TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 447
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....f notice under section 148 by the Assessing Officer, the assessee requested the Assessing Officer to treat the return originally filed as return filed in response to notice under section 148 of the Act. While finalising the assessment proceedings the Assessing Officer made an addition of Rs. 18,81,031 as the amount of income not offered to tax, as per mismatch of TDS certificates. The Assessing Officer also made an addition of Rs. 6,00,00,000 being the disallowance of contribution made by the assessee to M/s. Institute of Life Sciences, as deduction under section 35/37 of the Act. 3. Aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). 4. Before the Commissioner of Income-tax (Appeals), the assessee contended that the issues under reference were being examined during the original assessment proceedings and the reopening of assessment is only on account of mere change of opinion and without any fresh material brought on record. 5. The Commissioner of Income-tax (Appeals) after considering the submissions of the assessee, confirmed the action of the Assessing Officer in reopening of the assessment by observing as under : "The assessment wa....
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....d promote" research and as such the assessee can carry on research and development activities on its own or support and promote the research and development activities carried on by other organisations. The assessee further contended that in case of research and development organisations the activities themselves may not generate income as in case of other business entity and hence expenditure for such activity is incurred out of contributions or grants or sponsorships from other entities and as such the case of the assessee cannot be examined from the point of view of typical business entity. 8.1 Before the Commissioner of Income-tax (Appeals), while elaborating on the issue it was submitted that the assessee-company was carrying on the research and development activities on its own till the financial year 2004-05, being a research institution under section 10(2) of the Act, but in the years down the line, due to reduction in sponsorships and grants, discontinued own research, but continued supporting/promoting research carried on by other organisations like Institute of Life Sciences and during the year under reference, it spent a total amount of Rs. 603.37 lakhs on its objects ....
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....aiming the amounts of contribution as business expenditure was that the amounts were spent on the objectives of the assessee-company and the spending on objectives partakes the character of carrying on a business and as such any expenses carrying on its activities should be allowed as expenditure. 7.4 The claim of the appellant appears to be misplaced on facts. The expenditure relatable to scientific research is specialised and cannot be equated with general expenses associated with the business. Indeed, in case of weighted deduction under section 35(1), the expenditure should be either incurred by the assessee itself or contributed to a third party engaged in the similar activity of scientific research and approved by DSIR. At the same length and breadth, the scientific expenditure in order to be claimed as business expenditure is required to be associated with the relevant business or the scientific research undertaken by it. In the case under reference, there was no research work undertaken by the assessee-company during the year. Further, there was no business activity carried on by the assessee, except earning the interest income and gains on sale of assets of the company. T....
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.... decision of the Punjab and Haryana High Court in the case of CIT v. Majestic Auto Ltd. [2009] 315 ITR 445 (P&H), wherein the Hon'ble High Court supported the finding of the Income-tax Appellate Tribunal, that the expenses in order to be claimed as business expenditure required to have nexus with the existing business of the assessee. Thus, based on the facts of the case, where no business activity was carried on, it is reasonable to hold that the assessee is not entitled for claiming the expenditure, as business expenditure. In the instant case, the amount of Rs. 6,00,00,000 contributed to M/s. Institute of Life Sciences, is not established to be incurred for the business of the assessee. Accordingly, the disallowance of Rs. 6,00,00,000 made by the assessee in the assessment order, held to be sustained and this ground of appeal treated as dismissed." 10. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the assessee is in appeal before us raising the following grounds of appeal : "1. The learned Commissioner of Income-tax (Appeals) erred in law and as to the facts and circumstances of the case in allowing the appeal only partly and dismissing the appeal on o....
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....lied on the judgment of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC). 11.1 Further, the learned authorised representative submitted that the Assessing Officer cited the reason for reopening as weighted deduction under section 35(1)(ii) but ended up making addition under section 37. This is contrary to the reason for reopening of assessment. All these information's were already submitted and made submission before the Assessing Officer during the original assessment. There is no tangible material on record. 2. Chennai Properties and Investments Ltd. v. CIT [2015] 373 ITR 673 (SC) 12. On the other hand, the learned Departmental representative submitted that reopening was proper as there is cogent/tangible material available on record since the Assessing Officer has noticed mismatch of TDS certificates with gross receipts. 13. Considered the rival submissions and material facts on record. Original assessment under section 143(3) was completed on December 31, 2010 and the authorised representative brought to our notice the submission made by the assessee before the Assessing Officer on December 9, 2010 wherein the assessee has bro....
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....Life Sciences (refer pages 93 to 100 of paper book). He submitted that since both the institutes objectives are similar, the contribution made by the assessee to M/s. Institute of Life Sciences is similar to carrying on the research activity by itself. He submitted that it is nothing but the expenditure incurred for the business of the assessee, hence, it is eligible to claim deduction under section 37 of the Act. He further submitted that originally assessee intended to claim weighted deduction under section 35(1)(ii) of the Act, since Institute of Life Sciences could not get the required approval from the authorities under section 35, it was brought to the notice of the Assessing Officer during the course of assessment that it is claiming contribution made to Institute of Life Sciences only under section 37 of the Act. He submitted that since the above contribution is made for the business purpose, it is eligible to claim deduction under section 37(1) of the Act. He relied on the following case laws : 1. Asst. CIT v. Ranbaxy Laboratories Ltd. [2011] 7 ITR (Trib) 161 (Delhi); TS-5776-ITAT-2009 (Delhi)-O. 2. Dr. Reddy's Laboratories Ltd. v. Addl. CIT (No. 1) [2014] 30 ITR (....
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...., which is the sister concern of the assessee, on the similar issue, allowed the deduction under section 37 to the assessee, by observing as under (at page 427) : "This ground pertains to disallowance of contribution paid to Institute of Life Sciences. Institute of Life Sciences is a research institution, engaged in research activities in the field of pharmaceuticals and is affiliated to Osmania University, Hyderabad. Since the assessee is also engaged in the business of manufacturing, research and development of pharmaceuticals, the assessee in its own business interest contributed a sum of Rs. 3,41,18,538 to Institute of Life Sciences and claimed deduction under section 35AC and alternately under section 37. The Assessing Officer disallowed the contribution as the assessee was not able to produce the certificate required under the provisions of section 35AC of the Act. It was submitted that though it is not allowable under section 35AC, the said payment is allowable under section 37 as the payment was made to an organisation which is in similar line with the asses see. Similar expenditure was allowed by the Commissioner of Income-tax (Appeals)-III and further confirmed by the....
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....Officer disallowed the deduction by holding that the payment was neither mandatory nor statutory, but was only discretionary. The Commissioner of Income-tax (Appeals) also disallowed the claim of the assessee. The Special Bench of the Income-tax Appel late Tribunal came to the conclusion that though there was no compulsion on the assessee to make contribution but still the contribution was made in pursuance of a scheme which was evolved by the Rice Millers' Association in consultation with the District Collector and therefore the deduction was allowable under section 37(1) of the Act. The Tribunal also held that such contribution could not be held to be opposed to public policy. The Department filed reference application under section 256. The Hon'ble High Court answered the questions referred in favour of the assessee. The Hon'ble High Court, however, disallowed deduction by coming to the conclusion that the payment of this amount was opposed to public policy. The Hon'ble Supreme Court, after making reference to various decisions, allowed the claim of the assessee by observing as under (page 111 of 223 ITR) : 'From the aforesaid discussion it follows that any contributio....