DCM Shriiram Ltd (Earlier Known as Bioseed Research India Ltd), New Delhi V. Addi. CIT Special Range-3, New Delhi

CO 116/DEL/2022

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted certain disallowances made by the Assessing Officer under section 80IB(8A) of the Income Tax Act. These disallowances were related to royalty income from hybrid cotton seeds and miscellaneous income. The assessee, M/s. DCM Shriram Ltd, argued that the assessment order was invalid as it was passed in the name of M/s. Bioseed Research India Ltd, a company that had already been amalgamated with DCM Shriram Ltd. The Tribunal found that the assessee was entitled to the deductions as it had engaged in research activities and the income was derived from these activities. Regarding the procedural issue of the assessment being made in the name of a non-existent entity, the Tribunal noted that the correct entity name was used in the assessment order, thus dismissing the cross objection.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124241 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-06-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-06-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 23-08-2022
• Other Referred Cases: Continental Constructions Vs. CIT(A) 195 ITR 81 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 80IB; 195; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH : “A” NEW DELHI ] BEFORE DR. B. R. R. KUMAR, ACCOUNTANT MEMBER AND SHRI SHRI YOGESH KUMAR US, JUDICIAL MEMBER I.T.A. No. 4261/DEL/2019 (A.Y 2012-13) Addl. CIT, Special Range : 3, New Delhi. Vs. M/s. DCM Shriram Limited [Earlier known as Bioseed Research India Limited] 5 th Floor, Kanchenjunga Building, 18, Barakhamba Road, New Delhi – 110 001. PAN No. AAACD0097R AND C. O. No. 116/Del/2022 [In I.T.A. No. 4261/DEL/2019 (A.Y 2012-13) ] M/s. DCM Shriram Limited [Earlier known as Bioseed Research India Limited] 5 th Floor, Kanchenjunga Building, 18, Barakhamba Road, New Delhi – 110 001. PAN No. AAACD0097R (APPELLANTS) Vs. Addl. CIT, Special Range : 3, New Delhi. (RESPONDENTS) Assessee by : Shri Pradeep Dinodia, C.A.; Shri V. P. Gupta, Advocate; & Shri Ravi Kumar, C. A. Department by : Shri P. Praveen Sidharth,[CIT] D. R. ORDER PER YOGESH KUMAR U.S., JM This appeal and the cross objection are filed by the Revenue and assessee respectively against the order of the ld. Commissioner of Income Tax Date of Hearing 07.06.2023 Date of Pronouncement 16.06.2023 ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 2 (Appeals)-34 [hereinafter referred to CIT (Appeals)] New Delhi, dated 21.01.2019 for assessment year 2012-13. I.T.A. No. 4261/DEL/2019 : 2. The Revenue has raised the following substantive ground of appeal: “1. Whether on facts and in circumstances of the case and in law the Ld. CIT (Appeals) has erred in deleting the disallowance u/s 80IB(BA) of Rs.14,78,15,335/- made by the Assessing Officer on royalty income from hybrid cotton seeds as not developed directly by the assessee company. 2. Whether on facts and in circumstances of the case and in law the Ld. CIT (Appeals) has erred in deleting the disallowance u/s 80IB(BA) on account of miscellaneous income of Rs.3,92,972/- as not derived from the operational profits, by the Assessing Officer.” C. O. No. 116/DEL/2022 : 3. The assessee has raised the following ground of appeal : “ Order of assessment dated 14.01.2015 passed in the name of M/s. Bioseed Research India Ltd. Is invalid and not sustainable under law as above-named company had amalgamated with DCM Shriram Ltd. Vide order of High Court dated 22.03.2013k w.e.f. 01.04.2013 and, accordingly, the order was passed in the name of non-existent entity.” 4. There is delay of 63 days in filing of Cross Objection No. 116/Del/2022 by the Assessee. The assessee in the application for condonation of delay, pleaded that there was no notice issued to the assessee on the appeal filed by the Revenue and the assessee came to know of fixation of above appeal through cause list and appearance has been made by the representative of the assessee and the matter was adjourned to 23.08.2022 and on going through the appeal ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 3 memo by the Assessee, ‘it is found that validity of the assessment order passed in the name of non-existent entity’ therefore, the assessee company has been advised to file Cross Objection by the expert. Since there is no formal notice of appeal was received by the respondent, there is no delay in filing the cross objection and sought for condonation of delay if any. Considering the above facts and circumstances we deem it fit to condone the delay of 63 days in filing of cross objection. 5. The brief facts of the case are that M/s. Bioseed Research India Ltd filed its return of income on 13.09.2012 declaring income of Rs. 2,16,600/-. The case of the assessee was selected for scrutiny and notice u/s 143(2) of the Act was issued on 08.08.2013. It is pertinent to note that M/s. Bioseed Research India Ltd. amalgamated with DCM Shriram Ltd. pursuant to the order of the Hon'ble High Court dated 22.03.2013 w.e.f. 01.04.2013. The assessment order came to be passed on 14.01.2015 in the name of M/s Bioseed Research India Ltd. (since amalgamated with DCM Shriram Ltd.) by computing the income of the assessee at Rs. 26,21,13,275/- as against the return income of Rs. 2,16,600/-. As against the said assessment order, the assessee i.e. M/s DCM Shriram Ltd. preferred an appeal before the ld CIT(A), the ld CIT(A) vide order dated 21.01.2019 partly allowed the appeal by deleting the additions. 