2020 (1) TMI 1038

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....of this Court on the following substantial questions of law: i) Whether in law the tribunal was justified in allocating the R & D expenditure to the Pondy unit when no such products were manufactured by the Pondy unit during the relevant year for which research was carried out by R & D unit. ii) Even when the answer to the first question is in the affirmative, whether in law, the tribunal is justified in not excluding the capital expenditure to the tune of Rs. 99 lakhs from the total R & D expenditure of Rs. 1.99 crores while allowing the expenditure on R & D between the other units. iii) Whether the tribunal was right in holding that the computation of deduction under Section 80HHC has to be done by reducing the ....

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....e appeal preferred by the appellant. In the aforesaid factual background, the appellant has preferred this appeal. 5. Learned counsel for the appellant, at the outset, submitted that sofar as substantial questions of lawNos.3 and 4 are concerned, the same have already been answered in favour of the appellant by an order dated 11.07.2011 passed in ITA No.471/2008. However, it was fairly submitted that the issues pertaining to question Nos.3 and 4 are pending consideration before the Supreme Court. It is further submitted that the Tribunal was not justified in allocating research and development expenditure to the Pondicherry unit of the appellant when no such products were manufactured in the aforesaid unit in the relevant year. It is als....

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....iture to the Pondicherry unit. It ought to have been appreciated that when research was helpful for other units, the question of apportionment of the expenditure to the Pondicherry unit would not arise. This fact can also be ascertained from the books of accounts of the Pondicherry unit. Thus, if the product is manufactured by other unit of the appellant, then only allocation of research and development expenses to the other unit is justified. Therefore, the first substantial question of law framed is answered in favour of the assessee and against the revenue. 8. Section 35(1) of the Act provides that in respect of expenditure on scientific research, the deductions made therein namely expenditure laid down or expended on the scientific r....