GVK Bioscience Private Limited, Hyderabad V. ACIT, Circle-2(2), Hyderabad

ITA 1053/HYD/2013

• Counselvise Citation: 105322514 RSA 2013
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHARA REDDY
• Assessee Lawyers: I RAMA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE THE HONBLE VICE PRESIDENT, SHRI D.MANMOHAN AND SHRI B.RAMAKOTAIAH, HONBLE ACCOUNTANT MEMBER ITA NO.1053/HYD/2013 : ASST. YEAR 2008 - 09 M/S. GVK BIOSCIENCES PV T. LTD., HYDERABAD . ( PAN - AABCG 3208 J) V/S. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 2(2), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI I.RAMA RAO RESPONDENT BY : SHRI P.SOMASEKHARA REDDY DR DATE OF HEARING 6 . 2 .20 1 4 DATE OF PRONOUNCEMENT 6.2.2014 O R D E R PER D.MANMOHAN, VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23 RD APRIL, 2013 , PASSED BY THE COMMISSIONER OF INCOME - TAX(APPEALS) III, HYDERABAD, AND IT PERTAINS TO ASSE SSMENT YEAR 2008 - 09. 2. FOLLOWING GROUNDS ARE URGED BY THE ASSESSEE - 1. THE OR D ER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) III, HYD DATED 23.04.2013 PASSED FOR ASST YEAR 2008 - 09 I S ERRONEOUS CONTR A RY TO LAW AND FACTS OF THE CA S E. 2. (A) THE COMMISSIONER OF INCOME - TAX(APPEALS) GROSSLY ERRED IN LAW IN DENYING DEDUCTION CLAI M E D U/S. 80IB(8A) OF THE AC T ON THE PROFITS DERIVED FORM MEDICINAL CHEM I S TRY DI VISI ON AND CLINICAL PHARMACOLOGY DIV I S ION ON T H E GROUND THAT THE APPEL L A N T IS N O T CARRYING ON S C IENTIFIC R ES E ARCH AND D EVELOP M E N T AND HAD NOT FULFILLED THE CONDITIONS O F SEC TI ON 80IB(8A) OF THE AC T. ITA NO. 1053 /HYD/2013 M/S. GVK BIOSCIENCES PVT. LTD., HYDERABAD . 2 (B) THE COMMISSIONER OF INCOME - TAX(APPEALS) OUGHT TO HAVE SEEN T H A T THE AP P E LLANT IS APPROVED AS R&D COMPANY UNDER SECTION 80I B(8 A ) OF THE I T A C T, 1961, FOR ASSESSMENT YEAR 2008 - 09 BY THE PR E SCRIBED AUTHORITY AND IT HA S FULFILLED ALL T H E C ONDITIONS IN S EC T I ON 80IB(8A) READ WITH RULE 18D/DA OF IT RU L E S AND HENCE T H E DE D UC T I ON CLAIMED U/S. 80IB(8A)IS IN ACCOR DA NCE W I T H LAW. 3. 3 . FACTS NECESSARY FOR THE DISPOSAL OF APPEAL ARE STATED IN BRIEF . THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BIO - INFORMATICS, C ONTRACT RESEARCH SERVICES, ETC. FOR THE YEAR U N D E R C O N S IDERATION, I T C L A I M E D DEDUCTION UNDER S.80IB OF THE AC T AND THUS DECLARED NIL INCOME. ACCO RD I NG TO THE ASSESSEE, IT IS ELIGIBLE FOR DEDUCTION UNDER S.80IB, SI N C E IT WAS ENGA G ED IN SCIENTIFIC RE S EARCH AND DEVELOPME N T ; THE ASSESSEE WAS ENGAGED IN C LINI CAL P HARMACOLOGY DIVISION, WHEREIN ASSESSEE CAR R I ES ON T H E W ORK OF CARRYING ON TESTS ON HUMAN BEINGS TO FIND THE EFFICACY OF THE DRUGS, WHICH IS CALLED BIO - VIAB ILITY AND BIO EQUIVALENCE. THE ASSESSING OFFICER N O T ICED THAT AS P E R THE SERVICE AGREEMENT, THE ASSESSEE COMPANY RECEIVES INCOME IRRESPECTIVE OF WHETHER THERE IS SUCCESS IN THE RESEARCH UNDERTAKEN OR N O T , AND THUS, ACTIVITY OF THE ASSESSEE IS IN THE NATURE OF JOB WORK ONLY, AND THUS, SINCE THE PR I MARY CO N D IT I ON OF CARRYING ON SCIENTIFIC RESEARCH AND DEVELOP M E N T IS N O T FULFILL ED, THE ASSESSING OFFICER REJECT E D THE DEDUCTION, APART FROM OTHER REASONS. 4. THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER, BY OBSERVING THAT THE ASSESSEE IS N O T ENGAGED IN RESEA R C H, WHICH MAY LEAD TO DISCOVERY OF ANY NEW MOLECUL E / DRUG OR IN D E V ELOP M E NT OF ANY NEW TECHNOLOGIES . T HE ENTIRE RESEARCH IS CONDUCTED BY T H E VARIOUS PHARMA CEUTICAL COMPANIES, AND W HAT IS DONE BY THE ASSESSEE IS THE ADMINISTRATION OF THE NEW DRUGS TO HUMAN BEINGS, AND THE SUBSEQUENT COLLECTION OF THEIR BLOOD AND URINE SAMPLES, WHICH ARE TESTED FOR VARIOUS PARAMETERS. TH E R E FORE, THE ACTIVITY OF THE ASSESSEE CANN O T B E EQUATED TO R E SEARCH AND DEVELOP M E N T , SO AS TO ENTITLE THE ASSESSEE TO DEDUCTION UNDER S.80IB OF THE ACT. ITA NO. 1053 /HYD/2013 M/S. GVK BIOSCIENCES PVT. LTD., HYDERABAD . 3 5. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL , AT THE OUTSET, SUBMITTED THAT THE ISSUE STANDS SQUARELY COVERED BY THE DECISION OF THE HYDERABAD BENCH OF THE T RIBUNAL IN ASSESSEES OWN CA S E FOR THE ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 ( ITA NOS.215/HYD./2012 AND 1276/HYD/2010 DATED 2.8.2013 ) WHEREIN THE BENCH ELABORATELY CONSIDERED THIS ISSUE AND ARRIVED AT A CO N C L U S ION THAT THE PRESCRIBED AUTHORITY UNDER THE A C T, HAVING APPROVED THE ASSESSEE AS A R E SEARCH AND DEVELOP M E N T COMPANY , ASSESSEE IS ELIGIBLE FOR DE D U C T I ON UNDER S .80IB( 8A) AND ALSO RENEWED SUCH APPROVAL FROM YEAR TO YEAR, THE LEARNED CIT(A) CANNOT OVERRIDE THE APPROVAL/RENEWAL GRANT E D BY THE PR E SCRI B E D AUTHORITY AND DENY THE BEN E FIT TO THE ASSESSEE. THAT APAR T , THE I TAT AHEMEDABAD BENCH, IN THE CASE OF ITO V/S. GUJARAT INFORMATION T E C HNOLOGY FUND IN I TA N O.2264/ AH D/2007 AN D OTHERS DATED 27.5.2011 , WHICH IN TURN WAS FOLLOWED BY THE HYD ERABAD B ENCH, HELD THAT SUCH ASSESSEE S ARE ELIGIBLE TO AVAIL EXEMPTION TILL CERTIF ICATE BY SEBI IS NOT SPECIFICALLY WITHDRAWN. T H E BENCH ALSO LE F T A NOTE OF CAUTION THAT THE VIEW TAKEN THEREIN MAY N O T APPLY TO SUBSEQUENT YEARS, IF THERE ARE CHANGE OF FACTS. IT WAS THUS CLEAR THAT DEDUCTION UNDER S.80IB C ANNOT B E DENIED TO THE ASSESSEE, TILL SUCH TIME, THE ASSESSEE IS AP P R OVE D AS A R ESEARCH AND D E VELOP M E NT ORG ANISAT ION. THE LEARNED COUNSEL SUBMITTED THAT THE ISSUE THUS, STANDS SQUARELY CO VE RE D BY THE SAID DECISION, SI N C E TH E RE IS NO CHANGE IN FACTS FOR THE YEAR UNDER CONSIDERATION. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE , ON THE O T HER HAND, FAIRLY ADMI TTED TH AT THOUGH THE ASSESSING OFFICER AND THE CIT(A) WERE JUSTIFIED IN TAKING A VIEW THAT IT IS FOR THE ASSESSEE TO PROVE THAT IT WAS CARRYING ON RESEARCH ACTIVITY, THE FACT REMAINS THAT THE ISSUE IS COVERED BY THE DECISION OF THE ITAT (SUPRA) IN ASSESSEES OWN CA S E FOR T H E EARLIER YEARS. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THE LIGHT OF THE DECISION O F THE I TAT IN ASSESSEES OWN CA S E FOR EARLIER YEARS, WE HO L D THAT ITA NO. 1053 /HYD/2013 M/S. GVK BIOSCIENCES PVT. LTD., HYDERABAD . 4 THE ASSESSEE I S ENTITLED TO DEDUC T I ON UNDER S.80IB FOR THE REASONS STATED IN T H E AFOREM E N TI ONED ORDER. WE DIRECT THE ASSESSING OFFICER ACCORDINGLY , AND A S PRONOUNCED IN THE OPEN CO U R T, THE APPEAL FI L E D BY THE ASSESSEE IS ALLOWED. 9. I N THE RESULT , ASSESSEE S APPEAL IS ALLOW E D. ORDER PRONOUNCED IN THE COURT ON 6. 2.2014 SD/ - SD/ - (B.RAMAKOTAIAH ) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT DT/ - 6 TH FEBRUARY 2014 COPY FORWARDED TO: 1. M/S. GVK BIOSCIENCES PV T. LTD., PLO T NO.2 8A, ROAD NO.15, IDA NACHARAM, HYDERABAD . 2 . ASST. COMMISSIONER OF INCOME - TAX CIRCLE 2(2), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) II I , HYDERABAD COMMISSIONER OF INCOME - TAX I I HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S