Sun Pharmaceuticals Industries Ltd. (Erstwhile Ranbaxy Laboratories Ltd.), Baroda V. The Pr. CIT, Central Circle-2, Baroda

ITA 1390/AHD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9716 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 24-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N PARBAT
• Assessee Lawyers: PARIN SHAH ARS; S N SOPARKAR SHRI P M MEHTA
• Keywords: Opportunity of being heard; Wrong claim; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO. 1390/AHD/2016 (ASSESSMENT YEAR: 2009-10) SUN PHARMACEUTICAL INDUSTRIES LTD. (ERSTWHILE RANBAXY LABORATORIES LTD.) SPARC, TANDALJA, BARODA - 390020 APPELLANT VS. PR. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, 2 ND FLOOR, AAYKAR BHAVAN, RACE COURSE CIRCLE, BARODA - 390007 RESPONDENT PAN: AADCS3124K / BY ASSESSEE : SHRI S. N. SOPARKAR, SHRI P. M . MEHTA & SHRI PARIN SHAH, A.RS. / BY REVENUE : SHRI R. N. PARBAT, CIT. D.R. /DATE OF HEARING : 14.10.2016 /DATE OF PRONOUNCEMENT : 22 .12.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 ARISES AGAINST THE PRINCIPAL CIT-2, VADODARAS ORDER DATED 28.03.2016, IN CASE NO. PR.CIT- ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 2 - 2/263/4/2015-16, IN PROCEEDINGS UNDER SECTION 263 O F THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. WE COME TO ASSESSEES PLEADINGS FIRST. IT CHALL ENGES THE PCITS ORDER IN QUESTION REVISING A REGULAR ASSESSMENT FRAMED ON 30.01.2014 BY THE ASSESSING OFFICER ON THE GROUND THAT HE HAD WRONGLY ACCEPTED ITS CLAIM OF WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT INVOLVING REVENUE AND CAPITAL EXPENSES OF RS.2,03,86,37,456/- AND RS.33,90,67,854 /-; RESPECTIVELY AGGREGATING TO RS.237,77,05,310/-. LEARNED PCIT FU RTHER DIRECTS THE ASSESSING OFFICER TO FRAME AFRESH ASSESSMENT IN ASS ESSEES CASE. ALL THIS CULMINATES INTO ASSESSEES GRIEVANCE AS ADJUDICATED IN THE INSTANT APPEAL HEREUNDER. 3. WE ADVERT TO THE RELEVANT FACTS NOW. THE ASSESS EE (EARLIER M/S. RANBAXY LABORATORIES LTD.) IS A COMPANY MANUFACTURI NG AND TRADING IN PHARMACEUTICALS AND BULK DRUGS. IT FILED ITS RETUR N ON 27.09.2009 STATING LOSS OF RS.44,14,10,77,665/- ALONG WITH BOOK LOSS COMPUT ED U/S.115JB AMOUNTING TO RS.29,47,15,15,100/-. THE ASSESSING OFFICER TOO K UP SCRUTINY. HE ISSUED SECTION 143(2) NOTICE ON 23.08.2010 INTER ALIA SEEK ING DETAILS OF ASSESSEES WEIGHTED DEDUCTION CLAIM RAISED HEREINABOVE ALONGWI TH NECESSARY APPROVAL THEREOF. THE ASSESSEE FILED REPLY ON 10.09.2010 PL ACING ON RECORD THE ABOVE PARTICULARS SOUGHT FOR. IT IS EVIDENT TO US THAT A SSESSEES RETURN FILED ALSO CONTAINED ITS NOTES OF ACCOUNTS STATEMENT INDICATIN G THE FACTUAL BACKDROP OF ITS WEIGHTED DEDUCTION CLAIM. IT TRANSPIRES THAT A SSESSEES IN HOUSE RESEARCH AND DEVELOPMENT FACILITIES WERE APPROVED BY THE PRE SCRIBED AUTHORITY ON 11.06.2009 QUA THE IMPUGNED EXPENSES INCURRED DURIN G THE FINANCIAL YEAR 2008-09. THE ASSESSING OFFICER THEN FRAMED A REGUL AR ASSESSMENT ON 30.01.2014 ACCEPTING ASSESSEES ABOVE WEIGHTED DEDU CTION CLAIM. ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 3 - 4. THIS CASE FILE INDICATES THAT THE LEARNED PCIT T HEREAFTER SOUGHT TO REVISE THE ABOVE REGULAR ASSESSMENT BY EXERCISING S ECTION 263 REVISIONAL JURISDICTION. HE ISSUED A SHOW CAUSE NOTICE DATED 10.03.2016 FOR THE FOLLOWING REASONS: 2. IF WAS NOTICED FROM THE RECORDS THAT THE ASSESS ES HAD CLAIMED DEDUCTION U/S. 35(2AB) OF THE ACT ON ACCOUNT OF R & D REVENUE AND CAPITAL EXPENDITURE @ 100% AND 150% RESPECTIVELY IN THE RETURN OF INCOME, WITHOUT THE APPROVAL OF THE PRESCRIBED AUTHORITY I.E. DSIR IN FORM 3CL, AS UNDE R : PARTICULARS WEIGHTED DEDUCTION THE