GVK Biosciences Pvt. ltd., Hyderabad V. Addl. CIT, Hyderabad

ITA 1276/HYD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69718 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKARA RAO PHANI RAJU
• Assessee Lawyers: I RAMA RAO
• Keywords: Reopening of assessment; Search and seizure; Additional evidence; Question of law; Tangible material; Difference of opinion; Corroborative evidences; Competent authority; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80IB; 10B; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.215/HYD/2012& 1276/HYD/10 ASSESSMENT YEARS: 2005-06 & 2006-07. GVK BIOSCIENCES PVT. LTD., -V- ADDL.CIT, RANGE-2, HYDERABAD. HYDERABAD. PAN:AABCG3208J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI I. RAMA RAO RESPONDENT BY : S/SHRI D. SUDHAKARA RAO PHANI RAJU DATE OF HEARING 4-6-2013 DATE OF PRONOUNCEMENT: 2- 8-2013 ORDER PER SAKTIJIT DEY, J.M: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST SEPARATE ORDERS OF CIT (A) PERTAINING TO THE ASSESS MENT YEARS 2005- 06 AND 2006-07. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THESE ARE TAKEN UP TOGETHER AND DISPOSED O F BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. ITA NO.215/HYD/2012 PERTAINING TO THE ASSESSMENT YE AR 2005-06. 2. ORIGINALLY, THE ASSESSEE HAD RAISED THE FOLLO WING GROUNDS IN THE MEMORANDUM OF APPEAL:- 2.(A) THE CIT (A) GROSSLY ERRED IN LAW IN DENYING EXEMPTION U/S 10B OF THE ACT ON THE PROFITS DERIVED FROM MEDI CINAL CHEMISTRY DIVISION AND CLINICAL PHARMACOLOGY DIVISI ON ON THE GROUND THAT THERE IS NO PRODUCTION OF ARTICLE OR TH ING OR COMPUTER SOFTWARE AND THEREFORE NOT ELIGIBLE FOR DE DUCTION U/S 10B OF THE ACT. (B) THE CIT (A) OUGHT TO HAVE SEEN THAT THE APPELL ANT IS A 100% EOU AND ITS MEDICINAL CHEMISTRY DIVISION AND C LINICAL PHARMACOLOGY DIVISION ARE ENGAGED IN THE PRODUCTION OF ARTICLES OR THINGS OR COMPUTER SOFTWARE AND THEREFO RE THE PROFITS DERIVED FROM THE SAID DIVISIONS ARE ELIGIBL E FOR DEDUCTION U/S 10B OF THE ACT. 3. FOR ALL OF THE ABOVE AND SUCH OTHER GROUNDS AS M AY BE URGED AT THE TIME OF HEARING IT IS MOST RESPECTFULL Y PRAYED THAT THIS HONBLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPEAL AND SUITABLE DIRECTIONS BE GIVEN TO THE ASSESSING O FFICER TO ALLOW THE CLAIM OF THE APPELLANT IN THE INTEREST OF JUSTICE. SUBSEQUENTLY ON 23-5-2013, THE ASSESSEE MOVED PETIT ION SEEKING PERMISSION TO RAISE THE FOLLOWING ADDITIONAL GROUND S:- OL. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE APPRECIATED THAT THE RE-ASSESSMENT PROCEEDINGS INIT IATED U/S. 147 OF INCOME TAX ACT, 1961 ARE BAD IN LAW, INASMUCH AS, (A) THERE WAS NO TANGIBLE NEW MATERIAL BROUGHT O N RECORD 3 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. SHOWING THE ESCAPEMENT OF INCOME FROM TAX. REOPENING WAS DONE O N THE BASIS OF SAME SET OF FACTS ON WHICH THE ORIGINAL ASSESSME NT HAD BEEN MADE; (B) REOPENING WAS PROMPTED BY MERE CHANGE OF OPI NION BY SUCCEEDING ASSESSING OFFICER. THE ORIGINAL ASSESSMENT WAS COMP LETED AFTER MAKING THE NECESSARY ENQUIRIES WITH REGARD TO CLAIM FOR EXEMPTION U/S.L0B OF INCOME TAX ACT, 1961. (C) THERE WAS NO FAILURE ON THE PART OF THE APPEL LANT TO DISCLOSE ALL MATERIAL FACTS, WHICH WERE NECESSARY FOR MAKING ASS ESSMENT, IN FACT, NO SUCH ALLEGATION WAS MADE BY THE ASSESSING OFFICER. F OR THESE OR ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSES SEE AT THE TIME OF HEARING SUBMITTED THAT THE ADDITIONAL GROUNDS RA ISED BEING PURELY ON LEGAL ISSUE, NOT REQUIRING INVESTIGATION INTO AN Y FRESH FACTS, THEY MAY BE ENTERTAINED FOR ADJUDICATION. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSES SEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF NA TIONAL THERMAL POWER CO., REPORTED IN 229 ITR 383. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER OBJECTED TO THE ADMISSION OF THE ADDITIONAL GROUND AS THEY WERE RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AND NOT RAISED BEFOR E THE CIT (A). ALTERNATIVELY, THE LEARNED DEPARTMENTAL REPRESENTAT IVE HAS SUBMITTED THAT THE ISSUE BEING RAISED FOR THE FIRST TIME, IT MAY BE SET ASIDE TO THE FILE OF THE CIT (A) FOR HIS DECISI ON ON THE LEGAL ISSUE. 4 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. 4. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES ON THIS ISSUE. WE ACCEPT THE CONTENTION OF THE LEARNED AUTHORISEDL REPRESENTATIVE THAT THE ISSUE RAISED IN THE ADDITIONAL GROUND IS A PURELY LEGAL ISSUE WITHOUT INVOLVING INVESTIGATION INTO FRESH FACTS AND CAN BE DECIDED ON THE BASIS OF FACTS ALREADY ON RECORD. IN AFORESA ID VIEW OF THE MATTER, WE ADMIT THE ADDITIONAL GROUND AND DEAL WI TH THE SAME AT THE FIRST INSTANCE. 5. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A COMPAN Y ENGAGED IN THE BUSINESS IN THE FIELD OF BIO-INFORMATICS, MEDIC INAL CHEMISTRY AND CLINICAL PHARMACOLOGY. FOR THE ASSESSMENT YEAR UNDE R DISPUTE, THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 1-11-200 5 DECLARING A TOTAL INCOME OF RS.1,35,32,490 AFTER CLAIMING DEDUC TION U/S 10A AND SECTION 10B OF THE ACT. THE ASSESSEE WAS SUBJECTED TO SCRUTINY ASSESSMENT PROCEEDINGS AND ASSESSMENT ORDER U/S 143 (3) WAS PASSED ON 31-12-2007 BY THE ASSESSING OFFICER ACCEP TING THE INCOME RETURNED AFTER ALLOWING DEDUCTION U/S 10A AN D 10B OF THE ACT. HOWEVER, SUBSEQUENTLY ACTION U/S 147 WAS INIT IATED BY THE ASSESSING OFFICER BY ISSUING A NOTICE DATED 29-5-20 07 U/S 148 OF THE ACT. AS PER THE REASONS COMMUNICATED TO THE ASSES SEE, THE ASSESSMENT WAS REOPENED FOR THE REASON THAT IN THE SCRUTINY ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 DEDUCTIO N CLAIMED U/S 10B FOR MEDICAL CHEMISTRY DIVISION AND CLINICAL PH ARAMACOLOGY WERE DENIED. SINCE THE SAME FACT HAS BEEN PREVAILING F OR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE IS NOT ELIGIB LE FOR DEDUCTION U/S 10B IN RESPECT OF MEDICINAL CHEMISTRY AND CLI NICAL PHARMACOLOGY DIVISION AND CONSEQUENTLY THE TAXABL E INCOME TO THE EXTENT OF RS.2,83,95,994/- HAD ESCAPED ASSESSMENT. 5 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. 6. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSEE SUBMITTED THAT THE COMPANYS MEDICINAL CHEMISTRY DI VISION IS ENGAGED IN MANUFACTURE OF R & D SERVICES (SCIENTIFI C CONSULTING AND CONTRACT RESEARCH IN THE AREAS OF INFORMATICS, CHEM ISTRY AND BIOLOGY) REQUIRED IN THE PROCESS OF DRUG DISCOVERY. MAJOR A REAS OF MANUFACTURING BY THE COMPANY ARE IN THE AREAS OF (I ) SYNTHESIS OF COMPOUNDS (II) BUILDING BLOCKS, SCAFFOLDS, INTERMED IATE COMPOUNDS FOR GENERATING ANALOGUES AND (III) REFERENCE COMPOU NDS OR STANDARD COMPOUNDS USEFUL IN IN-VITRO ASSAYS AND IN-VIVO ANI MAL MODEL STUDIES. (IV) SPECIALLY DESIGNED SMALL MOLECULES OR ANALOGUES FOR LEAD GENERATION AS WELL AS LEAD OPTIMIZATION STUDIE S. (V) PHARMACOPHORS BASED FOCUSSED LIBRARIES GENERATED FO R A PARTICULAR TARGET. (VI) CUSTOM SYNTHESIS OF LEAD COMPOUNDS I N GRAMS AND KILOS. 7. IT WAS SUBMITTED THAT THIS DIVISION WAS INVOLVE D IN TWO TYPES OF PROJECTS NAMELY (A) PURCHASE ORDER (PO) BASED PR OJECT AND (B) FULL TIME EQUIVALENT (FTE) BASED PROJECT. IT WAS S UBMITTED THAT IN PO PROJECT, COMPANY RECEIVES PURCHASE ORDERS FROM C USTOMERS DETAILING THE REQUIREMENT OF COMPOUNDS. THEREAFTER , CHEMISTS START EXECUTING THE SYNTHETIC SCHEME. PROJECT MANAGER SE NDS REGULAR PROGRESS REPORTS TO THE CUSTOMER ON WEEKLY OR BIWEE KLY BASIS AND RECEIVES ANY FEED BACK AS APPROPRIATE THROUGH E-MAI L/E- CONFERENCE. ONCE THE TARGET MOLECULE IS SYNTHESIZED, IT IS SENT FOR ONE FINAL AND INDEPENDENT ANALYSIS (QUALITY CHECK) FOR CONFIRMATI ON OF STRUCTURE AND PURITY. AN ANALYTICAL TEST REPORT (ATR) IS GEN ERATED AND THE COMPOUND ALONG WITH ATR IS SENT TO CUSTOMER. IN TH E CASE OF FTE BASED PROJECT, CONTINUOUS REQUESTS FOR SYNTHESIS OF COMPOUNDS ARE SENT BY THE CUSTOMER AND THE PROJECT TEAM EXECUTES THESE PROJECTS 6 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. IN COORDINATION WITH THE CUSTOMER. THUS, THE ASSES SEE COMPANY CLAIMED THAT THE COMPOUNDS GENERATED BY THEM ARE A RTICLES OR THING. IN RESPECT OF CLINICAL PHARMACOLOGY DIVISI ON, THE ASSESSEE SUBMITTED THAT THIS DIVISION UNIT CONDUCTS BIOEQUIV ALENCE (BE) AND/OR BIOAVAILABILITY [BA) STUDIES ON FORMULATIONS DEVELOPED BY VARIOUS CLIENTS. ALL THE STUDIES ARE DONE ON THE B ASIS OF PROJECT AGREEMENTS SIGNED BY THE COMPANY WITH CLIENT. 