FERMENTA BIOTECH LTD, MUMBAI v. ASST CIT CIR 1, MUMBAI

ITA 7398/MUM/2012 | 2009-2010
Pronouncement Date: 24-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 739819914 RSA 2012
Assessee PAN AAACF2503N
Bench Mumbai
Appeal Number ITA 7398/MUM/2012
Duration Of Justice 1 year(s) 11 month(s) 11 day(s)
Appellant FERMENTA BIOTECH LTD, MUMBAI
Respondent ASST CIT CIR 1, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 24-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 24-11-2014
Assessment Year 2009-2010
Appeal Filed On 13-12-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUM BAI BEFORE SHRI JOGINDER SINGH JM AND SHRI SANJAY ARO RA AM ./ I.T.A. NO. 7398/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) FERMENTA BIOTECH LIMITED DIL COMPLEX GHODBUNDER ROAD S. V. ROAD MAJIWADA THANE (W) MUMBAI-400 610 / VS. ASST. CIT CIRCLE -1 OFFICE OF THE INCOME TAX LOWER GROUND FLOOR VARDHAMAN BUILDING WAGLE INDUSTRIAL ESTATE THANE (W)-400 604 ! ./' ./PAN/GIR NO. AAACF 2503 N ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# & ' / APPELLANT BY : SHRI NITESH JOSHI $%!# & ' / RESPONDENT BY : SHRI PAWAN KUMAR BIRLA ( )*+ & - / DATE OF HEARING : 25.09.2014 ./0 & - / DATE OF PRONOUNCEMENT : 24.11.2014 1 / O R D E R PER SANJAY ARORA A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-II THANE (CIT(A) FOR SHO RT) DATED 15.10.2012 DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143 (3) OF THE INCOME TAX ACT 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 20 09-10 VIDE ORDER DATED 09.11.2011. 2. THE FIRST ISSUE RAISED PER GROUND NO. 1 RELATE S TO THE CLAIM FOR DEDUCTION U/S.35(2AB) MADE AT RS.2 88 32 702/- SINCE CONFIR MED FOR DISALLOWANCE BY THE FIRST 2 ITA NO. 7398/MUM/2012 (A.Y. 2009-10) FERMENTA BIOTECH LIMITED VS. ASST. CIT APPELLATE AUTHORITY. SECTION 35(2AB) PROVIDES FOR W EIGHTED (I.E. AT 1.5 TIMES) DEDUCTION QUA THE EXPENDITURE INCURRED BY A COMPANY ENGAGED IN T HE BUSINESS OF BIOTECHNOLOGY OR IN THE MANUFACTURING OR PRODUCTION OF ANY ARTICLE O R THING (NOT BEING AN ARTICLE OR THING SPECIFIED IN THE ELEVENTH SCHEDULE TO THE ACT) ON S CIENTIFIC RESEARCH (OTHER THAN ON THE COST OF ANY LAND OR BUILDING) CARRIED OUT IN-HOUSE PER A RESEARCH AND DEVELOPMENT FACILITY WHICH STANDS APPROVED BY THE PRESCRIBED AUTHORITY. THE REASONS FOR THE DISALLOWANCE IN THE INSTANT CASE ARE AS UNDER: A) THE APPROVAL IS NOT IN THE PRESCRIBED FORM (FORM 3C M); B) THE APPROVAL IS NOT BY THE PRESCRIBED AUTHORITY I. E. THE SECRETARY DEVELOPMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH GOVERNMENT OF I NDIA (DSIR) BUT BY SCIENTIST G DSIR; C) THE RENEWAL OF RECOGNITION (COPY NOT ON RECORD) FUR NISHED BY THE ASSESSEE FOR THE PURPOSE ITSELF CLARIFIES PER THE TERMS AND CONDITI ONS OF THE RECOGNITION THAT THE RECOGNITION ACCORDED IS NOT MEANT FOR TAX EXEMPTION /QUANTUM OF TAX CONCESSION; D) THE RELEVANT EXPENDITURE INCLUDES QUA PAYMENTS MADE TO M/S. RESEARCH SUPPORT INTERNATIONAL PVT. LTD. A SUBSIDIARY COMPANY FOR RESEARCH AND DEVELOPMENT SERVICES CLEARLY INDICATING THAT THE EXPENDITURE C LAIMED AS INCURRED ON SCIENTIFIC RESEARCH IS NOT WHOLLY CARRIED OUT AS OR BY WAY OF IN-HOUSE RESEARCH BUT ALSO INCLUDES THAT OUT-SOURCED. THE ASSESSEES CASE IS THAT ONCE IT HAS MADE AN APP LICATION IN THE PRESCRIBED FORM (FORM 3CK) TO THE PRESCRIBED AUTHORITY IT CANNOT B E FAULTED WITH FOR THE PURPOSE. DSIR HAS SINCE CLARIFIED (VIDE ITS LETTER DATED 12.10.20 11) AND WITH REFERENCE TO ITS OFFICIAL WEBSITE THAT THE RESPONSIBILITY FOR ACCORDING RECO GNITION BY IT TO IN-HOUSE R & D CENTRES IS GIVEN BY SCIENTIST G. THE ASSESSEE ALSO RELIES BEFORE US ON THE ORDER BY THE TRIBUNAL IN ITS CASE FOR A.Y. 2008-09 (IN ITA NO.4341/MUM/20 12 DATED 12.02.2014/COPY ON RECORD) WHICH WAS ALSO ADVERTED TO DURING HEARING. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. WE FIND OURSELVES IN COMPLETE AGREEMENT WITH THE VIEW BY THE TRIBUNAL IN THE ASSESSEES OWN CASE WHICH DISCUSSES THIS ISSUE VIDE PARAS 11-13 OF ITS ORDER DATED 12.02.2014 (SUPRA). IN OUR CLEAR VIEW EXCEPT WHERE AND TO THE EXTENT IT LEADS TO DE FEATING THE LEGISLATIVE INTENT THE 3 ITA NO. 7398/MUM/2012 (A.Y. 2009-10) FERMENTA BIOTECH LIMITED VS. ASST. CIT ASSESSEE IS OBLIGED TO COMPLY WITH THE PRESCRIPTION OF THE PROVISION. THE APPROVAL THE QUANTUM OF DEDUCTION BEING NOT THE SUBJECT MATTER T HEREOF IS TO BE IN THE PRESCRIBED FORM. THOUGH APPARENTLY PROCEDURAL THE SAME IT MAY BE A PPRECIATED HAS A SUBSTANTIVE ASPECT TO IT IN-AS-MUCH AS THE SAME ONLY CONVEYS THAT THE IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY UNDER REFERENCE IS AN APPROVED ONE. IT IS ONLY THIS THAT WOULD EXHIBIT THAT ALL THE CONDITIONS FOR GRANTING THE APPROVAL (WHICH THE TRI BUNAL IN THE ASSESSEES CASE FOR A.Y. 2008-09 LAYS EMPHASIS ON) ARE MET AND WHICH CAN ON LY BE REGARDED AS AN ESSENTIAL REQUIREMENT FOR THE CLAIM OF DEDUCTION U/S. 35(2AB) . AS REGARDS THE PRESCRIBED AUTHORITY WE ARE AGAIN I N AGREEMENT WITH THE TRIBUNAL I.E. THAT IF THE CONCERNED BODY (DSIR) HAS ITSELF ASSIGNED THE RELEVANT FUNCTION I.E. FOR GRANTING APPROVAL TO IN-HOUSE R & D CENTRES TO SCI ENTIST G THE SAID AUTHORITY CAN OR IS TO BE CONSIDERED AS HAVING SIGNED THE RELEVANT FORM FOR AND ON BEHALF OF THE SECRETARY DSIR THE PRESCRIBED AUTHORITY. THE ISSUE THAT THEREFORE OBTAINS IN THE PRESENT CAS E IS IF THE APPROVAL GRANTED BY DSIR IS INDEED IN THE PRESCRIBED FORM (NOT ON RECOR D). IF NOT THE SAME IS NOT VALID SO THAT THE SIGNATORY BECOMES INCONSEQUENTIAL. THERE I S IN THAT CASE NO PURPOSE IN INSISTING ON ACCEPTANCE OF SCIENTIST G AS COMPETENT FOR THE PURPOSE. IN THIS REGARD THE CONTENTS OF THE OFFICIAL WEBSITE OF DSIR CAN