TaxTMI 
TaxTMI 
2014 (11) TMI 769
X X X X Extracts X X X X
X X X X Extracts X X X X
....admitting total income of Rs. 2,13,69,953 under section 115JB. The Assessing Officer amongst various additions made, disallowed an amount of Rs. 2,31,07,017 claimed under section 35(1)(iv) as capital expenditure incurred for the purpose of research. Assessing Officer was of the opinion that assessee is not indulging in research and development activities in its own business but undertaking contract research for third parties. Hence, the claim of capital expenditure under section 35(1)(iv) is not allowable. It was submitted by assessee that it is carrying on manufacturing of special chemicals and intermediates and also its R & D unit has been approved from its inception by the Ministry of Science and Technology, Department of Scientific and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....landins. Further, Ld. CIT(A) noted that on Prostaglandins and on the synthesis of mesoprostos and kesobidopa and in the case of anti-ancillary drugs which have been initiated on two products viz., bicalgtamide and anastorazole assessee was doing research. It was further noted that in addition to its own R & D projects, AVRA scientists have worked out several contract research projects of R & D level to optimize the laboratory process and then undertaken scale-up and production. Ld. CIT(A) also noted that assessee has been claiming capital expenditure for R & D under section 35 for A.Y. 2003-04 of Rs. 24,30,722, for A.Y. 2004-05 Rs. 48,15,718 and these expenses were allowed. Only in this year A.O. raised objection. Ld. CIT(A) also noted that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch additional evidence. 3. The Ld. CIT(A) erred in ignoring the decisions of M/s. Enem Nostrum Remedies P. Ltd., vs. ACIT 314 ITR 47 and in the case of M/s. Ciba India P. Ltd., vs. ITO 305 ITR (AT) 75." 5. We have heard the Ld. D.R. and Ld. Counsel and perused the written submissions filed on behalf of respondent and the paper book evidencing the activities of assessee. On perusal of the same, we are of the opinion that there is no merit in Revenue contentions at all. As far as ground No.1 is concerned, it is a fact that assessee is involved in R & D activities and has employed its activities of research for commercial purposes also. Ld. CIT(A) has given factual findings, even though A.O. refused to acknowledge in the two remand reports.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on the contract research part which is a miniscule part of assessee's business activity. Ground is rejected. 7. Coming to ground No.2, we are unable to accept the contention. In fact, Ld. CIT(A) sent the additional evidence filed to A.O. twice on remand. As briefly stated above, there are two remand reports from A.O. What is interesting is the observation of Ld. CIT(A) after obtaining the remand reports from A.O. The Ld. CIT(A) has observed in page 12 of the order as under : "Since the remand reports submitted by the A.O. do not reflect the examination of the documents filed by the appellant despite requested by my predecessor and also by me and it looks as though they are directing the CIT(A) to verify and conduct the examination in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owance of entire amount if it is spent for the purpose of R & D, whether it is for inhouse products or for contract research. As rightly held by Hon'ble jurisdictional High Court the section does not say that expenditure should be wholly and exclusively for in-house products only. So long as the expenditure is for the purpose of business and in R & D activity, the expenditure has to be allowed. Therefore, we do not find any merit in ground No.2. 10. As far as ground No.3 is concerned, the decision relied on by Revenue does not apply to the facts of the case. In the case of M/s. Enem Nostrum Remedies P. Ltd., vs. ACIT 314 ITR 47 that company has undertaken research and development work for its parent company in USA and the capital expenditu....