8. AS PER PROJECT AGREEMENT AND PROTOCOL, THE SAMP LE SIZE WILL BE DECIDED AND THE PROTOCOL TO BE APPROVED BY INDEPEND ENT ETHICS COMMITTEE (IEC) BEFORE STARTING STUDY. THERE ARE T HREE PHASES IN CLINICAL RESEARCH SUCH AS CLINICAL PHASE, BIO ANALY TICAL PHASE AND FINAL PHASE. IN CLINICAL PHASE, THE SUBJECTS ARE TO BE I N HOUSED, DOSING WILL BE PROVIDED AND BLOOD SAMPLES COLLECTED AT REG ULAR INTERVALS ARE SEPARATED AND STORED. IN BIO ANALYTICAL PHASE, THE STORED BLOOD SAMPLES ARE ANALYSED UNDER DIFFERENT METHODS ON LCM S MACHINES FOR ARRIVING AT THE CONCLUSIONS. AT FINAL PHASE, A LL THE DATA WILL BE COLLECTED FROM CLINICAL AND BIOANALYTICAL DEPARTMEN TS AND A FINAL REPORT ON THE STUDY WILL BE PREPARED. IT WAS THERE FORE CONTENDED THAT VARIOUS PROCESSES ARE CONDUCTED IN THE ABOVE TWO DIVISIONS, MANUFACTURING/PRODUCING DRUGS AND GENERATING REPORT S IN THE AREAS OF INFORMATICS, CHEMISTRY AND BIOLOGY FOR PRODUCIN G DRUGS FOR THEIR CLIENTS AND EXPORTING THE SAME. HENCE THE REPORTS GENERATED BY THEM CAN BE CLASSIFIED AS AN ARTICLE OR A THING . IT WAS FURTHER CONTENDED THAT THEY ARE EXPORTING THE REPORTS IN TH E FORM OF HARD COPIES AND THE PRODUCT/DRUG MANUFACTURED IS ALSO EX PORTED AND DELIVERED TO THEIR CLIENTS ABROAD. IN SUPPORT OF S UCH CONTENTION, THE ASSESSEE RELIED UPON A DECISION OF INCOME-TAX APPEL LATE TRIBUNAL, HYDERABAD BENCH IN THE CASE OF MBL RESEARCH AND CO NSULTANCY 7 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. GROUP PVT. LTD. VS. JCIT (107 ITD 438). THE ASSESS ING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HOWEVER DID NOT ACCEPT IT FOR THE REASON THAT DEDUCTION U/S 10B OF THE ACT IS ALLOWABLE ONLY TO THAT UNDERTAKING WHICH IS MANUFACTURING OR PRODU CING AN ARTICLE OR THING OR COMPUTER SOFTWARE. THE ASSESSING OFFICE R PARTICULARLY EXAMINING THE AGREEMENT ENTERED WITH PFIZER INC. NE W YORK NOTED THAT THE AGREEMENT WITH THE CLIENTS, REVEALED THAT THE PAYMENT FOR THE SERVICES RENDERED BY THE ASSESSEE AND THE CLIEN TS ARE BASED ON NUMBER OF FTES ASSIGNED TO THE WORK AND SUCH RATE INCLUDES ASSESSEES EXPENSES AND RE-AGENT EXPENSES. HE FURT HER NOTED THAT THE AGREEMENT STIPULATED THAT THE CLIENT OWNED ALL INTELLECTUAL PROPERTIES WITH RESPECT TO PFIZER COMPOUNDS AND T ECHNOLOGY WITHOUT FURTHER COMPENSATION TO THE ASSESSEE. IT WAS ALSO NOTED THAT AGREEMENTS WITH OTHER CLIENTS WERE ALSO IN SIM ILAR LINE. HE THEREFORE CONCLUDED THAT AS PER THE AGREEMENT THE A SSESSEE IS BEING PAID FOR CONTRACT RESEARCH SERVICES AND NOT FOR ANY COMPOUND BEING DELIVERED. 9. HE FURTHER CONCLUDED THAT THE PAYMENT IS FOR TH E SERVICES IN SYNTHESIZING VARIOUS COMPOUNDS. HE FURTHER NOTED T HAT SUCH PAYMENT IS BEING PAID TO THE ASSESSEE ON THE BASIS OF NUMBER OF EMPLOYEES WORKING. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT THE CONSIDERATION RECEIVED BY THE ASSESSEE IS NOT F OR ANY ARTICLE OR THING BEING PRODUCED BY THE RESEARCH SERVICES BUT O NLY FOR THEIR SERVICES. HE HELD THAT THE ASSESSEE WAS NOT INVOLV ED IN MANUFACTURING ANY ARTICLE OR THING. SIMILARLY, REF ERRING TO THE CASE OF CLINICAL PHARMACOLOGY DIVISION, THE ASSESSING OF FICER OBSERVED THAT THE ASSESSEE IS ENTRUSTED WITH THE WORK OF CAR RYING OUT TEST ON HUMAN BEINGS TO FIND THE EFFICACY OF DRUGS WHICH IS CALLED AS 8 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. BIOAVAILABILITY AND BIOEQUIVALENCE. HE THEREFORE ULTIMATELY CAME TO THE CONCLUSION THAT THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S 10B AND ACCORDINGLY COMPLETED THE ASSESSMENT U/S 1 43(2) READ WITH SECTION 147 BY DISALLOWING THE DEDUCTION CLAIM ED U/S 10B OF THE ACT. THE ASSESSEE BEING AGGRIEVED OF THE ASSESSMEN T ORDER SO PASSED PREFERRED AN APPEAL BEFORE THE CIT (A). 10. THE CIT (A) ALSO CONFIRMED THE ACTION OF THE AS SESSING OFFICER IN DISALLOWING THE DEDUCTION CLAIMED U/S 10B OF THE ACT BY HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO SUCH DEDUCTIO N AS IT HAS NOT MANUFACTURED OR PRODUCED ANY ARTICLE OR THING AS PR OVIDED U/S 10B OF THE ACT. 11. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE A SSESSEE SUBMITTED BEFORE US ORALLY AS WELL AS THROUGH WRITT EN SUBMISSIONS THAT THE GIST OF THE REASONS WHICH WERE COMMUNICATE D TO THE ASSESSEE REVEALS THAT THE ASSESSING OFFICER HAD INI TIATED THE REASSESSMENT PROCEEDINGS TO DISALLOW THE CLAIM U/S 10B OF THE ACT MERELY BECAUSE IN THE SUCCEEDING ASSESSMENT YEAR 20 06-07 THE ADDL. CIT, RANGE-2 HAD TAKEN A VIEW THAT THE ASSESS EE WAS NOT ENTITLED FOR DEDUCTION U/S 10B OF THE ACT IN RESPE CT OF MEDICINAL CHEMISTRY DIVISION AND CLINICAL PHARMACOLOGY DIVISI ON. HE THEREFORE SUBMITTED THAT THE ASSESSING OFFICER HAD INITIATED REASSESSMENT PROCEEDINGS ONLY AT THE BEHEST OF A HIGHER AUTHORI TY BY BORROWING THE SATISFACTION FROM HIS HIGHER UPS WITHOUT PROP ER APPLICATION OF MIND. THEREFORE, IT CAN BE SAID THAT THE ASSESSING OFFICER HAD NOT FORMED HIS OWN OPINION THAT INCOME HAD ESCAPED ASSE SSMENT. IT WAS THEREFORE SUBMITTED THAT THE POWERS WHICH ARE C ONFERRED UPON THE ASSESSING OFFICER HAVE TO BE EXERCISED BY THE ASSESSING OFFICER ALONE AND THE SATISFACTION OF THE ASSESSING OFFICER CANNOT BE 9 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. SUBSTITUTED WITH THAT OF THE HIGHER AUTHORITY. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE F OR THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS:- (I) ACIT VS. RESHAM PETROTECH LTGD. (136 ITD 185 (AHD.TRIB) (II) CIT VS. SFIL STOCK BROKING LTD. (325 ITR 285 (III) JAY BHARAT MARUTI LTD. VS. CIT (324 ITR 289 (IV) CIT VS. BATRA BHATTA COMPANY (321 ITR 526) (V) ATUL JAIN (299 ITR 383 (DELHI) (VI) DSI COMMUNICATION LTD. VS. DCIT WP NO.722 OF 2011 BOMBAY HIGH COURT 12. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE A SSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD NO INFOR MATION IN HIS POSSESSION OR REASON TO BELIEVE THAT THE INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT WAS SUBMITTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B OF THE ACT IN THE RETURN OF INCOME AND SUCH CLAIM WAS SUPPORTED BY AN AUDIT REPORT IN FORM NO.56-G. IT WAS SUBMITTED THAT DURING SCRUTINY ASSESSMENT PROCE EDINGS U/S 143(3) OF THE ACT, THE ASSESSING OFFICER HAD THOROU GHLY ENQUIRED INTO THIS ASPECT BY ISSUING A QUESTIONNAIRE TO THE ASSESSEE AND SEEKING INFORMATION ABOUT THE NATURE OF BUSINESS AC TIVITY AND ALSO VERIFIED THE RECEIPT OF FOREIGN EXCHANGE ETC., WHI CH ARE THE RELEVANT CONDITIONS TO BE SATISFIED FOR THE CLAIM OF DEDUCT ION U/S 10B OF THE ACT. THE ASSESSEE ALSO COMPLIED TO THE QUERIES MA DE BY THE ASSESSING OFFICER BY FURNISHING ALL THE DETAILS AN D THE ASSESSING OFFICER AFTER SCRUTINY OF THE INFORMATION FILED BE FORE HIM AND AFTER DUE APPLICATION OF MIND, COMPLETED THE ASSESSMENT U/S 143(3) ACCEPTING THE RETURNED INCOME. THEREFORE, IT HAS TO BE ACCEPTED 10 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. THAT THE ASSESSING OFFICER WHILE COMPLETING THE ORI GINAL ASSESSMENT U/S 143(3) OF THE ACT WAS CONSCIOUS OF THE CLAIM MA DE BY THE ASSESSEE AND FORMED AN OPINION ABOUT THE VALIDITY O F THE CLAIM U/S 10B OF THE ACT. IT WAS SUBMITTED BY THE LEARNED AU THORISED REPRESENTATIVE FOR THE ASSESSEE THAT THE REASONS RE CORDED MAKES IT CLEAR THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY TANGIBLE MATERIAL SUGGESTING ESCAPEMENT OF INCOME F ROM ASSESSMENT. THERE IS ALSO NO ALLEGATION THAT THE ASSESSEE HAS FAILED TO DISCLOSE ALL FACTS NECESSARY FOR ASSESS MENT, HE THEREFORE SUBMITTED THAT THE REOPENING WAS DONE ON THE BASIS OF SAME SET OF FACTS ON WHICH THE ORIGINAL ASSESSMENT WAS MADE AND THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED MEREL Y BECAUSE IN THE SUBSEQUENT ASSESSMENT YEAR I.E., 2006-07 THE AD DL. CIT UNDER WHOSE CONTROL THE ASSESSING OFFICER FUNCTIONS, T OOK A DIFFERENT VIEW AGAINST THE ASSESSEE IN RESPECT OF THE CLAIM M ADE U/S 10B OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE THEREFORE SUBMITTED THAT THE FACT ON RECORD CLEARLY SUGGESTS THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BY IN VOKING THE PROVISIONS SECTION 