ONLY BE CONSIDE RED AS OFFICIAL PRONOUNCEMENT/S BY IT. BESIDES NOBODY PREVENTS THE REVENUE FROM SEEKING C LARIFICATION FROM DSIR DIRECTLY I.E. IN CASE OF DOUBT WHICH IT CAN IN FACT DO O N CENTRAL BASIS CONSIDERING THAT SUCH ISSUES WOULD ARISE IN EVERY CASE. THE QUANTUM OF DE DUCTION WOULD HAVE TO IN ANY CASE BE DECIDED BY THE ASSESSING OFFICER (A.O.). IN VIEW OF THE FOREGOING WE UNDER THE CIRCUMSTANC ES ONLY CONSIDER IT FIT AND PROPER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE A.O. FOR AN ADJUDICATION AFRESH AFTER ALLOWING THE ASSESSEE TO PRESENT ITS CASE. TH E ASSESSEES SUBMISSIONS DATED 27.06.2011 20.09.2011 AND 12.10.2011 (PB PGS.121-1 28) WE FIND RELEVANT IN THIS REGARD IN-AS-MUCH AS THEY DO NOT BEAR ANY REFERENCE TO ANY EXPENDITURE PER PAYMENTS TO AN OUTSIDER. FURTHER THE ASSESSEE HAS IN PURSUANCE O F ITS APPLICATION U/S.154 DATED 21.11.2011 ALREADY SECURED DEDUCTION U/S.37(1) QUA THE REVENUE COMPONENT OF THE 4 ITA NO. 7398/MUM/2012 (A.Y. 2009-10) FERMENTA BIOTECH LIMITED VS. ASST. CIT RELEVANT EXPENDITURE SO THAT WE MAY NOT ISSUE ANY SEPARATE DIRECTION/S QUA THE SAME (PB PGS.137-138 139) AS WAS DONE BY THE TRIBUNAL FOR A.Y. 2008-09 VIDE PARA 13 OF ITS ORDER. NEEDLESS TO ADD WHERE AND TO THE EXTENT THE ASSESSEES DEDUCTION IS ALLOWED U/S. 35(2AB) DEDUCTION U/S.37(1) SINCE ALLOWED WOULD REQUIRE BEING WITHDRAWN. WE DECIDE ACCORDINGLY. 4. THE ASSESSEES SECOND GROUND AGITATES THE ISSUE OF DISALLOWANCE OF DEDUCTION U/S.80-IB OF THE ACT IN RESPECT OF PROFIT OF ITS NE W INDUSTRIAL UNDERTAKING SET UP IN MARCH 2004 IN THE STATE OF HIMACHAL PRADESH. THE REASON F OR THE DISALLOWANCE BY THE A.O. AS WELL AS ITS CONFIRMATION BY THE LD. CIT(A) IS THE NON-FURNISHING OF THE AUDIT REPORT IN TERMS OF SECTION 80-IB(13) R/W S. 80-IA(7). THOUGH THE A.O. ALSO STATES OF NON-PREFERENCE OF THE CLAIM BY THE ASSESSEE PER ITS RETURN OR REVI SED RETURN OF INCOME (BUT ONLY VIDE ITS LETTER DATED 20.09.2011) SO THAT IT WAS NOT ELIGIB LE FOR BEING CONSIDERED IN VIEW OF THE DECISION BY THE APEX COURT IN GOETZE (INDIA) LTD. VS. CIT [2006] 284 ITR 323 (SC) WE FIND THE SAME AS WITHOUT BASIS. THIS IS FOR THE REA SON THAT THE ASSESSEE HAD VIDE ITS STATEMENT OF INCOME (PB PG.1) CLEARLY SPECIFIED ITS CLAIM FOR THE IMPUGNED DEDUCTION U/S.80-IB FOR THE CURRENT YEAR BEING THE 6 TH YEAR OF ITS OPERATIONS AT RS.1 05 20 567/- ADVERTING TO FORM-10CCB THE PRESCRIBED FORM ALSO STATING THAT THE SAME WOULD THOUGH NOT IMPACT ITS TAXABLE INCOME FOR THE YEAR IN THE A BSENCE OF A POSITIVE GROSS TOTAL INCOME (GTI). THE LETTER DATED 20.09.2011 VIDE WHICH THE CLAIM IS SAID TO HAVE BEEN MADE FOR THE FIRST TIME IS ONLY BY WAY OF ABUNDANTLY CLARIF YING MATTERS IN VIEW OF THE EMINENT NON- DISALLOWANCE OF ITS CLAIM U/S.35(2AB) AND IN RESUL T A POSITIVE GTI. THE SAID OBJECTION WHICH ALSO FOUND APPROVAL