TaxTMI 
TaxTMI 
2015 (8) TMI 763
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....Next assessment year 2003-04 involves assessee's appeal IT(SS)A No. 808/Ahd/2010 comprising of grounds challenging validity of Section 153A proceedings, disallowance of deduction u/s.80HHC of Rs. 24,50,509/-, quantification of Section 80JJA deduction and also Section 80G deduction of Rs. 1,30,000/-; respectively. The Revenue's cross appeal No. IT(SS)A No. 819/Ahd/2010 asseeils lower appellate order deleting disallowance of Rs. 1,15,49,116/- relating to staff welfare expenses and deferred revenue expenditure. Next A.Y. 2004-05 comprises of assessee's appeal IT(SS)A No.809/Ahd/2010 raising grounds of validity of Section 153A proceedings and Section 80HHC deduction claim of Rs. 4,92,223/-. The Revenue's cross appeal IT(SS)A No. 820/Ahd/2010 challenges CIT(A)'s order deleting disallowance of Rs. 1,15,83,646/- relating to staff welfare expenses, miscellaneous expenses, interest expenditure u/s. 14A and 36 (i)(iii) of the Act; respectively. The next A.Y. 2005-06 involves Revenue's appeal IT(SS)A No. 821/Ahd/2010 seeking restoration of disallowance amounting to Rs. 1,13,48,242/- of staff welfare expenses, miscellaneous and interest expenses u/s. 14A r. W. S. 36(1)(iii) of the Act. The ass....
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....first assessment year involves a summary assessment u/s.143(1) of the Act. Rest all are 'regular' assessments. The latter three assessments were agitated before the CIT(A). And upto the tribunal on various issues on merits. The assessee submits that no incriminating documents, papers, books of accounts or any money or other valuable assets was found in the course of search. Nor is any such material stated in these impugned assessments framed u/s. 153A of the Act. It contends that the Assessing Officer framed the impugned assessments without highlighting any incriminating material by merely reviewing merits of the disallowances earlier made and the same is not valid as per law. Case law of (2015) 58 taxmann. Com 78 (Bombay) CIT vs. Continental Warehousing Corporation (Nhava Sheva ) Ltd. affirming Special Bench decision of the tribunal in All India Cargo Logistic vs. DCIT 137 ITD 287 is quoted in support. Thereafter, submits is that its assessment had already finalized before search which could not have been treated as abated alike pending assessments for initiating Section 153A proceeding in question. The assessee's last plea is that for the purpose of adjudicating validity of proce....
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....king some additions; most common being those of staff welfare expenses and deductions u/s. 80G/80HHC and interest etc. The assessee filed separate appeals for these three latter assessment years before the CIT(A). The same were partly allowed on 25.01.2007 and 19.10.2007. This latter date relates to the CIT(A)'s orders in A.Y. 2004-05 and 05-06. Thereafter, the parties came to the tribunal. 7. It transpires from the case file that in the mean time, the department conducted the impugned search in case of M/s. "INTAS" group of companies. This culminated in issuance of Section 153A notices dated 06.05.2008. The assessee filed separate returns on 18.11.2008. The Assessing Officer framed consequential search assessments on 30.12.2009 inter alia making the above stated disallowances/additions. The assessee preferred separate appeal. It would raise a legal plea that once no incriminating material or any undisclosed assets had been discovered during the search, the impugned Section 153A jurisdiction could not have been assumed. It submitted that the Assessing Officer nowhere mentioned all or any such material in his assessment orders. And also that Section 153A proceedings are not in th....
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....) d) Anilkumar Bhatia vs. ACIT C. C. I7, Delhi. It has been held that the initiation of 153A/153Cproceedings are invalid in respect of those years for which no incriminating documents is found d search. That means 153A proceedings can be initiated only in those yea) which incriminating documents is seized. In other words, the assessment u/s. 153A/153C can be made only in respect of seized material. Only in respect of pending assessments other issues can be considered besides the seized documents. In other words, there needs to be two assessments order for completed assessments - one regular and other based on seized documents. With due respect, this interpretation is not correct as the basic scheme of search assessments u/s. 153A/153C was introduced w. E. F. 2003 to overcome the two assessments theory i. E. block assessments u/s. 158BC/158BD based on seized material and regular assessment u/s. 143(3). Section 153A presupposes making of the assessment of 6years irrespective of whether any incriminating document is seized or not. 5.3 Further, if the decisions are considered as good law then no remedial action is possible in respect of completed assessments u/s. 143(3) or ret....