147 OF THE ACT ON CONSIDERING TH E SAME SET OF FACTS ON A MERE CHANGE OF OPINION IN SUPPORT OF SU CH CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSES SEE HAS RELIED UPON THE FOLLOWING DECISIONS:- (1) CIT V. FORAMER FRANCE {20031 264 ITR 66 (SC) (2) CIT V. KELVINATOR OF INDIA LTD. AND EICHER LTD. REPORTED IN {20101 320 ITR 561 (SC). (3) GUJARAT POWER CORPORATION LTD. V. ASST. CIT REP ORTED IN {20131 350 ITR 266 (GUJ); {20121 77 DTR (GUJ) 89. (4) CIT V. USHA INTERNATIONAL LTD. REPORTED IN {201 21 348 ITR 485 (DELHI) {FBI 11 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. (5) ASHWAMEGH CO-OPERATIVE HOUSING SOCIETY LTD. V. DY. COMMISSIONER OF INCOME-TAX & ANOTHER 353 ITR 413 (GUJ. HIGH COURT) (6) ASTEROIDS TRADING & INVESTMENT P. LTD. VS DCIT(2009)308 ITR 190 (BOM)(193) NO NEW MATERIAL BROUGHT ON RECORDS - REASSESSMENT ON CHANGE OF OPINION OF OFFICER NOT VALID. (7) ASIAN PAINTS LTD. V. DCIT (2008) 308 ITR 195 (BOM) (198) MERE CHANGE OF OPINION OF A.O. NOT GROUND FOR REASSESSMENT (8) ICICI PRUDENTIAL LIFE INSURANCE CO. LTD. (2010) 325 ITR 471 (BOM) RE-OPENING OF ASSESSMENT ON THE SAME GROUND IN THE ABSENCE OF ANY TANGIBLE MATERIAL WAS BASED ON MERE CHANGE OF OPINION AND TH EREFORE IS NOT SUSTAINABLE. (9) AVENTIS PHARMA LD. V. ASTT. CIT (2010) 323 ITR 570 (BOM) (577) RE-OPENING OF ASSESSMENT ON MERE CHANGE OF OPINION NOT SUSTAINABLE. (10) BHAVESH DEVELOPERS VS. A.O. (2010) 224 CTR 160 (BOM) (11) INTERNATIONAL GLOBAL NETWORKS B V V. DDIT (IT) (2012)50 SOT 433 (MUM)(TRIB.) (12) GENERAL INSURANCE CORPORATION OF INDIA V. DY. CIT (2012) VOL. 114 (1) BOM: L.R. 0246 (HIGH COURT); 13. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT WHILE INITIATING PROCEEDINGS U/S 147 OF THE ACT IT IS THE DUTY OF THE ASSESSING OFFICER TO SHOW THAT THER E WAS NO FULL AND TRUE DISCLOSURE ON THE PART OF THE ASSESSEE OR THE ASSESSING OFFICER IN HIS POSSESSION HAS SAME FRESH TANGIBLE MATERIAL WHICH INDICATES THAT THERE IS ESCAPEMENT OF INCOME. THE LEARNED A UTHORISED REPRESENTATIVE FOR THE ASSESSEE ALSO ASSAILED THE V ALIDITY OF THE PROCEEDINGS INITIATED U/S 147 OF THE ACT AS WELL AS THE ASSESSMENT 12 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. ORDER PASSED CONSEQUENT THEREUPON ON THE GROUND THA T IT IS NOT CLEAR WHETHER THE SAME ASSESSING OFFICER WHO RECORD ED THE REASONS HAS ISSUED A NOTICE U/S 148 OF THE ACT. IT WAS FU RTHER CONTENDED, FROM THE REASONS RECORDED IT IS NOT KNOWN AS TO WHE THER NECESSARY SANCTION OF COMPETENT AUTHORITY I.E., JCIT WAS OBTA INED OR NOT U/S 151 OF THE ACT. THE LEARNED AUTHORISED REPRESENTAT IVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WHILE REOPENING THE ASSESSMENT HAS NOT RECORDED ANY SATISFACTION OF HIS OWN BUT ONLY BASED ON THE OBSERVATION MADE BY THE ADDL. CIT IN T HE ASSESSMENT MADE BY HIM FOR THE SUBSEQUENT ASSESSMENT YEAR REOP ENING HAS BEEN MADE. THUS, THE SATISFACTION WAS NOT OF THE AS SESSING OFFICER HIMSELF BUT WAS OF THE ADDL. CIT. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT AS REOPENING WAS MADE WITHIN FOUR YE ARS, THERE WAS NO NEED FOR APPROVAL U/S 151 OF THE ACT. HE FURTHE R SUBMITTED THAT INFORMATION OBTAINED IN AN ASSESSMENT PROCEEDING FO R THE SUBSEQUENT ASSESSMENT YEAR ALSO CONSTITUTES VALID I NFORMATION ON THE BASIS OF WHICH ASSESSMENT CAN BE REOPENED U/S 1 47 OF THE ACT. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE REPORTED IN (23 6 ITR 34). 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL ON RECORD WHICH ALSO INCLUDES THE DOCUMENTS SUBMITTED IN THE PAPER BOOK FILED BY THE ASSESSEE. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE JUDICIAL PRECEDEN TS PLACED BEFORE US BY THE PARTIES. THERE IS NO DISPUTE TO THE FA CT THAT THE ASSESSEE IN THE RETURN FILED HAS CLAIMED DEDUCTION U/S 10B OF THE ACT WHICH IS SUPPORTED BY AN AUDIT REPORT SUBMITTED IN FORM NO.5 6G OF THE ACT. IT IS ALSO A FACT THAT THE ASSESSING OFFICER AFTER CAUSING NECESSARY 13 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. ENQUIRY HAS COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT, A COPY OF WHICH AS COMMUNICATED TO THE ASSESSEE IS AT PAGE-16 OF THE PAPER BOOK, READS AS UNDER:- OFFICE OF THE ASSISTANT CORMMISSIONER OF INCOME TAX, CIRCLE-2(2), 8 TLL FLOOR, B BLOCK, ITTOWERS. A.C.GUARDS, HYDERABAD. F.NO.ACIT-2(2)/G-144/10-11 DATE : 07-10..201 O. TO THE PRINCIPAL OFFICER, M/S.GVK BIO SCIENCES PVT.LTD., NO.210, MY HOME TYCOON, 6-3-1192, KUNDANBAGH, HYDERABAD-500 106. SIR, SUB:-I.T.ASSESSMENT U/S.143(3)-A.Y.2005-06---YOUR OWN-RAG. REF:-YOUR DIRECTOR (FINANACE) LETTER DATED 1.7.2009. @@@@ PLEASE REFER TO THE ABOVE. THE REASONS RECORDED FO R REOPENING OF ASSESSMENT ARE AS UNDER:- 'FOR THE A.Y.05-06, THE ASSESSEE FILED A RETURN OF INCOME ON6.01.2006 ADMITTING TAXABLE INCOME OF RS.L,35,32,490/- AFTER CLAIMING A DEDUCTION OF RSA,07,24,183/- U/S.L0A & LOB OF THE !\CT AND THE SAME WAS ACCEPTED U/S.143(3) OF THE ACT. HOWEVER, LATER A SCRUTINY ASSESSMENT FOR THE A.Y.2006-07 WAS COMPLETED BY THE ADDI.CIT, RANGE-2 ON 31.12.08 IN WHLCH THE DEDUCTION CLAIMED U/S.L0B FOR THE MEDICINAL CHEMISTRY DIVISION AND CLINICAL PHARMACOLOGY DIVISIONS WAS DENIED. 14 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED DEDUCTION OF RS.2,83,95,994/- FROM THE MEDICINAL CH EMISTRY DIVISION AND CLINICAL PHARMACOLOGY DIVISION U/S.L0B OF THE ACT. SINCE THE SAME FACTS PREVAIL IN THIS YEAR. ~I~~ FOR THE REASONS RECORDED IN THE A.Y.06-07, THE ASSESSEE IS NO~R~R DEDUCTION U/S.L0B IN RESPECT OF MEDICINAL CHEMISTRY DIVISION AND CLINICAL PHARMACOLOGY DIVISION. CONSEQUENTLY, THE TAXABLE INCOME TO THE E XTENT OF RS.2,83,95 / 994/- ESCAPED ASSESSMENT .' YOURS FAITHFULLY, (G.N.RAGHAVENDRA RAO) ASST.CORNMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD. 16. A PLAIN READING OF THE REASONS CLEARLY INDICATE THAT THE ASSESSMENT HAS BEEN REOPENED ONLY ON THE BASIS OF T HE FINDING RECORDED BY THE ADDL. CIT IN THE ASSESSMENT ORDER P ASSED U/S2006- 07 WHILE DENYING EXEMPTION U/S10B OF THE ACT. THUS , IT IS VERY MUCH CLEAR THAT THE ASSESSING OFFICER HAS NEITHER A PPLIED HIS MIND INDEPENDENTLY TO THE FACTS RECORDED FOR THE YEAR UN DER DISPUTE NOR THE SATISFACTION REACHED OF HIS OWN. THERE IS NEI THER ANY MENTION EITHER IN THE REASONS RECORDED BY HIM OR IN THE ASS ESSMENT ORDERS PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT THAT THERE IS ANY NON DISCLOSURE OF MATERIAL FACTS WITH REGARD TO THE CLAIM OF DEDUCTION U/S 10B OF THE ACT BY THE ASSESSEE OR AT THE TIME OF ORIGINAL ASSESSMENT, THE ISSUE REGARDING CLAIM OF D EDUCTION U/S 10B OF THE ACT WAS NOT EXAMINED BY THE ASSESSING OFFICE R OR NO OPINION WAS FORMED BY HIM. SIMPLY BECAUSE DEDUCTION U/S 10 B HAS BEEN DENIED IN THE ASSESSMENT COMPLETED FOR THE ASSESSME NT YEAR 2006- 07 BY THE ADDL. CIT, RANGE-2 WHO IS A HIGHER OFFICE R IN RANK, THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT. THE FINDING OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED WH ILE REJECTING THE CLAIM OF EXEMPTION U/S 10B ALSO MAKES INTEREST ING READING. THE ASSESSMENT ORDER PASSED IS NOTHING BUT A REPLIC A OF THE 15 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. ASSESSMENT ORDER PASSED FOR ASST. YEAR 2006-07 IN T HE CASE OF THE ASSESSEE BY THE ADDL. CIT, RANGE-2. THE ASSESSING OFFICER HAS REPRODUCED VERBATION THE FINDINGS OF THE ADDL. CIT RECORDED IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT FOR T HE ASSESSMENT YEAR 2006-07. THUS, ON PERUSAL OF THE ASSESSMENT ORDER, IT BECOMES CLEAR THAT THE REOPENING OF THE ASSESSMENT HAS BEEN MADE NOT ON THE BASIS OF ANY FRESH TANGIBLE MATERIAL AVA ILABLE ON RECORD BUT MERELY ON THE BASIS OF THE ASSESSMENT MADE FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER HAS NOT SHOWN ANY REASON OF HIS OWN AS TO WHY A DIFFERENT VIEW HAS TO BE TAKEN SO FAR AS THE ISSUE OF SECTION 10B OF THE ACT IS CONCERNED, THEN WHAT HAS BEEN TAKEN IN THE ORIGINAL ASSESSMENT ON THE SAME SETS O F FACTS WHEN THERE IS NO FRESH TANGIBLE MATERIAL AVAILABLE BE FORE THE ASSESSING OFFICER. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. (320 ITR 561) HELD AS UNDER:- 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDM ENT) ACT, 1987 ,RE- OPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS AN D FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE A CT [WITH EFFECT FROM 1- 4-1989], THEY ARE GIVEN A GO-BY AND ONLY ONE CONDIT ION HAS REMAINED, VIZ., THAT WHERE THE ASSESSING OFFICER HAS REASON TO BELI EVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO RE-OPEN THE ASSESSMENT. THEREFORE, POST 1-4-1989 , POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WOR DS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIV E ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE-OPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND P OWER TO RE-ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HA S THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFI LMENT OF CERTAIN PRE- CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN. IN THE GARB OF RE-OPENING THE 16 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POW ER BY THE ASSESSING OFFICER. HENCE, AFTER 1-4-1989 ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION TH AT THERE IS ESCAPEMENT OF INCOME F ROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF, OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREIN ABOVE. U NDER DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , PARLIAMENT NOT ONLV DELETED THE WORDS 'REASON TO BELIEVE' BUT ABOVE INSERTED THE WORD 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE-INTRODUCED THE SAID EXPRESS ION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRAR Y POWERS IN THE ASSESSING OFFICER. WE QUOTE HCRCINBCLOW THE RELEVANT PORTION OF CIRCULAR NO, 549 , DATED 31-1O-198~, WHICH READS AS FOLLOWS: 7.2. AMENDMENT MADE BY THE AMENDING ACT, 1989, TO R EINTRODUCE THE EXPRESSION REASON TO BELIEVE IN SECTION 147. A N UMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS 'REASON TO BELIEV E' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE 'OPINION' OF THE ASSESSING OFFI LER.LT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, REASON TO BELIEVE HAD B EEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND 'AS WELL SETTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION, TO ALLAV THESE FEARS, THE AMENDING ACT, 1989 , HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION 'HAS REASON TO BELIEVE' IN PLACE OF THE WORDS 'FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION'. OTH ER PROVISIONS OF THE NEW SECTION 147, HOWEVER, REMAIN THE SAME,' 17. THE RATIO LAID DOWN BY THE HONBLE SUPREME COUR T THUS IS TO THE EFFECT THAT UNLESS THERE IS TANGIBLE MATERIAL I N THE POSSESSION OF THE ASSESSING OFFICER TO COME TO A CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME, THE REOPENING OF ASSESSMENT O N THE SAME SET OF FACTS WHICH ARE AVAILABLE AT THE TIME OF OR IGINAL ASSESSMENT PROCEEDINGS WOULD AMOUNT TO REOPENING OF THE ASSESS MENT ON A MERE CHANGE OF OPINION. THE HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. USHA INTERNATIONAL LTD. (348 ITR 485) AND H ONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT POWER CORPORATION (350 ITR 266) 17 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. ALSO HELD SIMILAR VIEW. AT THE COST OF REPETITION, WE WOULD LIKE TO REITERATE THAT IN THE PRESENT CASE THERE IS NO ALLE GATION BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT DISCLOS ED ALL MATERIAL FACTS WITH REGARD TO THE CLAIM OF DEDUCTION U/S 10B OF THE ACT. IT IS ALSO NOT THE ALLEGATION OF THE ASSESSING OFFICER THAT WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THE CLAIM OF DE DUCTION U/S 10B OF THE ACT AND AS SUCH NO OPINION WAS FORMED WITH REGA RD TO SUCH ISSUE. ON THE OTHER HAND, THE FACTS AND MATERIALS C LEARLY INDICATE THAT BECAUSE OF THE FACT THAT IN THE ASSESSMENT ORD ER PASSED FOR THE ASSESSMENT YEAR 2006-07 A DIFFERENT VIEW HAS BEEN T AKEN WITH REGARD TO THE CLAIM OF DEDUCTION U/S 10B OF THE ACT ONLY ON THAT BASIS THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT Y EAR HAS BEEN REOPENED. THERE IS NO INDEPENDENT APPLICATION OF M IND BY THE ASSESSING OFFICER ON THE BASIS OF THE FATS AND MATE RIALS IN POSSESSION OF HIM THAT INCOME HAS ESCAPED ASSESSMEN T. THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS.SFIL STO CK BROKING LTD.( 325 ITR 285) HAS HELD THAT WHILE RECORDING REASONS FOR INITIATING ACTION U/S 147 OF THE ACT, THE ASSESSING OFFICER HA S TO APPLY HIS MIND TO THE INFORMATION AND INDEPENDENTLY ARRIVE AT THE BELIEF THAT ON THE BASIS OF THE MATERIAL WHICH HE HAD BEFORE HI M INCOME HAD ESCAPED ASSESSMENT. 18. THE INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD B ENCH IN THE CASE OF ACIT VS. RESHAM PETROTECH LTD. (136 ITD 18 5) HELD THAT THE BASIC REQUIREMENT OF SECTION 147 OF THE ACT IS THAT THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT. SUCH BELIEF MUST BE THE BELIEF OF JURI SDICTIONAL ASSESSING OFFICER AND NOT ANY OTHER ASSESSING OFFIC ER OR THE 18 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. AUTHORITY OF THE DEPARTMENT. IN THE FACTS OF THE P RESENT CASE, THE MATERIALS ON RECORD CLEARLY INDICATE THAT THE ASSES SING OFFICER HAS NOT INDEPENDENTLY APPLIED HIS MIND TO THE MATERIALS IN HIS POSSESSION FOR HAVING A REASON TO BELIEVE THAT INCO ME HAS ESCAPED ASSESSMENT. THE RECORD ALSO DOES NOT INDICATE WHETH ER THERE IS ANY OTHER INFORMATION OR MATERIAL IN THE POSSESSION OF THE ASSESSING OFFICER WHICH WAS NOT CONSIDERED AT THE TIME OF ORI GINAL ASSESSMENT ON THE BASIS OF WHICH HE COULD HAVE FORMED A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. MERELY BECAUSE A DIFFERENT VI EW HAS BEEN TAKEN IN THE ASSESSMENT ORDER PASSED FOR THE SUBSEQ UENT ASSESSMENT YEAR CANNOT BE A REASON TO REOPEN THE A SSESSMENT UNLESS THERE IS STRONG REASON TO BELIEVE ON THE BAS IS OF FRESH TANGIBLE MATERIAL AVAILABLE BEFORE THE ASSESSING O FFICER THAT INCOME HAS ESCAPED ASSESSMENT. THEREFORE, CONSIDERED IN TH E LIGHT OF THE RATIO LAID DOWN IN THE VARIOUS JUDICIAL PRECEDENTS REFERRED TO HEREINABOVE, WE ARE OF THE VIEW THAT THE REASONS RE CORDED FOR INITIATING PROCEEDINGS U/S 147 OF THE ACT IS NOT A VALID REASON AS THERE IS NO TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER FOR COMING TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE ASSESSING OFFICER HAS MERELY ADOPTED THE REASON FOR DENIAL OF EXEMPTION U/S 10B FOR THE ASSESSMENT YEAR 2006-07 FOR INITIATING ACTION U/S 147 OF THE IMPUGNED ASSESSMENT YEAR WHICH IN OUR CONSIDERE D OPINION IS NOT VALID. WE THEREFORE HOLD THAT THE INITIATION O F PROCEEDINGS U/S 147 OF THE ACT IS WITHOUT AUTHORITY OF LAW AND CONS EQUENTLY THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTI ON 147 OF THE ACT IS ALSO INVALID IN LAW AND ACCORDINGLY WE QUASH THE SAME. THE GROUNDS RAISED BY THE ASSESSEE ARE THUS ALLOWED. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 19 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. ITA NO.1276/HYD/2010 PERTAINING TO ASSESSMENT YEAR 2006-07 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) HYDERABAD DATED 12.8.2010 IS ERRONEOUS, CONTRARY TO LAW FACTS OF THE CASE. 2.A) THE COMMISSIONER OF INCOME TAX (APPEALS) QROSSLY ERRED LN LAW IN DENYING EXEMPTION U/S 10B O F THE ACT ON THE PROFITS DERIVED FROM MEDICINAL CHEMISTRV DIVISION AND CLINICALPHARMACOLOGY DIVISIO N ON THE GROUND THAT THERE 1S NO PRODUCTION OF ARTICLE OR THINQ OR COMPUTER SOFTWARE AND THEREFORE NOT ELIQIBLE FOR DEDUCTION U/S 10B OF THE ACT. B) THE COMMISSIONER OF INCOME TAX (APPEALS) OUQHT TO HAVE SEEN THAT THE APPELLANT IS A 100% EOU AND ITS MEDICINAL CHEMLSTRV DIVISION AND CLINICAL PHARMACOLOQY DIVISION ARE ENQAQED IN THE PRODUCTION OF ARTICLE OR THING OR COMPUTER SOFTWARE AND THEREFORE THE PROFITS DERIVED FROM THE SAID DIVISIONS ARE ELIQIBLE FOR DEDUCTION U/S 10B OF THE ACT. 3.A) WITHOUT PREJUDICE TO THE ABOVE. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO SEE THAT. THE ASSESSING OFFICER HAVING HELD THAT THE APPELLANT COMPANY IS APPROVED AS 100%EOU IN R & D SERVICES HE SHOULD HAVE ALLOWED DEDUCTION U/S 80I8(8A) OF THE ACT AS THE APPELLANT COMPANY WAS APPROVED AS R & D COMPANY UNDER SECTION 80-IB(8A) OF THE IT ACT, 1961. FOR ASSESSMENT YEAR 2006-07. B) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE APPELLANT HAS NOT FULFILLED THE CONDITIONS LAID DOWN IN SECTION 80-IB(8A) READ WITH RULE 18DA AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 80-IB(8A) OF THE ACT. 4. FOR ALL OF THE ABOVE AND SUCH OTHER GROUNDS AS MAV BE URGED AT THE TIME OF HEARING IT IS MOST RESPECTFULLY PRAYED THAT THIS HON'BIE TRIBUNAL MAV BE PLEASED TO ALLOW THE APPEAL AND SUITABLE DIRECTIONS BE QIVEN TO THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE APPELLANT IN THE 20 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. INTEREST OF JUSTICE. 