6. Aggrieved by the order of the ld CIT(A) in deleting the addition made by the Assessing Officer, the department filed the appeal in ITA No. 4261/Del/2019 and on the other hand the assessee filed Cross Objection No. 116/Del/2022 on the ground that the order of the assessment has been passed against the non-existent entity. Since the assessee raised legal issue in ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 4 the C.O., we deem it fit to decide the Cross Objection of the assessee before the disposing the appeal filed by the revenue. C.O. NO. 116/Del/2022 (Assessee) 7. Ld. counsel for the assessee vehemently submitted that the M/s. Bioseed Research India Ltd. has been amalgamated with DCM Shriram Ltd. pursuant to the order of the Hon'ble High Court dated 22.03.2013 w.e.f 01.04.2013 which has been duly intimated to the AO vide letter dated 10.06.2013. The AO issued notice u/s 143(2) of the Act on 08.08.2013 Consequently, the AO passed order u/s 143(3) of the Act against the non-existent entity on 14.01.2005 and the said order of the AO has been confirmed by the ld CIT(A) which is illegal and arbitrary. 8. On the other hand the ld DR has relied upon the order of the AO and submitted that no error has been committed in passing the assessment order against the assessee. Further submitted that assessment order came to be passed on 14.01.2015 in the name of M/s. Bioseed Research India Ltd. (since amalgamated with DCM Shriram Limited), the representative of the Assessee has appeared and participated in the assessment proceedings, submitted the details, further the A.O. committed no error in framing the assessment order, thus the C.O. filed by the Assessee is devoid of merit. 9. We have heard the parties and perused the material. It is found from the record that the case of M/s. Bioseed Research India Ltd was selected for scrutiny under CASS. Notice u/s 143(2) of the Act was issued on 08.08.2013 on which date M/s. Bioseed Research India Ltd has already been amalgamated with M/s. DCM Shriram Ltd. in view of the order of the Hon’ble High Court ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 5 dated 22.03.2013 in the Company Petition No. 46/2013 connected with Company Application (M) No. 9/2013. It is also found that assessee has informed the said fact of amalgamation to the Assessing Officer vide letter dated 13.06.2013 which is reproduced hereunder:- ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 6 10. During the assessment proceedings, both the A.O. and the Assessee/appellant herein were aware of the amalgamation and the Representative of the Assessee has participated in the assessment proceedings. The assessment order came to be passed on 14.01.2015 in the name of “M/s. Bioseed Research India Ltd. (since amalgamated with DCM Shriram Limited)”. It is also gathered from the assessment order that, though order mentioned the name as M/s. Bioseed Research India Ltd., but in the bracket, it has also been mentioned that “since amalgamated with DCM Shriram Limited”. Accordingly it cannot be said that order has been passed in the name of non existing company as the name of the amalgamated company has clearly been mentioned by the AO in the assessment order. Considering the fact that, the Assessee (M/s DCM Shriram Ltd.) has participated in the assessment proceedings and the A.O. has rightly mentioned the name of Assessee as M/s. Bioseed Research India Ltd. (since amalgamated with DCM Shriram Limited)” and mere mentioning the name of both the Companies has not resulted in any hardship to the Assessee. Considering the above facet, it cannot be said that the assessment order has been passed in the name of non-existent entity and the case laws relied by the Ld. AR are not applicable to the case in hand and the same are differentiable. Thus, we find no merit in the cross objection filed by the assessee. 11. In the result, C.O No. 116/Del/2022 filed by the Assessee is dismissed. ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 7 ITA No. 4161/Del/2019 (Revenue) 12. Ground No. 1 of the Revenue’s appeal is directed against deletion of the disallowance u/s 80IB(8A) of the Act of Rs. 14,78,15,335/- made by the AO on royalty income from Hybrid Cotton Seeds. 13. It is specific case of the revenue that hybrid seeds are not developed directly by the assessee company, therefore the assessee is not entitled for deduction u/s 80IB(8A) of the Act. The Ld. AR supported the findings and conclusion of the CIT(A) and submitted that no interference is called for at the hands of the Tribunal. We have heard and perused the material available on record. 