appellantcompany failed to discharge its onus by furnishing evidence to prove all the three requirements i.e. identity, creditworthiness and genuineness of the transaction, the action of the Assessing Officer in considering the deposits of Rs. 20,19,000 as unexplained is therefore, considered justified and calls for no interference. The addition is therefore sustained." 3. Learned counsel for the assessee contended that neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) have denied the fact that depositors in question were employees of the assessee. The Commissioner of Income-tax (Appeals) has clearly observed that the assessee furnished copies of applications made by these depositors and further held that applications made by the applicants contained signatures, addresses, telephone numbers and PA numbers of these persons. It has been further held that all these amounts have been received by cheque, repayment has also been made by cheque. Despite these admissions, the Commissioner of Income-tax (Appeals) without critically analyzing, has summarily held that these facts do not prove genuineness of tr....
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....the alleged creditors to find out their creditworthiness." 4. Learned counsel for the assessee contended that in business reality sometimes it is not possible for the assessee to produce parties as some shift residence, may go abroad leaving no whereabouts, which does not mean that these facts alone will be preferred over other materials available on record and addition under section 68 can be made. Further reliance was placed on the decision of the hon'ble Supreme Court in the case of CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78, which has been relied on by the hon'ble Gujarat High Court. Further reliance was placed on the decision of the hon'ble Gujarat High Court in the case of Deputy CIT v. Rohini Builders [2002] 256 ITR 360 wherein following has been held (headnote) : "The assessee was a firm engaged in the business of dealings in land. During the assessment year under consideration the assessee had taken loans from various parties and during the course of assessment proceedings, the assessee had furnished the loan confirmations giving full addresses, GIR numbers/PANs, etc. of all the depositors. The Assessing Officer however issued summons to some of the creditors a....
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....s out of its reach and same cannot be used as a tool to make such credit as income of the assessee. Further reliance was placed on Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gauhati) for the proposition that the assessee having established identity of creditor and amounts having been received by way of cheques, the assessee must be considered to have proved that creditor had creditworthiness. 6. Learned counsel for the assessee contended that applications submitted by depositors were themselves de facto confirmations, inasmuch as, they contained all details about identity, addresses, signatures, PA numbers, ward numbers, telephone numbers, besides, intention to make deposits was clearly written, accepting terms and conditions of FDRs. With these admitted facts on record, both lower authorities have accepted facts that these creditors were employees of the assessee. Records of their employment, wages, etc. were available with the Assessing Officer, their creditworthiness is impliedly proved by the assessee. In any case, the assessee has discharged its initial burden. Mere non-filing of a particular form of evidence i.e., alleged confirmations cannot be held against the assessee ....
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....eft services and migrated. The lower authorities have accepted facts that the depositors were ex-employees of the assessee. Section 68 reads as under : "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 9. Such credits are to be charged to income-tax as income only where the assessee offers no explanations about the nature and source thereof or the explanations offered by him are not satisfactory. In this case the assessee has furnished explanation. Satisfactoriness of the explanations has to be appreciated on objective considerations, material available on record, peculiar facts of the case and existing circumstances. In the instant case, it is clear that the assessee gave proper explanations, complied with by filing substantial confirmations of depositors whose credits have been accepted. In respect of some other depositors, who had left services or migrated a....
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....g Officer has rigidly stuck to the issue of confirmations to overshadow all other material available on record which has not been considered at all. The assessee had furnished before the Assessing Officer whatever evidence was available with it, which in our opinion was sufficient to reasonably discharge primary onus cast on the assessee in terms of section 68. It was for the Assessing Officer to rebut the same on the basis of available record, instead the Assessing Officer had merely picked up non-filing of confirmations as a tool to discard other material and explanations of the assessee. Rejection of the explanations of the assessee is not based on objective considerations but by way of summary rejection. In our view, the assessee having given reasonable and plausible explanations, which have not been found to be wrong or unsatisfactory on any objective consideration, we hold that cash credit in question cannot be added as unexplained cash credit under section 68 of the Act. Accordingly, this ground of the assessee is allowed. 10. Regarding ground No. 2, learned counsel for the assessee contends that there were two issues in appeal-one was regarding inclusion of sales-tax and e....
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....ts and in research and development ("R & D") of variety of products. For "R & D" the company has following objectives : (a) To develop clinical nutrition products i.e. intravenous amino acid solution (celemin), intravenous fat emulsion (celepid), total nutrient supplement etc. (b) To develop anesthetic products like propofol (profol). (c) To develop novel drug deliveries of anti-infective agents. (d) To develop synthesis methods for plasma volume expanders i.e. hydroxy ethyl starch (hestar), dextran (microspan) etc. (e) To conceptualise, initiate and nurture basic research programmes, contribute to the knowledge and understanding of medical science which will yield long-term benefits to the organization. 16. For these purposes, the assessee set up in-house R & D facility and after establishing the facility i.e. by incurring expenditure thereon, it applied for approval of prescribed authorities i.e. Ministry of Science and Technology, Department of Scientific and Industrial Research ("DSIR" for short), Government of India, vide application dated August 7, 2000. "DSIR" recognized assessee in-house "R & D" facility in terms of section 35(2AB) vide approval letter No.TU/IV-R....
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.... facility is to be allowed as deduction. The Commissioner of Income-tax (Appeals), however, merely referred to observations of the Assessing Officer and upheld his action. Aggrieved the assessee is before us. 18. Learned counsel for the assessee first of all read out sub-section (1) of section 35(2AB) which is reproduced above and contends as under: (i) Nowhere the provisions provide that expenditure from the date of approval only has to be allowed. In the absence of these words, such conditions cannot be imputed in the statute by the lower authorities. Doing so amounts to reading more in the law which is not expressly provided. (ii) Words used are any expenditure incurred by the assessee on scientific research on the in-house "R & D" facility approved by the prescribed authorities has to be allowed by deduction of expenditure so incurred. Meaning of these words is plain and clear ; the facility is to be established first that on approval of the facility all the expenditure so incurred by the assessee for development of in-house facility is to be held as eligible for weighted deduction. (iii) Form No. 3CM, which is order of approval as provided by the rules in this behalf al....
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....terpretation cannot be assumed so as to provide a cut-off date for eligibility of weighted deduction of expenditure, which is not provided by the law. Further rule 6(5A) provides as under : "(5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, pass an order in writing in Form No. 3CM : Provided that a reasonable opportunity of being heard shall be granted to the company before rejecting an application." 22. Form No. 3CM which is order of approval reads as under : "Form No. 3CM Order of approval of in-house research and development facility under section 35(2AB) of the Income-tax Act, 1961 1. Name, address and PAN of the company. 2. Nature of the business of the company-Manufacture/production of article or thing. 3. Objectives of the scientific research to be conducted by in-house research and development facility. 4. Address at which such research and development facility is located. 5. Ref. No. and date of the application. The above research and development facility is approved for the purpose of section 35(2AB), subject to the conditions underlined ther....
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....ically raised as ground No. 4(iv) in grounds of appeal before the Commissioner of Income-tax (Appeals). We, therefore, set aside this issue also back to the file of the Commissioner of Income-tax (Appeals) to decide the same on merits. 27. In the result, the assessee's appeal is partly allowed for statistical purpose. I. T. A. No. 563/Ahd/2005 (Revenue's appeal) 28. Following grounds are raised : "1. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in directing to delete the additions made on account of interest payment of Rs. 4,68,573. 2. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in directing to treat the DEPB incentive under section 28(iib) and allow deduction under section 80HHC. 3. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in directing to exclude the excise duty and salestax from total turnover for deduction under section 80HHC of the Act." 29. The learned Departmental representative relied on the order of the Assessing Officer. 30. For ground No. 1, learned counsel for the assessee contends that the assessee had no borrowing except export bill discounting facility....