20. IN GROUND NO.2 WITH ITS SUB-GROUNDS, THE ASSES SEE HAS RAISED THE ISSUE OF DENIAL OF EXEMPTION U/S 10B OF THE ACT ON THE PROFIT DERIVED FROM MEDICAL CHEMISTRY DIVISION AND CLINICA L PHARMACOLOGY DIVISION ON THE GROUND THAT THERE IS NO PRODUCTION OF ARTICLE OR THING OR COMPUTER SOFTWARE AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. SINCE THE FACTS RELATING TO THE AFO RESAID ISSUE IS IDENTICAL TO THE FACTS NARRATED IN ITA NO.215/HYD/2 012 WHILE DEALING WITH SIMILAR ISSUE EXCEPTING THE FACT THAT ASSESSME NT IN THE PRESENT CASE HAS BEEN COMPLETED U/S 143(3) OF THE ACCT AND SINCE THE FINDING OF THE ASSESSING OFFICER ON THE ISSUE IN DI SPUTE IS VERBATION THE SAME, WE DO NOT FEEL IT NECESSARY TO DISCUSS TH EM OVER AGAIN IN THIS APPEAL. 21. THE ASSESSEE BEING AGGRIEVED OF THE ASSESSMENT ORDER PREFERRED AN APPEAL BEFORE THE CIT (A). IN COURSE OF HEARING BEFORE THE CIT (A), THE ASSESSEE HOWEVER DID NOT PRESS THE GROUND WITH REGARD TO DENIAL OF EXEMPTION U/S 10B OF THE ACT. THE CIT (A) THEREFORE DISMISSED THE GROUND BY OBSERVING AS UNDE R: DURING THE HEARING OF APPEAL, THE LEARNED AUTHORISE D REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE APPELLANT DOES NOT PRESS FOR GROUND NO.2. ACCORDINGLY, THE S AID GROUND IS DISMISSED AS NOT PRESSED. 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE RAISED A PRELIMINARY OBJECTION AGAINST ENTERTAINING THE AFORESAID GROUND BY SUBMITTING THAT SINCE THE ASSESSEE HAS NOT PRESSED THIS GROUND BEFORE THE CIT (A), IT CANNOT BE ENTERTAINED NOW. THE LEARNED AUTH ORISED REPRESENTATIVE FOR THE ASSESSEE COUNTERING THE OBJE CTION OF THE 21 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAD NOT PRESSED THIS GROUND OF APPEAL BEFORE THE CI T (A) ON A MISTAKEN VIEW OF THE MATTER, HENCE IT CANNOT BE PRE CLUDED FROM RAISING THE GROUND BEFORE THE TRIBUNAL. IT WAS SUB MITTED THAT THE TRIBUNAL IS EMPOWERED TO ADJUDICATE THE GROUND AS NO INVESTIGATION INTO THE FACTS OF THE CASE IS REQUIRED AND THE GROU ND RELATED TO THE SUBJECT MATTER OF APPEAL. IN SUPPORT OF SUCH CONTE NTION, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED U PON THE DECISION OF FULL BENCH OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CELLULAR PRODUCTS (151 ITR 499) AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWE R CO. LTD. (229 ITR 383). 23. WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PA RTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO APPLI ED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES. IT IS NOT DISPUTED THAT THE ASSESSEE HAD GIVEN UP ITS CLAIM IN RESPECT OF THE D ISALLOWANCE OF EXEMPTION U/S 10B OF THE ACT BY NOT PRESSING THE GR OUND BEFORE THE CIT (A). IT IS THE CONTENTION OF THE LEARNED AUTHOR ISED REPRESENTATIVE FOR THE ASSESSEE BEFORE US THAT THE GROUND RELATING TO 10B WAS NOT PRESSED ON A MISTAKEN VIEW OF THE MATTER. HOWEVER, IT COULD NOT BE DEMONSTRATED BEFORE US, WHOSE MISTAKEN VIEW IT WAS I.E., WHETHER IT IS ASSESSEES OR THE COUNSEL REPRESENTING THE ASSES SEE. IT WAS ALSO NOT DEMONSTRATED WHETHER IT WAS AT ALL A MISTAKEN V IEW OR THE ASSESSEE HAS CONSCIOUSLY GIVEN UP ITS CLAIM WITH RE GARD TO 10B OF THE ACT. IN THE CIRCUMSTANCES, THE CONTENTION OF T HE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FOR CON SIDERING THE GROUND RELATING TO THE CLAIM U/S 10B CANNOT BE ACCE PTED. THE ASSESSEE CANNOT BE PERMITTED TO CHANGE ITS STAND AT ITS OWN SWEET 22 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. WILL. THE ASSESSEE HAVING CONSCIOUSLY GIVEN UP ITS CLAIM WITH REGARD TO SECTION 10B OF THE ACT BY NOT PRESSING THE GROUN D BEFORE THE CIT (A), IT CANNOT BE PERMITTED TO RAISE THE SELF SAME GROUND AGAIN BEFORE THE TRIBUNAL. IN CASE OF NTPC (229 ITR 383), THE HONBLE SUPREME COURT HAS HELD THAT WHETHER TO ADMIT A PART ICULAR GROUND AS ADDITIONAL GROUND IS WITHIN THE DISCRETION OF TH E TRIBUNAL. THE HONBLE SUPREME COURT FURTHER HELD THAT IF THE ADDI TIONAL GROUND IS PURELY ON LEGAL ISSUE AND DOES NOT REQUIRE INVESTIG ATION INTO FRESH FACTS AND CAN BE DECIDED ON THE BASIS OF FACTS ALRE ADY ON RECORD, THEN SUCH ADDITIONAL GROUND CAN BE ENTERTAINED. WE ALSO AGREE TO THE RATIO LAID DOWN IN CIT VS. EVELINE INTERNATIONA L (243 ITR 493) THAT THERE CAN BE NO CONCESSION ON AN ISSUE OF LAW. HOWEVER, THE ISSUE RAISED IN THE PRESENT GROUND IS NOT PURELY A QUESTION OF LAW BUT INVOLVES APPRECIATION OF FACTS AND EVIDENCES. T HE JURISDICTIONAL HIGH COURT IN CASE OF A.K. BABUKHAN VS.CIT (102 IT R 757) WHILE CONSIDERING THE ISSUE OF PRODUCTION OF ADDITIONAL E VIDENCE BEFORE TRIBUNAL HAS HELD THAT THE DISCRETION TO RECEIVE TH E ADDITIONAL EVIDENCE IS TO BE EXERCISED ONLY WHEN ANY POINT IS REQUIRED TO BE CLEARED IN THE INTERESTS OF JUSTICE AND THIS POWER GIVEN TO THE TRIBUNAL HAS TO BE EXERCISED CAUTIOUSLY AND SPARIN GLY IN ORDER TO ADVANCE INTEREST OF JUSTICE. THE HONBLE JURISDICT IONAL HIGH COURT FURTHER HELD THAT RULE 29 IS NOT INTENDED TO ALLOW AN ASSESSEE WHO HAS BEEN UNSUCCESSFUL THROUGH OUT TO PATCH UP WEAK PARTS OR TO FILL UP OMISSIONS. UNDISPUTEDLY, IN THE PRESENT CASE, TH E FACTS ON RECORD CLEARLY REVEAL THAT THE ASSESSEE HAS CONSCIOUSLY GI VEN UP ITS CLAIM U/S 10B OF THE ACT BY NOT PRESSING THE GROUND BEFOR E THE CIT (A). THEREFORE, IN THE AFORESAID CIRCUMSTANCES, WE DO NO T FIND ANY MERIT IN THE ASSESSEES CONTENTION FOR ENTERTAINING THE I SSUE RAISED AGAIN IN THE AFORESAID GROUND WHICH IS ACCORDINGLY DISMIS SED. 23 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. 24. IN GROUND NO.3(A) AND 3(B), THE ASSESSEE ASSAI LED THE ORDER OF THE CIT (A) IN REJECTING THE ASSESEES CLAIM OF DED UCTION U/S 80IB(8A) OF THE ACT. ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, IT CAN BE SEEN THAT THE AFORESAID ISSU E WAS RAISED BY THE ASSESSEE FIRST TIME BEFORE THE CIT (A). IN COURSE O F HEARING BEFORE THE CIT (A), IT WAS CONTENDED BY THE ASSESSEE THAT IT HAS BEEN RECOGNISED U/S 80IB(8A) BY THE SECRETARY OF DEPARTM ENT OF SCIENTIFIC & INDUSTRIAL RESEARCH, MINISTRY OF TECHN OLOGY, GOVERNMENT OF INDIA FOR A PERIOD OF THREE YEARS FOR ASSESSMENT YEARS 2006-07 TO 2008-09 VIDE LETTER DATED 9-10-2006. IT WAS SUBMI TTED THAT AS THE ASSESSEE SATISFIES THE CONDITIONS LAID DOWN IN 80IB AND (8A) OF THE ACT, IT IS ENTITLED FOR DEDUCTION. THE ASSESSEE FU RTHER REFERRING TO THE PROVISIONS CONTAINED U/S 80IB (II) AND RULE 18D A(1)(B), SUBMITTED THAT AS PER CLAUSE NO.III(A) OF MEMORAN DUM OF ASSOCIATION, THE OBJECTIVES OF THE ASSESSEE COMPAN Y IS TO UNDERTAKE, PROMOTE, ENCOURAGE, INITIATE, ASSIST AND ENGAGE IN ALL KINDS OF SCIENTIFIC RESEARCH AND DEVELOPMENT ACTIVI TIES IN THE FIELD OF DRUG DISCOVERY, BIO-INFORMATICS, BIOTECHNOLOGY, LIF E SCIENCES, BIO- SCIENCES AND TO ESTABLISH, PROVIDE MAINTAIN AND CON DUCT OR OTHERWISE SUBSIDIZE RESEARCH LABORATORIES AND EXPER IMENTAL WORKSHOPS FOR SCIENTIFIC AND TECHNICAL RESEARCH AND EXPERIMENTS AND TO UNDERTAKE AND CARRY ON WITH ALL SCIENTIFIC AND T ECHNICAL RESEARCH, AND TO PROMOTE STUDIES AND RESEARCH BOTH SCIENTIFIC AND TECHNICAL INVESTIGATION, TO CARRY ON SCIENTIFIC AND TECHNICAL RESEARCHES, EXPERIMENTS AND TESTS OF ALL KINDS FOR AND ON BEHAL F OF GOVERNMENT AND SEMI GOVERNMENT BODIES AND FOR OTHERS AND TO CA RRY ON SCIENTIFIC AND RESEARCH DEVELOPMENTAL ACTIVITIES LE ADING TO DISCOVERY OF NEW PRODUCTS, PROCESSES, METHODS AND ALL ACTIVIT IES LEADING TO TECHNOLOGY DEVELOPMENT, IMPROVEMENT AND TRANSFER IN CLUDING 24 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. PATENTING AND PUBLISHING. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS A POOL OF EMINENT SCIENTISTS WITH GLOBAL ACADEM IC AND INDUSTRIAL EXPERIENCE IN DRUG DISCOVERY AND DEVELOPMENT. IT WA S FURTHER SUBMITTED THAT THE COMPANY HAS WELL DEVELOPED LABOR ATORY FACILITIES FOR CONDUCTING RESEARCH AND DEVELOPMENT. THE ASSE SSEE REFERRING TO RULE 18DA(1)(D), SUBMITTED THAT THE COMPANY HAS A WELL FORMULATED RESEARCH AND DEVELOPMENT PROGRAMME AND A PERIODIC (EVERY WEEK) MONITORING SYSTEMS OF PROJECTS IN HAND . REFERRING TO RULE 18DA(1)(E), IT WAS SUBMITTED THAT THE COMPANY IS EXCLUSIVELY ENGAGED IN SCIENTIFIC RESEARCH AND DEVELOPMENT ACTI VITIES IN THE FIELD OF DRUG DISCOVERY, BIO-INFORMATICS, BIO-TECHNOLOGY, LIFE SCIENCES, BIO- SCIENCES LEADING TO TECHNOLOGY DEVELOPMENT, IMPROVE MENT OF TECHNOLOGY. FURTHER REFERRING TO RULE 18DA(1)(F) , IT WAS SUBMITTED THAT THE ASSESSEE HAS FILED THE ANNUAL RETURNS ALON G WITH STATEMENT OF ACCOUNTS AND ANNUAL REPORTS WITHIN 8 MONTHS FROM THE CLOSE OF THE THREE ACCOUNTING YEARS I.E. FINANCIAL YEAR ENDE D ON 31-3-2006, 31-3-2007 AND 31-3-2008. THE ASSESSEE SUBMITTED THA T IT IS NOT SELLING ANY PROTOTYPE OR OUTPUT FROM THEIR LABORATO RIES AND THE MAIN OBJECTS ARE NOT ALTERED AFTER APPROVAL OF DSIR. 25. IT WAS SUBMITTED THAT THE ASSESSEE HAS SYSTEM OF MONITORING AND MAINTAINING THE COST DETAILS, PROJECT WISE AS REQUIRED UNDER RULE 18DA(2)(D). REFERRING TO SECTION 80IB(13) REA D WITH SECTION 80-IA(5). IT WAS SUBMITTED THAT THE ASSESSEE HAS CA LCULATED THE QUANTUM OF DEDUCTION UNDER THIS SECTION BY TREATING THE ELIGIBLE BUSINESS AS THE ONLY SOURCE OF INCOME. FURTHER RE FERRING TO SECTION 80IB (13) READ WITH SECTION 80IA (9), IT WAS SUBMIT TED THAT NO DEDUCTION WAS CLAIMED ON THE INCOME FROM (1) CLINIC AL PHARMACOLOGY UNIT AND (2) MEDICINAL CHEMISTRY LAB (MCL) UNITS UN DER ANY OTHER 25 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. SECTION. THE ASSESSEE SUBMITTED THAT ALL THE CONDI TIONS LAID DOWN IN SECTION 80-IB (8A) OF THE ACT ARE SATISFIED AND THE ASSESSEE HAVING FURNISHED THE AUDIT REPORT IN FORM NO.10CCA, IT IS ELIGIBLE FOR 100% DEDUCTION AS PER THE PROVISION. THE CONTENTION RAI SED BY THE ASSESSEE IN THE WRITTEN SUBMISSIONS WAS FORWARDED B Y THE CIT (A) TO THE ASSESSING OFFICER INVITING HIS COMMENTS. THE A SSESSING OFFICER IN THE REMAND REPORT STATED THAT THE PRIMARY CONDIT ION FOR AVAILING DEDUCTION U/S 80IB (8A) IS THAT THE ASSESSEE SHOULD BE IN THE BUSINESS OF CARRYING ON RESEARCH AND DEVELOPMENT. H OWEVER, IN THE CASE OF THE ASSESSEE, THE BUSINESS IS OF RENDERING SERVICES TO OTHER COMPANIES, MOSTLY MULTI-NATIONAL COMPANIES IN THE F IELD OF CHEMISTRY/BIOLOGY AND NOT SCIENTIFIC RESEARCH. ON ITS OWN, THE ASSESSEE DID NOT UNDERTAKE ANY SCIENTIFIC RESEARCH OR DEVELOPMENT. WHATEVER WORK WAS DONE BY THE ASSESSEE WAS ON SPECI FIC PROJECT ASSIGNED TO IT BY OTHER MNCS. IT WAS SUBMITTED BY THE ASSESSING OFFICER THAT THOUGH SOME OF THE ACTIVITY CARRIED ON BY THE ASSESSEE IS CONNECTED WITH RESEARCH IN THE FIELD OF CHEMISTR Y/BIOLOGY, THE SAME CANNOT BE REGARDED AS SCIENTIFIC RESEARCH AND DEVELOPMENT BUT IT IS IN THE NATURE OF JOB WORK/SERVICE WORK ONLY. THE ASSESSING OFFICER FURTHER COMMENTED THAT IN RESPEC T OF MEDICINAL CHEMISTRY DIVISION THE ASSESSEE HAS ENTERED INTO S ERVICE AGREEMENT WITH OTHER COMPANY. IN THIS CONTEXT, THE ASSESSING OFFICER REFERRED TO THE AGREEMENT WITH M/S. PFIZER INC. NEW YORK. T HE ASSESSING OFFICER STATED THAT AS PER THE AGREEMENT THE NATURE OF SERVICES TO BE PERFORMED BY THE ASSESSEE, INCLUDES CUSTOM CHEMICAL SYNTHESIS AND OTHER WORK AS AND WHEN REQUESTED BY PFIZER. 26. HE FURTHER STATED THAT THE SERVICES AS PER THE AGREEMENT MEANS WORK PERFORMED BY GVK TOWARDS SYNTHESIS AND P URIFICATION OF 26 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. SPECIFIED AMOUNTS OF CUSTOM CHEMICALS AND/OR THE DE VELOPMENT AND REFINEMENT OF PROTOCOLS FOR SUCH SYNTHESIS AND PURI FICATION OF CUSTOM CHEMICALS. . FURTHER THE PAYMENT RENDERED BY THE ASSESSEE ARE BASED ON NUMBER OF FTE (FULL TIME EQUIVALENT EMPLOY EE) ASSIGNED TO THE PARTICULAR WORK WHICH INCLUDES GVK EXPENSES AND REAGENT EXPENSES. HE FURTHER STATED AS PER THE AGREEMENT PF IZER WILL OWN ALL INTELLECTUAL PROPERTIES WITH RESPECT TO PFIZER COMP OUNDS AND TECHNOLOGY WITHOUT FURTHER COMPENSATION TO GVK. T HE ASSESSING OFFICER FURTHER NOTED THAT THE PAYMENT MADE TO THE ASSESSEE IS FOR THEIR SERVICES RENDERED ONLY. SO FAR AS THE CLINIC AL PHARMACOLOGY DIVISION IS CONCERNED, THE ASSESSING OFFICER SUBMI TTED THAT THE NATURE OF WORK CARRIED ON BY THE ASSESSEE IS THAT O F CARRYING OUT TEST ON HUMAN BEINGS TO FIND THE EFFICACY OF DRUGS, WHIC H IS CALLED AS BIO- AVAILABILITY AND BIO-EQUIVALENCE. HE FURTHER STAT ED THAT THE DATA SO GENERATED IS FORWARDED TO CLIENT COMPANIES AND ALSO ANALYSED TO ARRIVE AT A PROPER CONCLUSION. THE ASSESSING OFF ICER OBSERVED THAT IN THIS CASE THE ASSESSEE IS PAID FOR CARRYING OU T THE CLINICAL EXPERIMENTS ON HUMAN BEINGS. HE STATED THAT THE G ENERATION OF PHYSICAL DATA AND ITS PRESENTATION CANNOT BE CALLED SCIENTIFIC RESEARCH AND DEVELOPMENT. IT WAS SUBMITTED THAT AS EVIDENT FROM THE SERVICES AGREEMENT, THE ASSESSEE IS BEING PAID FOR CONTRACT RESEARCH SERVICES AND THE WORK CONTRACT RESEARCH FREQUENTLY USED BY THE ASSESSEE COULD NOT BE EQUATED AS CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT, REFERRED TO IN SECTION 80 IB(8A) OF THE ACT. THE ASSESSING OFFICER STATED THAT IN THE BUSI NESS OF CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT, PROFITS OF A C OMPANY DEPENDS ON SUCCESS OF RESEARCH PROJECT UNDERTAKEN. 27 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. 27. HOWEVER, IN THE CASE OF THE ASSESSEE IRRESPECTI VE OF RESULT OF SUCH PROJECT, FIXED INCOME IS ASSURED ON BASIS OF NUMBER OF EMPLOYEES ENGAGED FOR COMPLETION OF PARTICULAR PIEC E OF WORK. IN THIS CONTEXT, HE REFERRED TO CLAUSE-4 OF THE SAID AGREEMENT WHICH RELATES TO MANNER OF PAYMENT. IT WAS STATED IN VI EW OF THE ABOVE REASONS THE PRIMARY CONDITION REGARDING CARRYING ON THE BUSINESS OF SCIENTIFIC RESEARCH AND DEVELOPMENT IS NOT FULFILLE D IN THE CASE OF THE ASSESSEE AND HENCE, IT IS NOT ELIGIBLE FOR DEDUCTIO N U/S 80IB(8A). THE CIT (A) FORWARDED A COPY OF THE REMAND REPORT T O THE ASSESSEE INVITING HIS OBJECTIONS. THE ASSESSEE IN HIS REPLY TO THE REMAND REPORT AGAIN REITERATED THE SAME CONTENTIONS AND SUBMITTED THAT AS PER SECTION 80IB OF THE ACT DEDUCTION IS ALLOWA BLE TO A COMPANY CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT. I T WAS SUBMITTED THAT SECTION DOES NOT STIPULATE THAT THE COMPANY S HOULD CARRY ON SUCH ACTIVITY ON ITS OWN. IT WAS SUBMITTED THAT BU SINESS CAN BE CARRIED ON DIFFERENT MODELS ONE SUCH MODEL CAN BE C ARRYING ON RESEARCH ON ITS OWN LICENCE/SELL THE PROCESS/KNOWHO W DEVELOPED BY IT. ANOTHER MODEL CAN BE CARRYING ON RESEARCH ON BE HALF OF SOME OTHER PERSONS FOR WHICH REMUNERATION CAN BE ON LUMP SUM BASIS OR ON THE BASIS OF NUMBER OF MAN HOURS TAKEN FOR SUCH WORK. IT WAS SUBMITTED THAT AS PER THE REQUIREMENT OF RULE 18DA( 1)(E), THE ASSESSEE HAS UNDERTAKEN RESEARCH AND DEVELOPMENT ON ONE OR MORE OF THE COMPLETE DISCOVERY STAGES BASED ON THE CONTR ACT SIGNED WITH THE CUSTOMERS. THE ASSESSEE REFERRING TO THE APPRO VAL GRANTED BY THE DSIR SUBMITTED THAT SUCH APPROVAL WAS GIVEN TO THE COMPANY AS A WHOLE AND NOT TO ANY PARTICULAR UNIT HENCE, TH E ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IB(8A) OF THE ACT. 28 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. 