Dy.CIT, Circle-1(3), Hyderabad V. M/s Bharath Biotech International Ltd., R.R.Dist

ITA 1150/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82395 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAMA KRISHNA
• Assessee Lawyers: C P RAMASWAMY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 1150 & 1151/HYD/2014 ASSESSMENT YEARS : 2009-10 & 2010-11 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 1(3), HYDERABAD. M/S BHARAT BIOTECH INTERNATIONAL LTD., R.R. DIST. PAN AABCB 3822B (APPELLANT) (RESPONDENT) REVENUE BY SHRI B. RAMA KRISHNA ASSESSEE BY SHRI C.P. RAMA SWAMY DATE OF HEARING 08-10-2014 DATE OF PRONOUNCEMENT 15-10-2014 O R D E R PER SAKTIJIT DEY, J.M.: THESE APPEALS BY THE DEPARTMENT ARE AGAINST A COMM ON ORDER DATED 11/03/2014 OF THE CIT(A)-II, HYDERABAD PERTAINING TO AYS 2009-10 AND 2010-11. 2. THE ONLY ISSUE ARISING OUT OF THE GROUNDS RAISED BY THE DEPARTMENT IN THE AFORESAID APPEALS RELATE TO ALLOW ANCE BY THE CIT(A) OF ASSESSEES CLAIM OF WEIGHTED DEDUCTION U/ S 35(2AB) ON CLINICAL TRIALS OUTSIDE INDIA. 3. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIAN COMPAN Y, IS ENGAGED IN RESEARCH AND PRODUCTION OF VACCINES FOR HUMAN BEINGS. FOR THE AYS UNDER DISPUTE I.E. 2009-10 AND 2010-11, ASSESSEE FILED ITS RETURN OF INCOME AS PER THE STATUTORY PROVISION S AFTER CLAIMING 2 ITA NOS.1150 & 1151/HYD/2014 M/S BHARAT BIOTECH INTERNATIONAL LTD. DEDUCTION U/S 35(2AB). DURING THE ASSESSMENT PROCEE DING, AO WHILE EXAMINING ASSESSEES RETURN OF INCOME AND OTH ER INFORMATIONS SUBMITTED BY ASSESSEE RELATING TO THE DEDUCTION CLAIMED U/S 35 NOTICED THAT AN AMOUNT OF RS. 51.89 LAKHS AND RS. 54.69 LAKHS RELATES TO EXPENDITURE INCURRED ON CLIN ICAL TRIALS OUTSIDE INDIA ON WHICH ASSESSEE HAS CLAIMED WEIGHTED DEDUCT ION U/S 35(2AB) AT 150%. AO OBSERVING THAT EXPENDITURE RELA TING TO CLINICAL TRIALS OUTSIDE INDIA HAVE NOT BEEN INCLUDED BY THE PRESCRIBED AUTHORITY IN ITS REPORT IN FORM NO. 3CL, DISALLOWED ASSESSEES CLAIM OF WEIGHTED DEDUCTION ON SUCH EXPENDITURE. BEING AG GRIEVED OF SUCH DISALLOWANCE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF STATUTORY PROVISION AS CONTAINED U/S 35(2AB) OF THE ACT, OBSERVED THAT AS PER THE EXPLANATION TO SECTIO N 35(2AB) EXPENDITURE INCURRED ON CLINICAL DRUG TRIALS IS PAR T OF EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH, HENCE, ENTITLED TO WEIGHTED DEDUCTION. SHE, FURTHER, NOTED THAT THE ISSUE IN DI SPUTE WAS DECIDED IN FAVOUR OF ASSESSEE BY THE ITAT, HYDERABAD IN ASS ESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS. ACCORDINGL Y, FOLLOWING THE DECISION OF ITAT, CIT(A) ALLOWED ASSESSEES CLA IM OF WEIGHTED DEDUCTION. BEING AGGRIEVED OF THE AFORESAID ORDER O F THE CIT(A), DEPARTMENT IS BEFORE US. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HAS INCURRED T HE EXPENDITURE OF RS. 51.89 LAKHS AND RS. 54.69 LAKHS RESPECTIVELY FO R THE AYS 2009- 10 AND 2010-11 TOWARDS CLINICAL TRIAL OF DRUGS. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, AO HAS DISALLOWED THE WEIGHTE D DEDUCTION CLAIMED ON SUCH EXPENDITURE BY MERELY OBSERVING THA T THE SAID EXPENDITURE IS NOT INCLUDED BY THE PRESCRIBED AUTHO RITY. HOWEVER, 3 ITA NOS.1150 & 1151/HYD/2014 M/S BHARAT BIOTECH INTERNATIONAL LTD. ON A PERUSAL OF THE REPORT OF THE PRESCRIBED AUTHOR ITY IN FORM NO. 3CL, A COPY OF WHICH IS PLACED AT PAGE 3 OF THE ASS ESSEES PAPER BOOK, IT BECOMES CLEAR THAT SUCH EXPENDITURE HAS, I N FACT, BEEN MENTIONED IN THE SAID REPORT OF THE PRESCRIBED AUTH ORITY. THEREFORE, THE REASONING OF THE AO IS WITHOUT ANY BASIS. FURTH ERMORE, THE ISSUE RELATING TO CLAIM OF WEIGHTED DEDUCTION ON EX PENDITURE INCURRED ON CLINICAL TRIAL OUTSIDE INDIA WAS SUBJEC T MATTER OF DISPUTE IN APPEALS FILED BY REVENUE BEFORE THE COORDINATE B ENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2000-01 TO 2002-03 AND AGAIN IN AY 2004-05 & 2005-06 IN ITA NOS. 558 TO 56 0/HYD/2007, ITA NO. 636/HYD/2007 AND ITA NO. 1327/HYD/2008. THE TRIBUNAL WHILE DECIDING THE ISSUE UPHELD THE ORDER OF CIT(A) BY OBSERVING THAT ASSESSEE IS ENTITLED FOR WEIGHTED DEDUCTION ON EXPENDITURE INCURRED ON CLINICAL TRIALS OUTSIDE INDIA. AS THE C IT(A) HAS FOLLOWED THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUN AL IN ASSESSEES OWN CASE FOR PRECEDING ASSESSMENT YEAR, THERE IS NO REASON TO INTERFERE WITH THE SAME. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) BY DISMISSING GROUNDS RAISED BY THE DEPARTMENT IN B OTH THE ASSESSMENT YEARS UNDER CONSIDERATION. 5. IN THE RESULT, APPEALS FILED BY THE DEPARTMENT I N BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER, 2014 SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 15 TH OCTOBER, 2014 KV 4 ITA NOS.1150 & 1151/HYD/2014 M/S BHARAT BIOTECH INTERNATIONAL LTD. COPY TO:- 1) DCIT, CIRCLE 1(3), HYDERABAD 2) M/S BHARAT BIOTECH INTERNATIONAL LTD., GENOME VA LLEY, TURKAPALLEYM, SHAMERPERT MANDAL, RR DT. 3) CIT(A)-II HYDERABAD. 4) CIT-I, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER