Dcit Circle 3 2 Hyd Hyderabad v. Sri Biotech Laboratories India Ltd Hyd Hyderabad

In The Income Tax Appellate Tribunal Hyderabad Bench A Hyderabad Before Smt P Madhavi Devi Judicial Member And Shri S Rifaur Rahman Accountant Member Ita No 499 Hyd 2016 And C O No 33 Hyd 2016 Assessment Year 2010 11 Dy Commissioner Of Income Tax Circle 3 2 Hyd Vs Sri Biotech Laboratories India Ltd Hyderabad Pan Aakcs 6296 B Appellant Respondent Cross Objector Revenue By Smt U Minichandran Assessee By Shri R Vijayaraghavan Date Of Hearing 11 12 2017 Date Of Pronouncement 13 12 2017 O R D E R Per S Rifaur Rahman Am This Appeal Is Filed By The Revenue Against The Or Der Of Cit A 3 Hyderabad Dated 29 01 2016 Relates To T He Ay 2010 11 The Assessee Also Filed C O Against The S Aid Order Of Cit A 2 Briefly The Facts Of The Case Are Assessee Comp Any Is In The Business Of Manufacture And Sale Of Pesticides Bio Fertilizers And Organic Manure Assessee Filed Its Return Of Income For Ay 2010 11 On 15 10 2010 By Admitting In Come Of Rs 14 63 84 180 After Claiming A Deduction Of Rs 6 02 05 350 U S 80 Jja Of The Income Tax Act 1961 In Short The Act The Assessee Has Computed Deduction U S 80 Jja As Under Particulars Total Organic Manure Non Organic Income Income From 75 74 70 126 17 33 01 500 58 41 68 626 I T A No 499 Hyd 2016 And Co No 33 Hyd 16 Sri Biotech Laboratories India Ltd Hyd 2 Supply And Services Other Income 2 97 01 958 0 2 97 01 958 Total 78 71 72 084 17 33 01 500 61 38 70 584 Expenditure Manufacturing Expenses 37 98 53 756 8 25 08 112 29 73 45 644 Selling Administrative Expenses 8 31 24 878 1 90 18 131 6 41 06 747 Payments Benefits To Employees 3 07 17 566 70 27 868 2 36 89 698 Research Development Expenses 3 49 70 194 0 3 49 70 194 Financial Charges 55 18 341 12 62 541 42 55 800 Depreciation 1 81 76 836 32 79 498 1 48 97 338 Total 55 23 61 571 11 30 96 150 43 92 65 421 Net Profit 23 48 10 513 6 02 05 350 17 46 05 163 Profit For The Year 23 48 10 513 6 02 05 350 17 46 05 163 Based On The Above Table Assessee Claimed Deducti On U S 80 Jja For Rs 6 02 05 350 During The Assessment Proceedings Ao Observed That Assessee Apportioned Direct Expenses Between Organic And Non Organic Segments On The Actual Expenses Basis Further He Noted That Asses See Has Declared Organic Manure Sale Of Rs 17 33 Crores I T Is 22 88 Of Total Turnover Which Is Rs 75 75 Crores As Per The Above Table He Observed That Assessee Has Claimed R D Ex Penses In The P L A C Which Was Charged Only To Non Organ Ic Segment Accordingly He Apportioned The R D Expens Es Based On The Turnover Basis Based On The Above Ao Has Reworked The Profit Of The Organic Segment For Rs 5 22 04 170 And Accordingly Disallowed To The Ex Tent Of Rs 80 01 180 2 1 Further Ao Noticed That Assessee Has Claimed Deduction U S 35 2 Ab To The Extent Of Rs 30 39 75 9 In Order To Allow Deduction Ao Asked The Assessee To Submit I T A No 499 Hyd 2016 And Co No 33 Hyd 16 Sri Biotech Laboratories India Ltd Hyd 3 Relevant Approval Certificates From Dsir And Suppor Ting Vouchers For The Same Since The Assessee Could Not File The Required Information Called For Ao Denied The Dedu Ction U S 35 2 Ab Aggrieved With The Above Order Assessee P Referred An Appeal Before The Cit A 3 As Regards The Deduction U S 80 Jja The Assessee Explained Before The Cit A That All The Expenditur E Were Incurred Exclusively Towards Non Organic Segment Therefore The Same Cannot Be Proportionately Allocated To Org Anic Segment Vide Letter Dated 04 02 2015 Cit Directed The Ao To Allow An Opportunity To The Assessee To Make Submis Sions And Ao Was Asked To Examine The Issue And Send His Rema Nd Report Accordingly The Ao Submitted His Report Vi De Letter Dated 24 08 2015 Which Was Extracted By The Cit A In