BY THE LD. CIT(A) WOULD THEREFORE BE OF NO MOMENT. AS REGARDS THE FURNISHING OF THE AUDIT REPORT IN TH E REQUISITE FORM AS AFORE-SAID REFERENCE THERETO HAS ALREADY BEEN MADE PER THE RET URN OF INCOME. THE COPY OF THE SAME DATED 26.09.2009 THE SAME DATE ON WHICH THE AUDITE D ACCOUNTS HAVE BEEN SIGNED BY THE DIRECTORS AND AUDITORS IS ON RECORD (PB PGS.103-11 2). REFERENCE THERETO IS ALSO MADE AT PARA 26 OF FORM 3CD I.E. THE AUDIT REPORT PRESCRI BED U/S.44AD. EVEN ASSUMING THAT THE REPORT STOOD OMITTED TO BE FILED ALONG WITH THE RET URN OF INCOME THE SAME HAS SINCE BEEN 5 ITA NO. 7398/MUM/2012 (A.Y. 2009-10) FERMENTA BIOTECH LIMITED VS. ASST. CIT MADE GOOD. UNDER THE CIRCUMSTANCES WE FIND NO MERI T IN THE OBJECTION RAISED BY THE REVENUE. WE DECIDE ACCORDINGLY. 5. THE THIRD AND THE FINAL GROUND RAISED BY THE ASS ESSEE IS IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S.80-G I.E. QUA DONATION TO PRIME MINISTERS NATIONAL RELIEF FUND I N THE SUM OF RS.54 698/-. BOTH THE AUTHORITIES BELOW HAVE DENIED THE SAME IN THE ABSENCE OF THE ASSESSEE FURNISHING THE RELEVANT RECEIPT AND W HICH FACT STANDS ACCEPTED BY THE ASSESSEE WHO ONLY PRAYS FOR BEING ALLOWED LEAVE TO PRODUCE THE SAME BEFORE THE ASSESSING AUTHORITY BY ADMITTED THE SAME AS ADDITI ONAL EVIDENCE. THE AUTHORITIES BELOW HAVE DENIED THE CLAIM ON THE GROUND OF NON-FURNISHI NG THE RELEVANT RECEIPT WITHOUT APPRECIATING THAT NO CLAIM TOWARD THE SAME HAS BEEN MADE BY THE ASSESSEE PER ITS RETURN OF INCOME ITSELF IN THE ABSENCE OF ANY POSITIVE INC OME. THE CONSIDERATION OF THE CLAIM BY THE REVENUE ON MERITS THUS ITSELF SHOWS THAT IN CONTRADICTION TO ITS STAND QUA DEDUCTION U/S.80-IB A CLAIM COULD BE PRESSED SUBSEQUENTLY WH ERE THE CONDITIONS JUSTIFY THE SAME. THE RELEVANT RECEIPT (NO.929069 DATED 01.12.2008) S TANDS ADDUCED BY THE ASSESSEE ALONG WITH ITS APPLICATION FOR ADMISSION OF ADDITIONAL EV IDENCE DATED 23.09.2014. WE THEREFORE IN THE CIRCUMSTANCES ACCEPT THE ASSESSEES PRAYER AND ADMIT THE SAID ADDITIONAL EVIDENCE UNDER RULE 29 OF THE APPELLATE TRIBUNAL RULES 1963 . THE MATTER WOULD ACCORDINGLY STAND RESTORED TO THE FILE OF THE A.O. TO EXAMINE T HE ASSESSEES CLAIM ON MERITS ALLOWING IT A REASONABLE OPPORTUNITY OF BEING HEARD. WE DECI DE ACCORDINGLY. 6. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY A LLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 24 2014 SD/- SD/- (JOGINDER SINGH) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( 2+ MUMBAI; 3) DATED : 24.11.2014 *.). ./ ROSHANI SR. PS 6 ITA NO. 7398/MUM/2012 (A.Y. 2009-10) FERMENTA BIOTECH LIMITED VS. ASST. CIT !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 4 ( ) / THE CIT(A) 4. ( 4 / CIT - CONCERNED 5. 7*8 $ )9 - 90 ( 2+ / DR ITAT MUMBAI 6. :; <+ / GUARD FILE !' ) / BY ORDER */)+ (DY./ASSTT. REGISTRAR) ( 2+ / ITAT MUMBAI