28. THE ASSESSEE ALSO SUBMITTED A NOTE CONTAINING T HE DETAILS OF PROCESSES FOLLOWED BY IT IN CARRYING OUT RESEARCH PROJECT. THE CIT (A) AGAIN CALLED FOR COMMENTS OF THE ASSESSING OFFI CER WITH REGARD TO THE SUBMISSIONS MADE BY THE ASSESSEE. THE ASSES SING OFFICER IN HIS REPORT STATED THAT THE DOCUMENTS FURNISHED BY T HE ASSESSEE WOULD REVEAL THAT THE ASSESSEE HAS RECORDED THE BUS INESS IN THEIR CASE IS CONTRACT RESEARCH THAT PROVIDED SERVICES TO BIO-TECH COMPANIES. THE SAID DOCUMENT FURTHER REVEALED THAT THE COMPANY HAS NO RIGHT TO GET ANY PATENT WHICH IN TURN SHOWS THAT IT WAS NOT IN THE BUSINESS OF CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT. THE ASSESSING OFFICER FURTHER STATED THAT THE ASSES SEE DOES NOT HAVE ANY OWN RESEARCH PROJECT AND WHATEVER PROJECTS ARE ONLY SHOWN FOR OTHER COMPANIES. THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE AS SESSING OFFICER IN THE CONTEXT OF PROVISIONS CONTAINED U/S 80IB (8A ) AND RULES 18D AND 18DA OF INCOME-TAX RULES HELD AS UNDER:- 8.6. HOWEVER, I FIND THAT THE COMPANY DOES NOT FULF ILL THE REQUIREMENTS AS PER THE ABOVE CLAUSES. REFERRING TO THE ABOVE CLAUS E-(D), THE APPELLANT IN ITS SUBMISSIONS, HAS MERELY SUBMITTED THAT THEY HAVE A WELL FORMULATED RESEARCH AND DEVELOPMENT PROGRAMME AND A PERIODIC MONITORING SYSTEM OF PROJECTS IN HAND. HOWEVER, IT HAS NOT BEEN EXPLAINED NOR CLARIF IED AS TO HOW IN THEIR CASE THERE WAS A WELL FORMULATED RESEARCH PROGRAMME WITH PERIODIC MONITORING SYSTEM. NO MATERIAL OR ANY DOCUMENT HAS BEEN FURNIS HED FOR SUBSTANTIATING SUCH SUBMISSION. IN ABSENCE OF ANY SUPPORTING EVIDE NCE IN THAT REGARD, SUCH CONTENTION CANNOT BE ACCEPTED. THUS, I AM OF THE VI EW, THE APPELLANT DOES NOT HAVE WELL FORMULATED RESEARCH AND DEVELOPMENT PROGR AMME COMPRISING OF TIME BOUND RESEARCH AND DEVELOPMENT PROJECTS WITH P ROPER MECHANISM FOR SELECTION AND REVIEW OF THE PROJECTS. SIMILARLY, I FIND THAT THE APPELLANT DOES NOT FULFIL! THE REQUIREMENT OF PROVISIONS CONTAINED IN CLAUSE-RE) OF THE ABOVE SUB-RULE. REFERRING TO SUCH CLAUSE, THE APPELLANT H AS MERELY SUBMITTED THAT THE COMPANY IS EXCLUSIVELY ENGAGED IN SCIENTIFIC RE SEARCH AND DEVELOPMENT ACTIVITIES IN THE FIELD OF DRUG DISCOVERY, BIO-INFO RMATICS, BIO-TECHNOLOGY, LIFE SCIENCES, BIO-SCIENCES LEADING TO TECHNOLOGY DEVELO PMENT, IMPROVEMENT OF TECHNOLOGY. HOWEVER, IT HAS NOT BEEN EXPLAINED NOR CLARIFIED HAS TO HOW THE COMPANY IN THEIR CASE, WAS EXCLUSIVELY ENGAGED IN S CIENTIFIC RESEARCH AND DEVELOPMENT ACTIVITIES IN SUCH FIELDS LEADING TO TE CHNOLOGY DEVELOPMENT AND 29 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. IMPROVEMENT OF TECHNOLOGY ETC. NO MATERIAL OR ANY D OCUMENT HAS BEEN FILED IN SUBSTANTIATING SUCH SUBMISSION. IN FACT, IN ABSE NCE OF ANY SUPPORTING EVIDENCE IN THAT BEHALF FILED BY THE APPELLANT, SUC H CONTENTION CANNOT BE ACCEPTED. IT IS MADE CLEAR, THAT MERELY ON BASIS OF SUCH VERBAL PLEA, WITHOUT ANY SUPPORTING DOCUMENTS / EVIDENCE IN THAT REGARD, SUCH CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED. THUS, IT HAS TO BE HELD THAT THE APPELLANT DOES NOT FULFIL THE PRESCRIBED CONDITION AS PER CLAUSE-(E) OF THE ABOVE SUB-RULE. THEREFORE, AS THE APPELLANT DOES NOT FULFIL ALL THE PRESCRIBED CONDITIONS LAID DOWN IN SEC.80-IB(8A )READ WITH RULE-18DA OF THE LT. RULES, IT IS NOT ENTITLED TO DEDUCTION UNDER SAID SECTION.THUS, THE PROFITS DERIVED BY THE APPELLANT FOR THIS ASST. YEAR IN RESPECT OF THE MEDICINAL CHEMISTRY DIVISION AND CLINICAL PH ARMACOLOGY DIVISION ARE NOT ELIGIBLE FOR DEDUCTION U/S.8O-IB(SA)OF THE ACT. 8.7. FURTHER, AS ADMITTED BY THE APPELLANT COMPANY, IN ITS STATEMENT FILED BEFORE DSIR AUTHORITIES, IT IS A CONTRACT RESEARCH ORGANIZATION AND PROVIDES SERVICES TO GLOBAL PHARMACEUTICAL AND BIO-TECH COMP ANIES. FROM THIS IT SHOWS, THE COMPANY IS NOT INDEPENDENTLY CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT ACTIVITIES. FROM THE SAME ALSO IT SHOWS , THE APPELLANT HAS NO WELL FORMULATED RESEARCH AND DEVELOPMENT PROGRAMME AND W AS NOT ENGAGED EXCLUSIVELY IN SCIENTIFIC RESEARCH AND DEVELOPMENT ACTIVITIES LEADING TO TECHNOLOGY DEVELOPMENT, IMPROVEMENT OF TECHNOLOGY A ND TRANSFER OF' TECHNOLOGY BY THEM. THEREFORE, THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S, 80-IBE8A). 8.8. FURTHER, AS STATED BY THE AO, THE APPELLANT AL SO DOES NOT FULFILL THE OTHER CONDITION PRESCRIBED UNDER RULE-1SDA(2)(A). UNDER T HIS CLAUSE, IT SAYS THAT THE COMPANY SHALL SELL ANY PROTOTYPE OR OUTPUT, IF ANY, FROM ITS LABORATORIES OR PILOT PLANTS WITH THE PRIOR PERMISSION OF THE PR ESCRIBED AUTHORITY. THE APPELLANT HAS SUBMITTED THAT IT IS NOT SELLING THE PROTOTYPE OR OUTPUT OF THE END PRODUCT. IT IS SELLING ONLY R&D REPORTS AND CON CLUSIONS DRAWN BY THE SCIENTISTS. IT IS FURTHER SUBMITTED THAT FOR SELLIN G SUCH REPORTS AND RESULTS, PERMISSIONS ARE NOT NECESSARY FROM THE PRESCRIBED A UTHORITY. HOWEVER, SUCH CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE. AS P ER SUCH SUBMISSION OF THE APPELLANT, VARIOUS REPORTS AND CONCLUSIONS DRAWN BY THEIR SCIENTISTS ARE OUTPUT IN THEIR CASE.HAVIN9 REGARD TO THE STIPULATI ON IN RULE-18DA(2)(A), EVEN FOR SELLING/TRANSFERRING THE SAME TO THE CONCERNED MNCS, PRIOR PERMISSION OF THE PRESCRIBED AUTHORITY IS NECESSARY. FURTHER, EVE N THOUGH THE APPELLANT HAS SUBMITTED THAT FOR SELLING THOSE REPORTS PERMISSION IS NOT NECESSARY, NO EVIDENCE HAS BEEN FILED IN SUPPORT OF SUCH CONTENTI ON. UNDER THESE CIRCUMSTANCES, AND SINCE THE APPELLANT HAS SOLD/TRA NSFERRED THE OUTPUT IN THEIR CASE TO THE MNCS, WITHOUT PRIOR PERMISSION FR OM THE PRESCRIBED AUTHORITY, HAVING NOT FULFILLED THE PRESCRIBED COND ITION UNDER RULE 18DA(2)(A). IN MY VIEW, THE APPELLANT IS NOT ELIGI BLE FOR DEDUCTION U/S 8A., 30 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. WITH THE AFORESAID OBSERVATION, THE CIT (A) HELD TH AT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80IB(8A) OF THE ACT FOR ITS MEDICINAL CHEMISTRY DIVISION AND CLINICAL PHARMACOLOGY DIVISIONS. 29. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE A SSESSEE HAS FILED WRITTEN SUBMISSION CONTENDING THEREIN THA T IT HAS BEEN RECOGNISED U/S 80IB(8A) OF THE ACT BY THE SE CRETARY, DSIR, MINISTRY OF SCIENCE AND TECHNOLOGY, GOVERNMEN T OF INDIA VIDE THEIR LETTER DATED 9-10-2006 FOR THE ASS ESSMENT YEAR 2006-07 TO 2007-08 AND 2008-09. IT WAS SUBMIT TED THAT THE ASSESSEE HAS DULY COMPLIED WITH ALL THE CO NDITIONS AS STIPULATED UNDER RULES 18D AND 18DA OF I T RULES. IT IS FURTHER SUBMITTED THAT NECESSARY APPROVAL U/S 80IB( 8A) HAVE BEEN RENEWED FROM TIME TO TIME WHICH INDICATES THA T THE ASSESSEE HAD FULFILLED HE PRESCRIBED CONDITIONS. IT WAS SUBMITTED THAT THOUGH DETAILED SUBMISSIONS WERE MAD E BEFORE THE CIT (A) WITHOUT PROPERLY APPRECIATING T HE SAME HE HAS DENIED THE BENEFIT ON FLIMSY GROUNDS . IT W AS SUBMITTED THAT THE CIT (A) CANNOT USURP THE POWERS OF THE PRESCRIBED AUTHORITY AND DENY THE BENEFIT U/S 80IB( 8A) EVEN AFTER APPROVAL BY THE PRESCRIBED AUTHORITY. IN THI S CONTEXT, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSES SEE RELIED UPON THE DECISION OF INCOME-TAX APPELLATE TRIBUNAL DELHI BENCH IN CASE OF DCIT VS. FORTIS CLINICAL RESEA RCH LTD. (27 TAXMAN PAGE 4 (DEL). IT WAS CONTENDED THAT EVE N ASSUMING BUT NOT ADMITTING THERE IS A BREACH OF PRO VISIONS OF RULE 18DA OF INCOME-TAX RULES, IT IS THE DUTY OF TH E PRESCRIBED AUTHORITY TO REVOKE THE APPROVAL ALREADY GRANTED 31 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. IN TERMS OF SUB-RULE (3) OF RULE 18DA OF I T RULES. AS THE STATUTE HAS CONFERRED THIS POWER ONLY ON THE PRESCR IBED AUTHORITY, THE POWER WHICH IS CONFERRED ON A PARTIC ULAR AUTHORITY HAS TO BE EXERCISED BY THAT AUTHORITY AL ONE. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE DEC ISION OF THE HONBLE DELHI HIGH COURT IN ITA NO.836/HYD/2011 DECIDED ON 14 TH SEPT. 2011. IT IS SUBMITTED THAT IN THE CASE OF A DOUBT OR AMBIGUITY IN TECHNICAL MATTERS, THE CIT (A ) SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO VERIFY THE M ATTER FROM THE PRESCRIBED AUTHORITY INSTEAD OF DENYING THE BEN EFIT TO THE ASSESSEE. IN THIS REGARD, RELIANCE WAS PLACED ON T HE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. BHARTI CELLULAR LTD., REPORTED IN 330 ITR 239. 