M/S BIOCON INDIA LIMITED V. THE JOINT COMMISSIONER OF INCOME-TAX

ITA/991/2006

AI Insights

The case involves M/s. Biocon India Limited, which appealed against the orders of the ITAT that denied certain deductions under Sections 80HHC and 80(O) of the Income Tax Act, 1961 for the assessment years 1997-98 and 1998-99. The primary contention was regarding the exclusion of 90% of Research and Development fee and Miscellaneous Income from the computation of relief under Section 80HHC, and the basis of deduction under Section 80(O). The High Court of Karnataka, after reviewing the similar issues addressed in a previous case (ITA No.263/2004), decided to remand the matter back to the Tribunal for a re-evaluation specifically concerning Section 80HHC, while upholding the Tribunal's decision on Section 80(O).

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 727188 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 19-07-2012
• Assessment Year: misc
• Other Referred Cases: ITA No.263/2004
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: G KAMALADHAR
• Assessee Lawyers: S
• Keywords: Export business; Income tax appeal; Research and Development Deduction; Technical Services; Foreign Exchange Profit
• Section: 80HHC; 80-O; 260-A

Judgement Text

" ITA 991/2006 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 19TH DAY OF JULY 2012 PRESENT: THE HON’BLE MR.JUSTICE K.SREEDHAR RAO AND THE HON’BLE MR.JUSTICE B.MANOHAR INCOME TAX APPEAL No.991/2006 (T-IT) BETWEEN: M/s. BIOCON INDIA LIMITED 20TH KM, HOSUR ROAD, HEBBAGODI, BANGALORE - 561 229 REPRESENTED BY ITS VICE PRESIDENT GROUP-FINANCE, Sri M.B.CHINNAPPA, SON OF SRI BHEMAIAH M.B. AGED ABOUT 38 YEARS. ... APPELLANT (By Sri S PARTHASARATHI, Adv.) ITA 991/2006 2 AND: THE JOINT COMMISSIONER OF INCOME-TAX SPECIAL RANGE-4, UNITY BUILDING ANNEXE, MISSION ROAD BANGALORE - 560 027 ... RESPONDENT (By Sri G KAMALADHAR, Adv.) This I.T.A. is filed under Section 260-A of I.T.Act, 1961 arising out of order dated 23-02-2006 passed in ITA Nos.1280 & 1281/Bang/2003 for the Assessment Years 1997-98 & 1998-99, praying that this Hon'ble Court may be pleased to: i. formulate the substantial questions of law stated therein, ii. allow the appeal and set aside the orders of the ITAT, bearing ITA Nos.1280 & 1281/Bang/2003 dtd: 23- 02-2006, in the interest of justice and equity. This Appeal coming on for hearing, on this day, SREEDHAR RAO, J., delivered the following: ITA 991/2006 3 J U D G M E N T The appeal pertains to the assessment years 1997-98 and 1998-99 of the appellant. The appellant is a manufacturer of Pharmaceutical products and exports the products abroad and are also sold in India. The appellant also offers technical services to other business institutions outside India and also in India. The appellant by its business earns a large profit made by foreign exchange by its export business rendered outside India. 2. The appellant, for the assessment years 1997-98 and 1998-99 made a claim for deduction under Section 80HHC and 80(O) towards the profit made by foreign exchange. The Assessing Authority rejected the claim in respect of the income relating to ITA 991/2006 4 Research and Development as inadmissible deduction. In respect of exemption under Section 80(O), the Assessing Officer held that the assessee is entitled to relief not on the gross income but on the net income. The CIT (Appeals) confirmed the order of the Assessing Officer. The Tribunal has also upheld the order of the Authorities and dismissed the appeal of the assessee. Hence, this appeal. 3. It is the contention of the learned counsel for the respondent that, an appeal is filed by the appellant in ITA No.263/2004 and this Court allowed the appeal of the assessee partly and remanded the matter to the Tribunal to consider only the eligibility of exemption under Section 80HHC for the relevant assessment years 1993-94. 4. The following substantial questions of law were raised in ITA No.263/2004: ITA 991/2006 5 i) Whether on the facts, the Tribunal was right in upholding the exclusion of 90% of Research and Development fee and Miscellaneous Income for the purpose of computing the relief under Section 80HHC of the Income Tax Act? ii) Whether the Tribunal was right in holding that Research and Development fee and Miscellaneous Income would fall within the ambit of Explanation (baa) to Section 80HHC of the Act and consequently, 90% of the receipts were required to be excluded from business profit for the purpose of computation of relief under Section 80HHC of the Act? iii) Whether the receipts to be excluded from the profits of the business as provided under Explanation (baa) to Section 80HHC of the Act represent gross receipts of such source of income or the net receipts after exclusion from gross receipts related to the expenses ITA 991/2006 6 which had been charged off in the profit and loss account? iv) Whether the Tribunal was justified in holding that deduction under Section 80(O) of the Act is required to be given to the net income out of the Research and Development fee without considering the precedence being the order of the Tribunal in the case of M.N.Dastur and Co. delivered by the same Bench as approved by the Hon’ble High Court of Karnataka? 5. The questions involved in ITA No.263/2004 and the questions involved in the present appeal are similar, without any scope of any sort of distinction. In that view, the order of the Tribunal is to be set aside. The matter is to be remanded to re-consider the eligibility of exemption under Section 80HHC. In respect of the order passed ITA 991/2006 7 under Section 80(O), the order has been confirmed to the effect that, the net income is to be taken for deduction and not the gross income. In that view of the matter, the appeal is partly allowed. The Appellate Tribunal shall consider the case only under Section 80HHC and the appeal in respect of exemption under Section 80(O) is rejected. The questions of law are answered accordingly in favour of the appellant. Sd/- JUDGE Sd/- JUDGE dh* "