His Order At Pages 4 5 Copy Of The Remand Report Wa S Forwarded To The Assessee For Its Comments And Vid E Its Letter Dated 06 11 2015 The Assessee Submitted Its Reply Which Was Extracted At Page 5 Of His Order By Cit A 4 Cit A After Considering The Submissions Of The Assessee As Well As Remand Report Of The Ao Direc Ted The Ao To Restrict The Disallowance U S 80 Jja To The Exten T Of Rs 38 75 Lakhs As Against Rs 88 80 542 Disallowed B Y The Ao 5 With Regard To The Deduction U S 35 2 Ab The As Sessee Submitted Before The Cit A That This Issue Is Squa Rely Covered By The Decision Of The Itat In Assessees Own Case For Ay 2009 10 In Ita No 385 Hyd 2014 Dated 24 09 2014 Considering The Above Submissions Of The Assessee The Cit A Allowed The Deduction Claim Of Assessee U S 35 2 Ab I T A No 499 Hyd 2016 And Co No 33 Hyd 16 Sri Biotech Laboratories India Ltd Hyd 4 6 Aggrieved By The Order Of The Cit A The Revenu E Is In Appeal Before Us Against The Action Of The Cit A I N Deleting The Disallowance Of Deduction Claimed U S 35 2 Ab O F The Act While The Assessee Filed Cross Objections Against The Action Of The Cit A In Sustaining The Addition To The Extent Of Rs 38 75 Lakhs U S 80 Jja Of The Act 7 First We Deal With The Appeal Of The Revenue 8 Ld Dr Submitted That The Assessee Has Not Submi Tted Any Proof Of Expenditure Incurred And Further Submi Tted That Assessee Has Not Submitted Approval Certificate Fro M Dsir He Therefore Contended That In Absence Of Relevant Information I E Submission Of Proof Of Expenditur E And Approval Certificate From Dsir The Cit A Is Wrong In Deleting Deduction U S 35 2 Ab 9 The Ld Ar On The Other Hand With Regard To Gr Ound No 2 Raised By The Revenue Submitted That The Assesse E Has Not Submitted Proof Of Expenditure Incurred Before The Ao He Brought To Our Notice That Assessee Has Submitted T He Relevant Proof Of Expenditure Before The Cit A And The Cit A Remanded The Same To The Ao For Verification Who H As Verified The Details Thoroughly And Gave His Findings To The Cit A He Submitted That Based On The Remand Report Submitted By The Ao Cit A Considered Allowing Deduction U S 35 2 Ab 9 1 With Regard To Ground No 3 Ld Ar Submitted T Hat Honble Itat Has Already Considered Issue Of Approv Al Certificate From Dsir In Assessees Own Case For Ay 2009 10 A Copy Of Which Is Filed Before Us I T A No 499 Hyd 2016 And Co No 33 Hyd 16 Sri Biotech Laboratories India Ltd Hyd 5 10 Considered The Rival Submissions And Perused Th E Material Facts On Record Assessee Has Submitted De Tails Of R D Expenditure Before The Cit A And The Same Was Remanded To The Ao For Verification And The Ao Has Not Submitted Any Adverse Report On The R D Expenditure Incurred By The Assessee Therefore It Cannot Be Claimed Th At There Is No Proof Of Such Expenditure With Regard To Approv Al From Dsir The Coordinate Bench Of This Tribunal Has Alr Eady Considered This Aspect And It Has Allowed The Plea Of The Assessee By Observing As Under 12 However As Can Be Seen From The Facts On Reco Rd As Well As The Observations Made By The Ld Cit A Assessees R D Facility Has Been Approved By The Competent Authority From The A Y 2003 04 And Such Approval Has Been Extended Till 31 03 2015 It Furt Her Transpires From Record That Assessee On 26 09 2012 Submitted Its Application In Form No 3 Ck For Certif Ication Of R D Expenditure Relating To Fys 2008 09 2009 10 And 2001 11 Which Is Duly Certified By The Auditors It Is Further Evident That Assessee Along With Form 3 Ck H As Also Submitted Account Copies Therefore It Is Evi Dent That Assessee Has Complied To The Provisions Of Sec 35 2 Ab Of The Act R W Rule 6 It Is Further E Vident That On The Application Made By Assessee In Form 3 C K Dated 26 09 2012 Dsir Has Also Issued