2011 (10) TMI 544

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....d. 3. The order of the learned. CIT(A) in allowing deduction u/s. 35(1)(iv) is not acceptable as the A.O. made the addition on the basis of the statement given by the Chairman of the group of companies withdrawing the claim of deduction u/s. 35(1)(iv) on 8/1/2007. 4. The ld. CIT(A) failed to appreciate the fact that the assessee was not engaged in any genuine R&D work but only quality control/testing." 3. The Learned Departmental Representative submitted that the CIT(A) has erred in allowing deduction under S.35(1)(iv) of the Act, although the assessing officer has made the addition on the basis of the statement made by the Chairman of the group of companies of the assessee, withdrawing the claim of the assessee for deduction under....

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....ent of the assessee was never controverted by the assessing officer. He submitted that the nature of the assessee's business being drugs, intermediates and hulk drugs and the same requires continuous process research to sustain itself in business. He placed reliance on the decision of the Hon'ble Bombay High Court in the case of CIT V/s. Sandoz (India) Ltd. (206 ITR 384) (Bom). 5. We have considered the rival submissions. We have perused the copy of the duly sworn statement of Shri B.P.Reddy, Chairman of the assessee's group of companies recorded under S.132(4) of the Act on 8.1.2007. We find that in reply to question No.5, Shri B.P.Reddy has stated that it would withdraw the claim for deduction under S.35(1)(iv) with regard to M/s. Hete....

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....h developmental activity in relation to process development and cost ambit and this expenditure incurred by the assessee falls within the scope of S.35(1)(iv) of the Act. The assessee has relied on the decision of the Hon'ble Bombay High Court in CIT V/s. Sandoz (India) Ltd. (supra). The claim of the assessee company was that the nature of the assessee's business requires continuous process research to sustain itself in business. We find that this explanation of the assessee could not be controverted by the assessing officer. We find that there was no basis for the assessing officer to observe that the expenditure was not incurred for R&D at its laboratory by the assessee. We find that the assessee has claimed that it was carrying on R&D ac....