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....ted prior to the search in respect of six assessment years referred to in s. 153A, has also been included in the assessment framed under s. 153A of the Act." However, in the present case the Assessing Officer has recomputed deduction u/s. 80HHC and 80IA of the Act by reducing the claim thereof. The Assessing Officer was not competent to do so in assessment u/s. 153A of the Act. We, therefore, cancel the assessment framed u/s. 153A of the Act for all the years," Therefore, the ratio of the decisions of the ITAT will not be applicable in this case. The assessment order passed u/s. 153A is therefore upheld. The first ground of appeal of the appellant is dismissed. " 4.1 As the facts of the present case are similar to the facts of the case of Rohan Dyes and Intermediates Ltd, that is, in the original assessment order is also the deduction under section 80 HHC has been disallowed along with other expenses as mentioned in the ground number 4 unlike in the case of Meghmani industries Ltd, the AO was fully justified in initiating proceedings under section 153 A of the Income-tax Act. In short, this ground of the appellant is dismissed." This leaves the assessee aggrieved. 8. We....
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....tion (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside.] Explanation.- For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." A perusal of above stated statutory provision reveals that pending assessments on the date of search in respect of preceding six assessment years abate as per the 2nd provision. However, the same does not include those assessments which have already attained finality or wherein , assessm....
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....d that initiation of impugned Section 153A proceedings in this set of four assessment years in absence of any incriminating material found in search conducted after finalization of regular assessments is not sustainable. We quote Delhi tribunal's decision (supra) and hold that assessments framed u/s.143(1) and 143(3) of the Act have to be treated at par in such cases. This leaves us with the other judgments quoted at the Revenue's behest. The case law of Raj Kumar Arora (supra) deals with scope of a Section 153A assessment and not that of assumption of jurisdiction which stands on a different footing. The same is the case in other decision of Filatex India Ltd. (supra). The case law of Bangalore and Chennai benches of the Tribunal holding that an Assessing Officer gets jurisdiction for passing orders u/s.153A after search even in absence of any incriminating material in case of assessments already finalized; go against the special bench decision hereinabove. The same are no longer valid precedents. The Revenue's arguments relying on the above stated decision are accordingly rejected. We accept the assessee's arguments challenging validity of initiation of Section 153A proceeding....
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....xtent of the approval granted by Department of Science. Against this action of the AO, the appellant submitted as under: "Ground no. 2 relates to the disallowance of expenditure u/s 35(2AB) amounting to Rs. 2,14,46,997/-. 5.1 The Assessing Officer has made disallowance of expenditure amounting to Rs. 2,14,46,997/-. The break up of the said disallowance is as under :- (a) Expenditure on clinical trials Rs. 4,25,86,793/-. (b) Expenditure on building maintenance Rs.3,07,245/- The Assessing Officer has disallowed the weighted deduction u/s 35(2AB) on the aforesaid expenditure. While disallowing the aforesaid expenditure, at page no. 2 of the assessment order, the Assessing Officer has stated the following: "Assessee has claimed weighted deduction in respect of revenue expenditure at Rs. 35,26,18,490/- on actual expenditure of Rs. 23,50,78,998/- instead of the amount approved for Rs. 1921.85 lacs by Department of Science. Therefore, balance weighted deduction u/s 35(2AB) in respect of the difference is added to the total income of the assessee. " In view of the above, it is stated that the Assessing Officer has disallowed the aforesaid expendit....
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....rds the claim of weighted deduction u/s. 35(2AB), all the conditions specified in the said provisions are satisfied by the company. With reference to the expenditure on Clinical trials, the explanation to section 35(2AB)(1)- should be considered, which reads under : Explanation.-For the purposes of this clause, "expenditure on scientific research ", in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970). In view of the above explanation, it is clear that the expenditure on clinical drug trail is specifically included within the meaning of "expenditure on scientific research" for the purpose of sec. 35(2AB). 5.4.2 As regard the building maintenance expenditure, it is submitted that this expenditure is incurred on the building on which in-house research and development activity is carried out. Moreover, it is stated that what is excluded under the provision of sec 35(2AB) of the IT act is the cost of land & building and not the recurring expenditure related to ....
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....specialist Doctors & Scientists on the products under experimentation so also on various agencies as per Regulatory Authorities. These clinical trials are part of the main research being carried on by the company. The payments made for the said purpose is expenditure on in-house R&D only. 6.4 The above requirement of the R & D activity has been rightly recognized and therefore, the expenditure 'on clinical trial has been specifically included within the meaning of 'expenditure on scientific research', as explained in para-5.4.1 hereinabove. 7. In view of the above, it is submitted that all the conditions specified u/s. 35(2AB) for claiming weighted deduction are fulfilled by the appellant-company. Moreover, in view of the explanation as reproduced above, expenditure on clinical trials is specifically included in the term "expenditure for scientific research" and the appellant-company has approved in-house Research & Development facility. Therefore, the expenditure incurred on clinical trails would be eligible for the weighted deduction u/s. 35(2AB). Apart from above, as stated in para 5.4.2, the recurring expenditure on building is also eligible for weighted de....