Order Of Approval In Form No 3 Cm Approving R D Facility Of Assessee Upto 31 St March 2016 For The Purpose Of Sec 35 2 Ab Therefore When The Prescribed Authori Ty Has Approved Assessees R D Facility And Assessee H As Complied To The Conditions Laid Down In Sec 35 2 Ab R W Rule 6 Only Because The Prescribed Authority Has N Ot Submitted The Report In Form 3 Cl To The Director Exemptions Assessees Claim Of Deduction U S 35 2 Ab Cannot Be Disallowed Considering The Fact T Hat Incurring Of Expenditure By Assessee Has Not Been Disputed 13 In The Aforesaid View Of The Matter We Direct Assessing Officer To Allow Weighted Deduction U S 35 2 Ab Of The Act Amounting To Rs 72 75 245 However We Make It Clear That If Subsequently The Prescribed Authority Does Not Approve Expenditure Claimed By Assessee Or Quantifies At A Lesser Amoun T Then The Deduction Claimed By Assessee Should Be I T A No 499 Hyd 2016 And Co No 33 Hyd 16 Sri Biotech Laboratories India Ltd Hyd 6 Modified Accordingly Assessees Ground Is Consider Ed To Have Been Allowed As The Facts And Circumstances Are The Same Respec Tfully Following The Above Decision The Grounds Raised B Y The Revenue Are Dismissed 11 Coming To The Cross Objections Filed By The Ass Essee Ld Ar Submitted That Cit A Has Adjudicated That A S Per The Ao Rs 38 75 Lakhs Was Spent On R D In Organic Segm Ent However According To Him Ao Did Not Give The Deta Ils Of The Same And How He Arrived At The Conclusion That Expe Nses Were Spent On Organic Segment Accordingly Cit A Called For The Assessment Records Which Was Not Made Avai Lable To Him Therefore He Directed The Ao To Restrict The Disallowance U S 80 Jja To The Extent Of Rs 38 75 Lakhs Against Rs 88 81 Lakhs Made By The Ao Ld Ar Submitted That R D Exp Enditure Cannot Be Allocated Without Any Basis In Computing The Business Profit To Arrive Deduction U S 80 Jja He S Ubmitted That In The Absence Of Information I E How The Ao Has Arrived And How This Expenditure Was Spent On Organic Segme Nt He Prayed That This Matter Should Go Back To The Ao Fo R Proper Verification And Proper Deduction As Per Law 12 Ld Dr On The Other Hand Relied On The Order Of Cit A 13 Considered The Rival Submissions And Perused Th E Material Facts On Record It Is A Fact That The Inf Ormation Relevant To R D Expenditure And Basis Of Allocation Between Organic And Non Organic Was Not Made Available To T He Cit A In Order To Arrive At The Proper Deduction U S 80 Jj A It Is Pertinent To Have The Information Available To Allo W Any Deduction Based On Some Method As Per Which Ao H As I T A No 499 Hyd 2016 And Co No 33 Hyd 16 Sri Biotech Laboratories India Ltd Hyd 7 Arrived The Deduction U S 80 Jja Which Was Not Made Available To The Cit A Even Cit A Without Any B Asis Restricted The Disallowance To Rs 38 75 Lakhs Agai Nst Rs 88 81 Lakhs Made By The Ao Therefore We Find It A Ppropriate To Remit This Matter Back To The File Of The Ao To Share The Information With Assessee And Arrive At The Proper Deduction U S 80 Jja After Providing A Reasonable Opportunity Of Being Heard To The Assessee In The Matter Accordingly T He Cross Objections Raised By The Assessee Are Treated As Al Lowed For Statistical Purposes 14 In The Result Appeal Of The Revenue Is Dismiss Ed And The Co Filed By The Assessee Is Allowed For Statistical Purposes Pronounced In The Open Court On 13 Th December 2017 Sd P Madhavi Devi Judicial Member Sd S Rifaur Rahman Accountant Member Hyderabad Dated 13 Th December 2017 Kv Copy Forwarded To 1 Dcit Circle 3 2 7 Th Floor B Block It Towers Ac Guards Hyderabad 2 M S Sri Biotech Laboratories India Ltd Plot No 21 Street No 02 Sagar Society Road No 02 Banjara Hills Hyd 3 Cit A 3 Hyderabad 4 Pr Cit 3 Hyderabad 5 The Dr Itat Hyderabad 6 Guard File