30. IT IS SUBMITTED THAT WHILE INTERPRETING THE PR OVISIONS OF SECTION 35(III) OF THE ACT WHICH ARE IN PARI MATERI A TO THE PROVISIONS OF SECTION 80IB (8A) OF THE ACT DIFFEREN T COURTS HAVE HELD THAT IT IS THE DUTY OF THE PRESCRIBED AUT HORITY TO TAKE A FINAL DECISION ON ANY CONTROVERSY. IT IS SUB MITTED THAT IN CASE OF J.K. SYNTHETICS LTD. VS. O.S. BAJPAI (1 05 ITR 864), THE HONBLE ALLAHABAD HIGH COURT EXPRESSED T HAT IF THE ITO DOES NOT ACCEPT THE CLAIM OF THE ASSESSEE U/S 3 5 OF THE ACT, HE HAS TO REFER THE MATTER TO THE BOARD THE BO ARD IN TURN WILL MAKE A REFERENCE TO THE PRESCRIBED AUTHORITY. NEITHER THE ITO NOR THE BOARD IS COMPETENT TO TAKE A FINAL DECISION ON ANY SUCH CONTROVERSY. IT WAS SUBMITTED THAT T HE AFORESAID DECISION OF ALLAHABAD HIGH COURT WAS FOLL OWED IN A LATER DECISION OF THE HONBLE SUPREME COURT IN CAS E OF UNION 32 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. OF INDIA VS. J.K. SYNTHETICS LTD. (199 ITR 14 (SC) . IT WAS SUBMITTED THAT IN CASE OF CIT VS. FCS INTERNATIONAL MARKETING (P) LTD. (283 ITR 32 ) THE HONBLE PUNJAB & HARYAN A HIGH COURT HELD THAT IF ANY QUESTION ARISES U/S 35(3) A S TO WHETHER AND TO WHAT EXTENT ANY ACTIVITY CONSTITUTED OR ASSET WAS BEING USED FOR SCIENTIFIC RESEARCH THE ASSESSIN G OFFICER SHOULD BE DUTY BOUND TO STRICTLY COMPLY WITH THE S TATUTORY PROVISIONS. IT WAS SUBMITTED THAT BY FOLLOWING THE ABOVE DECISION, THE HONBLE GUJARAT HIGH COURT IN DCIT ( ASSTS.) VS. MASTEK LIMITED (25 TAXMAN AT PAGE 133) HELD AS U NDER:- ......SECTION 35(3) OF THE ACT AS NOTICED REQUIRES A REFERENCE TO BE MADE BY THE BOARD TO THE PRESCRIBED AUTHORITY WHEN A QUESTION ARISES AS TO WHETHER AND IF SO TO WHAT EXTENT, ANY ACTIVITY CONSTITUTES OR CONSTITUTED OR ANY ASSET IS OR WAS BEING USED FOR SCIENTIFIC RESEARCH. THE DECISION OF THE PRESCRIBE D AUTHORITY ON SUCH A QUESTION WOULD BE FINAL. IN OU R OPINION, THEREFORE, WHENEVER ANY SUCH QUESTION ARIS ES, THE ASSESSING OFFICER CANNOT DECIDE THE ISSUE BUT M UST PLACE THE ISSUE BEFORE THE BOARD WHO, IN TERMS OF SECTION 35(3) OF THE ACT, WOULD REFER THE QUESTION TO THE PRESCRIBED AUTHORITY. THE DECISION OF THE PRESCRIBED AUTHORITY WOULD GOVERN THE PARTIES. THEREFORE, IF AN ASSESSEE PUTS FORTH A CLAIM OF DEDUCTION U/S 35(1) FOR EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH AND IF THE ASSESSING OFFICER IS NOT INCLINED TO ACCEPT SUCH A CLAIM, THE QUESTION CAN B E STATED TO HAVE ARISEN. IN SUCH A SITUATION, THE ASSESSING OFFICER CANNOT TAKE A DECISION BUT MUST S EEK THE OPINION OF THE PRESCRIBED AUTHORITY....... 33 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. 31. IN THIS CONTEXT, THE LEARNED AUTHORISED REPRESENTA TIVE FOR THE ASSESSEE ALSO RELIED UPON THE DECISION OF INCOM E-TAX APPELLATE TRIBUNAL IN CASE OF M/S ELECTRONICS COR PORATION OF INDIA LTD. VS. ACIT IN ITA NO.1106/HYD/2011 DATED 25-9-2 012. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT CLAIM OF EXEMPTION U/S 10B OF THE AC T WILL NOT ACT AS ESTOPPEL FOR CLAIMING DEDUCTION U/S 80IB(8A) AS BOTH ARE NOT MUTUALLY EXCLUSIVE PROVISIONS. 32. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORTING THE ORDER OF THE CIT (A) SUBMITTED THAT SINCE THE ASSESSEE HAS FAILED TO FURNISH EVIDENCE I N SUPPORT OF ITS CLAIM, THE DEDUCTION CLAIMED WAS RIGHTLY DISALLOWED . IT WAS SUBMITTED THAT THE APPROVAL BY THE PRESCRIBED AUTH ORITY WOULD IPSO FACTO NOT ENTITLED THE ASSESSEE TO AVAIL THE B ENEFIT U/S 80IB (8A) OF THE ACT WITHOUT FULFILLING THE CONDITIONS ENUMERATED THEREIN AND RULE 18BA OF INCOME-TAX RULES. IT WAS SUBMITTED THAT THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS AS WELL AS THE CIT (A) HAVING GIVEN A CATEGORICAL FINDING TO THE E FFECT THAT THE ASSESSEE HAS NOT FULFILLED THE PRE-CONDITION FOR AV AILING DEDUCTION U/S 80IB AND 80I OF THE ACT, THE DISALLOWANCE WAS JUSTIFIED. 33. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD INCLUDING THE DOCUM ENTS SUBMITTED IN THE PAPER BOOK. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES. IT IS NO T DISPUTED THAT THE ASSESSEE HAS OBTAINED APPROVAL FROM THE PRESCRI BED AUTHORITY AS A RESEARCH AND DEVELOPMENT COMPANY FOR AVAILING DEDUCTION U/S 80IB (8A) OF THE ACT. HOWEVER, SUCH CLAIM OF D EDUCTION IS SUBJECT TO FULFILMENT OF OTHER CONDITIONS AS PRESC RIBED U/S 80IB(8A) AND RULE 18BA OF I T RULES. WHILE THE ASS ESSEE HAS 34 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. CLAIMED THAT IT HAD FULFILLED ALL THE CONDITIONS AND THE PRESCRIBED AUTHORITY COULD NOT HAVE RENEWED THE APPROVAL GRA NTED HAD THERE BEEN ANY MATERIAL TO INDICATE THAT THE ASSESS EE HAS NOT CARRIED OUT RESEARCH AND DEVELOPMENT WORK, THE STAT UTORY AUTHORITIES WERE NOT JUSTIFIED IN OVER-RIDING THE A PPROVAL GRANTED BY THE PRESCRIBED AUTHORITY AND DENYING THE CLAIM O F DEDUCTION U/S 80IB (8A). WHEREAS IT IS THE CONCLUSION OF THE CIT (A) THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS FOR CLAIM ING DEDUCTION U/S 80IB(8A) OF THE ACT. THE REASON FOR COMING TO S UCH CONCLUSION, AS CAN BE SEEN FROM HIS FINDING EXTRACT ED HEREIN ABOVE, IS ON THE BASIS OF THE FACT THAT THE ASSESS EE HAS NOT PRODUCED ANY SUPPORTING EVIDENCE TO SUBSTANTIATE I TS CLAIM. AS CAN BE SEEN FROM THE FACT ON RECORD, THE CLAIM OF D EDUCTION U/S 80IB(8A) WAS DENIED BY THE CIT (A) MAINLY ON THE B ASIS OF THE FACT THAT THE ASSESSEE HAS NOT FURNISHED EVIDENCE T O SHOW THAT IT HAS FULFILLED ALL THE CONDITIONS AS LAID DOWN UNDE R RULE 18DA OF IT RULES. 34. HOWEVER, FACT REMAINS THAT THE PRESCRIBED AUTHO RITY UNDER THE ACT HAS NOT ONLY APPROVED THE ASSESSEE AS A RES EARCH AND DEVELOPMENT COMPANY ELIGIBLE FOR DEDUCTION U/S 80IB (8A) BUT HAS ALSO RENEWED SUCH APPROVAL FROM TIME TO TIME. T HE APPROVAL GRANTED AND SUBSEQUENT RENEWAL OF THE APPROVAL DOES REVEAL THE FACT THAT THE PRESCRIBED AUTHORITY HAS GRANTED SUCH APPROVAL AND SUBSEQUENT RENEWAL BEING SATISFIED WITH THE FACT TH AT THE ASSESSEE IS ELIGIBLE FOR AVAILING DEDUCTION U/S 80I B(8A) OF THE ACT. THE FACT ON RECORD ALSO REVEAL THAT BEFORE THE FIRS T APPELLATE AUTHORITY, THE ASSESSEE HAD PRODUCED ALL THE DETAIL S TO DEMONSTRATE THE FACT THAT THE CONDITIONS ENSHRINED FOR AVAILING THE BENEFIT U/S 80IB (8A) OF THE ACT HAS BEEN FULFI LLED. IN AFORESAID VIEW OF THE MATTER, THE CIT (A) CANNOT OV ER-RIDE THE 35 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. APPROVAL/RENEWAL GRANTED BY THE PRESCRIBED AUTHORIT Y AND DENY THE BENEFIT TO THE ASSESSEE BY MERELY STATING THAT THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH EVIDENCE. THE CIT (A) HAS NOT MENTIONED WHAT MORE CLINCHING EVIDENCE WAS REQUIRED TO ESTABLISH THE CLAIM OF THE ASSESSEE. THAT APART WHEN THE PRES CRIBED AUTHORITY HAS GRANTED APPROVAL/RENEWAL TO THE ASSES SEE AS A RESEARCH AND DEVELOPMENT ORGANISATION IT IS ELIGIBL E FOR DEDUCTION U/S 80IB (8A) OF THE ACT. THE STATUTORY AUTHORITY CANNOT DENY SUCH BENEFIT TO THE ASSESSEE DURING SUBSISTENCE OF SUCH APPROVAL GRANTED BY THE PRESCRIBED AUTHORITY. THE CO-ORDINA TE BENCH OF THIS TRIBUNAL WHILE CONSIDERING A SIMILAR ISSUE IN CASE OF ACIT VS. SMALL IS BEAUTIFUL (ITA 1004 AND 1005/HYD/2012 DATE D 4-7-2013 AFTER FOLLOWING THE DECISION OF AHMEDABAD BENCH IN CASE OF ITO VS. GUJARAT INFORMATION TECHNOLOGY FUND IN ITA NO. 2264/HYD/07 AND OTHERS DATED 27-5-11 HAS HELD THAT THE ASSESSEE IS ENTITLED TO AVAIL EXEMPTION U/S 10(23FB) TILL THE CERTIFICATE GRANTED BY THE SEBI IS NOT SPECIFICALLY WITHDRAWN. IN THE APPEAL BEFORE US, ADMITTEDLY THERE IS NO MATERIAL ON RECORD BEFORE US TO SHOW THAT THE APPROVAL GRANTED BY THE ASSESSEE HAS BEEN WITHD RAWN BY THE PRESCRIBED AUTHORITY. IN THE AFORESAID CIRCUMSTANC ES, THEREFORE THE DEDUCTION CLAIMED U/S 80IB(8A) CANNOT BE DENIED TO THE ASSESSEE TILL SUCH TIME THE ASSESSEE IS APPROVED A S RESEARCH AND DEVELOPMENT ORGANISATION BY THE PRESCRIBED AUTHORIT Y. IN AFORESAID VIEW OF THE MATTER, WE SET ASIDE THE ORDE R OF THE CIT (A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION U/S 80IB(8A) OF THE ACT. WE MAY FURTHER MAKE IT CLEAR THAT THIS DECISION OF OURS, ALLOWING ASSES SEES CLAIM OF DEDUCTION U/S 80IB (8A) IS ON CONSIDERING THE FACTS INVOLVED IN THE PRESENT APPEAL AND IS CONFINED TO THE ASSESSMEN T YEAR UNDER CONSIDERATION BEFORE US AND IT CANNOT BE CONSTRUED TO UNIFORMLY APPLY TO THE SUBSEQUENT ASSESSMENT YEARS ALSO THE CLAIM OF 36 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD. DEDUCTION U/S 80IB(8A) OF THE ACT FOR THE SUBSEQUEN T ASSESSMENT YEARS WILL HAVE TO BE DECIDED ON THE BASIS OF THE F ACTS AS MAY BE INVOLVED IN THOSE ASSESSMENT YEARS. 35. IN THE RESULT, ITA NO. 215/HYD/12 IS ALLOWED AN D ITA NO.1276/HYD/10 IS ALLOWED IN PART. ORDER IS PRONOUNCED IN THE OPEN COURT ON 2-8-2013. SD/- ( CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 2 ND AUGUST, 2013 COPY TO:- 1) GVK BIOSCIENCES (P) LTD., 210, 6-3-1192, KUNDANBAGH, BEGUMPET, HYDERABAD. 2) ADDL.CIT, RANGE-2, HYDERABAD. 3) CIT (A) III, HYDERABAD. 3) CIT , HYDERABAD. 5.THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. JMR* 37 ITA NOS. 215 OF 2012 AND 1276 OF 2010 GVK BIO SCIENCES P.LTD., HYD.