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....arch as proper security is required to avoid leakage and only inhouse staff will have assssed to building. Accordingly, this expenditure are for preserving the research which is completed and its clinical trial is pending. As regards to the environmental issue, the assessee Company has set up an affluent plant and as is widely accepted, the vegetation i. E. trees have contained the pollution. This expenditure of gardening and plantation have been done for the perseverance of the environment and this is directly related to the R&D facilities. As regards to salary paid to Dr. C Dutt amounting to Rs. 58.54 lacs, he is in charge of R&D centre at Bhatt. He is the person through whom all coordination of technical scientists and other technical persons are carried out. The entire reporting of the research activity to the management has been taken to the Board of Directors through him only and for this the salary is paid. Accordingly, the assessee has rightly paid the entire expenditure of Rs. 133.92 lacs and building repairs Rs. 37.55 lacs on which weighted deduction u/s. 35[2AB] of the Act is allowable. In view of the above discussion, we allow the claim of the assessee and this issue of....
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....ility, if approved, has to be allowed for the purpose of weighted deduction. We are in full agreement with the reasoning given by the Tribunal and we are of the view that there is no scope for any other interpretation and since the approval is granted during the previous year relevant to the assessment year in question, we are of the view that the assessee is entitled to claim weighted deduction in respect of the entire expenditure incurred under section 35(2AB) of the Act by the assessee. " On perusal of the above decision , your goodselves shall appreciate that the requirement of approval from DSIR has been fulfilled in the case of the appellant and therefore, the entire expenditure in respect of such R & D should be allowed. Once the facility is approved by the DSIR, all the expenses, incurred on R & D in the said facility, become eligible u/s 35(2AB) of the Income-tax Act. In view of above, it is submitted that the claim for weighted deduction in respect of expenditure on clinical trials and building maintenance are bonafide claims and the same should be held as eligible for weighted deduction. " 7. I have considered the submission of the appellant. In the profit an....
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....n under section 35(2AB) of Rs. 2,14,46,997/- on this ground. The contention of the appellant is that he is entitled to 150% deduction in respect of the expenses of Rs. 4,25,86,793/- incurred on clinical trial in view of the explanation to section 35(2AB) inserted by the Finance Act, 2001 with effect from 1/4/2002. As per this explanation, the expenditure on scientific research in relation to drugs and pharmaceuticals, includes, expenditure incurred on clinical drug trials, obtaining approval from any regulatory authority under any central, state or provincial act and filing an application for a patent under the Patents Act 1970. In view of the explanation, in my opinion, the appellant would be entitled to the weighted deduction in respect of the expenditure incurred on clinical drug trials of Rs. 4,25,86,793/- even though the same was not approved by the DSIR. The AO is therefore directed to allow 150% deduction in respect of the expenditure of Rs. 425,86,793/- incurred on clinical drug trials. However, since the expenditure of Rs. 3,07,244/- incurred on building repair and maintenance has not been approve by the DSIR, the appellant would not be entitled to weighted deduction on th....
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....h a building repair and maintenance sum as revenue expenditure, the same is also allowable u/s.35(2AB) of the Act as well. The Revenue fails to quote any case law to the contrary. We accept corresponding ground in its Cross Objection accordingly. Its legal ground challenging initiation of Section 153A proceedings is dismissed as not pressed. Assessee's C. O. No. 39/Ahd/2011 stands partly allowed. 12. Now we come to the last A.Y. 2008-09. The Revenue's sole substantive ground in its appeal IT(SS)A No. 39/Ahd/2011 seeks to restore the disallowance of Rs. 4,67,57,759/- for the purpose of weighted deduction of Rs. 9,35,14,755/- u/s. 35(2AB) of the Act. We find that the CIT(A) has followed his observation in the preceding assessment year extracted hereinabove. No distinction on facts is stated to be involved. We follow our reasoning based on the hon'ble jurisdiction high court decision quoted in the preceding paragraph in case of Cadila Healthcare and reject the Revenue's sole substantive ground. Revenue's appeal IT(SS)A No.39/Ahd/2011 for A.Y. 2008-09 is dismissed. 13. The assessee's Cross Appeal IT(SS)A No. 20/Ahd/2011 raises first substantive ground of disallowance of weighted ....
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.... the intimation of revised return was given to the AO on 31/12/2009 i. E. after the assessment order was passed in this case. In other words, no cognizance was taken by the AO in respect of this return as the same was filed after the assessment order was passed. A revised return can be filed under section 139(5) of the Income-tax Act within one year from the end of the financial year or before passing assessment order, whichever is earlier. Since in this case, the assessment order has been passed before filing the revised return of income, the revised return is not a valid return. In fact, this is a non est return. That is why, there is no discussion in the assessment order regarding the revised return. This ground is therefore, dismissed." 15. We have heard both the parties and perused the case file. The CIT(A) at the first instance holds that the assessee's revised return was filed on 30.12.2009 i. E. on the date of framing of assessment itself. Thereafter, he observes that this revised return was given to the Assessing Officer on 31.12.2009 i. E. after framing of the assessment. There is no justification forthcoming that when revised return was filed on the former date, how i....