14. While deleting the disallowance u/s 80IB(8A) of the Act the ld CIT(A) has observed as under:- “6.5 I have considered the facts of the case, finding of the AO and submissions of the appellant. I have also gone through the contentions of the Assessing Officer in the assessment orders passed in respect of Assessment Year under appeal as well as in earlier years. In the assessment order passed for year under appeal, the Assessing Officer has referred to the stand taken in earlier years and also, the order of CIT(A) in appeal for AY 2010-11. CIT(A) while deciding the appeal for AY 2009-10 has also specifically examined the clauses of the Agreement entered Into by the company with the MMB and has specifically reproduced clause 2.5(a) In his order wherein it has specifically been provided that the company can market its own product without using the technology of MMB and can also market the product after using the technology of the MMB. The aforesaid clause makes it quite clear that, the company has itself developed the hybrid seeds for cotton and the ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 8 technology of MMB was used by way of one Bt gene being transgressed in the cotton seeds for Increasing the Insect tolerance In the cotton hybrid seed developed by the company. Even before the aforesaid agreement was entered into by the company, the company has been already developing the hybrid seeds for cotton seeds and has been marketing the same. Further, It is also important to note that the payment being made to the MMB on account of 'tralt value' for use of gene was being borne by the customer namely Shriram Bloseed Genetics India Ltd. and that was in addition to the royalty payment the company had received from its customers in respect of Bt cotton hybrid seeds on the same basis as it has been receiving in respect of other seed products. This fact also is evidence that the aforesaid usage of technology was In addition to the development of hybrid seed by the company. The CIT(A) while passing the order in appeal for AY 2009-10, has also referred to the contention of the appellant company w.r.t. the decision of Hon'ble Supreme Court in the case of Continental Constructions Vs. CIT(A) 195 ITR 81 (SC) and certain other decisions of ITAT that once approval has been given by the prescribed Authority, the Assessing Officer could not reject the claim for deduction in the absence of withdrawal of approval of the prescribed Authority and while giving his conclusion also he has referred to the approval of the prescribed Authority granted to the appellant company as research company. CIT(A) while adjudicating the appeal of the company for AY 2011-12 has the benefit of orders available before him in appeal for AY 2009-10 as well as for AY 2010-11. After considering orders for both the years, CIT(A) while deciding the appeal for AY 2011-12, has relied upon and followed the order in appeal for AY 2009-10 and has also reproduced the conclusion taken by CIT(A) in appeal for AY 2009-10 while deciding the appeal of the company. In the circumstances and considering the facts of the case of the appellant and particularly the fact that the approval ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 9 had duly been granted by the concerned authority and the company has regularly been filing its report before the prescribed authority giving full details regarding each of the products and the Infrastructure maintained by it for carrying out its research activities, In my view, claim of the company cannot be rejected by taking a view that it was not carrying out research activity as far as relating to Bt cotton hybrid seed is concerned. Further, In case, it was carrying out research activities for other hybrid seeds, it cannot be said that company was not carrying out research activity for BT cotton hybrid seeds. 6.6 Considering the above facts, the AO is not justified in not allowing deduction u/s 801B(BA) of the Act to the appellant holding that royalty income in respect of cotton hybrid seed was pursuant to technology received by it from Mahyco Monsanto Blotech (I) Ltd. (MMB) and accordingly it was not carrying on research activities in regard to cotton hybrid seed. The appellant has furnished details in support of research activities carried out by the appellant including hybrid cotton seeds and also furnished production details of hybrid seeds. It has also furnished the detail of crop wise break up of royalty income from SBG for the FY 2011-12. The detalls given in respect of research activities in annual return submitted to the prescribed authority and also furnished details of royalty income earned during the year, it is evident that royalty income has been earned not only in respect of cotton seed in relation to which Monsanto technology was taken but also in respect of other hybrid seeds. The other products for which royalty has been received by the appellant company had been developed by the company out of its own research. The trade value received and paid by it in respect of technology of Monsanto was separate from the royalty income which have been received by the appellant company on which deduction u/s 801B(8A) has been claimed. AO has not brought anything on record to prove that appellant has not carried out any ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 10 research activity during the year under consideration in respect of hybrid cotton seed. Hence, addition made by the AO at Rs.14,78,15,335/- by not allowing deduction u/s 801B(BA) on royalty income from hybrid cotton seeds is not sustainable and it is hereby deleted.” 15. It is found that the AO while disallowing the deduction u/s 80IB(8A) of the Act held that, regarding royalty income in respect of cotton hybrid seed was pursuant to technology received by it from Mahyco Mansanto Biotech (I) Ltd. (MMB) and accordingly found that Assessee was not carrying on research activities in regard to cotton hybrid seed. The Ld. CIT(A) by considering the details in support of research activities carried out by the Assessee including hybrid cotton seeds, details of hybrid seeds and also considering the fact that the assessee furnished the details of royalty income from SBG for the FY 2011- 12 and the research activities in annual return and details of royalty income earned during the year, found that royalty income has been earned in respect of cotton seeds in relation to which Mansanto technology was taken but also in respect of other hybrid seeds. Thus, held that the trade value received and paid by assessee in respect of technology of Mahyco Mansanto Biotech (I) Ltd. was separate from royalty income which have been received by the assessee company on which deduction u/s 80IB(8A) has been claimed. Further, held that in the absence of anything on record to prove that the assessee has not carried out any research activities during the year under consideration in respect of Hybrid cotton seeds the disallowance has been deleted. The said observation of the ld CIT(A) neither erroneous nor suffers from infirmity, which ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 11 requires no interference. Thus, the ground No. 1 of the revenue is devoid of merit, accordingly Ground No. 1 of the Revenue is dismissed. 16. Ground No. 2 is regarding deletion of the disallowances u/s 80IB (8A) of the Act on account of miscellaneous income of Rs. 3,92,972/-. 17. It is the specific case of the department that the miscellaneous income of Rs. 3,92,972/- derived from operation profit therefore, deleting the disallowance u/s 80IB (8A) is erroneous. The Ld. AR relied on the findings of the CIT(A) and submitted that order of the CIT(A) requires no interference. 18. The Ld. CIT(A) while deleting the disallowance held as under:- “7.2 I have considered the facts of the case, finding of the AO and submissions of the appellant. The addition is related regarding miscellaneous Income of Rs.4,01,391/- credited to Profit & Loss Account in respect of which the Assessing Officer has observed that same are not in the nature of business income and therefore will not be eligible for deduction u/s 801B(8A) of the Act. I called for Item- wise details of the aforesaid income which have been duly submitted by the appellant company during the course of appeal. The aforesaid income of Rs.4,01,391/- consists of following items of income: AMOUN TS (Rs.) Description 1,91,178/- Contribution received from ICRISAT towards expenses incurred for research for Collaborative Research Activities 181,794 Contribution received from ICRISAT towards expenses Incurred for research for "Genetically enhanced ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 12 Micronutrientdense pearl millet grains for improved human Nutrition in India' 20,000 Training cost recovered from Tamil Agricultural University 8,419/- Sale of Scrap material On going through the details, there could be no doubt that first 3 items of the income are related to research activities of the company and, therefore, same undoubtedly should be considered as a part of business income. Sale of scrap material amounting to Rs. 8,419/-, however, cannot be said to be income derived from research activities. Therefore, claim of the company cannot be accepted to the extent it relates to sale of scrap amounting to Rs.8,419/-. The Assessing Officer is however directed to consider other three items of income as income derived from research activities. Hence, addition made by the AO confirmed to the extent of Rs. 8,419/- and balance addition made by the AO treating the miscellaneous Income as income from other sources is not sustainable and it is hereby deleted.” 19. Since the Ld. CIT(A) has gone into the factual details of the miscellaneous income earned by the assessee and given a conclusion that the amount of Rs. 3,92,972/- is nothing but items of income related to research activities of the company, the same would be considered as business income on which the deduction u/s 80IB (8A) of the Act would be allowable, we find no error or infirmity in the order of CIT(A). Accordingly Ground No. 2 of the Revenue is dismissed. ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 13 20. In the result, the Appeal filed by the Revenue in ITA No. 4261/Del/2019 is dismissed. Order pronounced in the Open Court on: 16.06.2023. Sd/- Sd/- (Dr. B. R. R. KUMAR) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 16/06/2023. *MEHTA/ AK Keot/R.N., Sr. PS* Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA. 4261/Del/2019 & C. O. No. 116/Del/2022 M/s. DCM Shriram Ltd 14