ASSESSEE CLAIMED BY DEDUCTION CLAIMED OF R & D REVENUE EXPENDITURE @ 150% RS. 2,03 ,86,37,456/- DEDUCTION CLAIMED OF R & D CAPITAL @ 150% RS. 33,90,67,854/- TOTAL WEIGHTED DEDUCTION CLAIMED RS. 237,77,05,310/- THE A.O. WHITE FINALISING ASSESSMENT U/S. 143(3) OF THE ACT ALLOWED THE WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT OF RS.237,77,05,31 0/-, CLAIMED BY THE ASSESSEE (WITHOUT THE APPROVAL OF THE PRESCRIBED AUTHORITY I .E. D.S.I.R. IN FORM 3CL, THOUGH THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE SA ID DEDUCTION IN ACCORDANCE WITH THE PROVISION OF SECTION 35(2AB) READ WITH RULE 06 OF I.T. ACT THE ASSESSING OFFICER, ERRED IN NOT APPRECIATING TH E FACTS IN PROPER PERSPECTIVE AND DID NOT MADE DISALLOWANCE OF RS.237,77,05,310/- TO THE TOTAL INCOME OF THE ASSESSEE., WHILE FINALIZING ASSESSMENT U/S. 143(3) OF THE ACT, THOUGH THE ASSESSEE BY CLAIMING DEDUCTION U/S. 35(2AB) OF THE ACT WITHOUT FULFILLING CONDITIONS LAID DOWN FOR CLAIMING DEDUCTION, HAD REDUCED ITS TAXABLE INC OME AND CONSEQUENTLY REDUCED ITS TAX LIABILITY. 3. IN VIEW OF THE ABOVE MENTIONED FACTS, IT IS CLEA RLY ESTABLISHED THAT THE A.O. DID NOT PROPERLY EXAMINE AND HAD NOT APPLIED HIS MIND F OR MAKING ADDITION ON THE ISSUE OF EXCESS CLAIM OF WEIGHTED DEDUCTION U/S. 35 (2AB) OF THE ACT, WHILE PASSING ORDER U/S. 143(3) R.W.S. 144(C) OF THE ACT., THEREF ORE, THE ORDER DATED 30-01-2014 U/S. 143(3) R.W.S. 144(C) OF THE ACT PASSED BY THE ADDL. C.I.T. RANGE-15, NEW DELHI HAS BEEN FOUND TO BE ERRONEOUS IN SO FAR AS I T IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN VIEW OF DISCUSSION MENTIONED IN ABO VE PARA, IT IS PROPOSED TO TAKE SUITABLE ACTION U/S 263 OF THE INCOME-TAX ACT, 1961 IN RESPECT OF AFORESAID ORDER, 4. IN THE ABOVE CIRCUMSTANCES, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS CONSIDERED TO BE ERRONEOUS AS WELL AS PR EJUDICIAL TO THE INTEREST OF REVENUE. YOU ARE, THEREFORE, ALLOWED AN OPPORTUNITY OF BEING HEARD AND SHOW CAUSE AS TO WHY AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT WITHIN THE MEANING OF SECTION 263 OF THE I. T. ACT MAY NOT BE PASSED IN THE CASE OF ASSE SSEE COMPANY.' ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 4 - 5. THE ASSESSEE FILED REPLY TO THE ABOVE SHOW CAUSE NOTICE ON 21.03.2016. IT FIRST OF ALL RAISED A LEGAL CONTENTION THAT THE ABOVE ASSESSMENT SOUGHT TO BE REVISED WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO IN TEREST OF THE REVENUE AS PER HONBLE APEX COURTS LAND MARK DECISION IN MALABAR INDUSTRIAL CO. VS. CIT 243 ITR 83 (SC). IT THEN PLEADED TO HAVE PLACED AL L NECESSARY DOCUMENTS OF HAVING CARRIED OUT IN HOUSE RESEARCH AND DEVELOPMEN T FOR THE PURPOSE OF CLAIMING THE ABOVE WEIGHTED DEDUCTION U/S.35(2AB) O F THE ACT SINCE HAVING FILED NOTES TO RETURN OF INCOME, COMPUTATION OF INC OME ALONG WITH CLAUSE 15 OF TAX AUDIT REPORT AS FOLLOWED BY ITS REPLY TO THE SCRUTINY NOTICE HEREINABOVE. THE ASSESSEE WOULD HIGHLIGHT THE FACT OF HAVING OBT AINED FORM 3CM APPROVAL FROM THE PRESCRIBED AUTHORITY. THE ASSESS EES CASE THEREAFTER WAS THAT IT FULFILLED EACH AND EVERY CONDITION FOR CLAI MING THE IMPUGNED WEIGHTED DEDUCTION AS PRESCRIBED U/S.35(2AB) OF THE ACT READ WITH RULE 6 OF THE INCOME TAX RULES. IT FURTHER QUOTED A CATENA OF CA SE LAW TO BUTTRESS ALL ITS SUBMISSIONS. WE FIND THAT ALL THIS FAILED TO IMPRE SS LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX. HE DECLINES ASSESSEES VARIOUS PLEAS IN THE ORDER UNDER CHALLENGE EXTRACTED AS FOLLOWS: 5. I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSION OF THE ASSESSEE. THE CONTENTION OF THE ASSESSEE IS NOT ACC EPTABLE IT IS AN UNDISPUTED LEGAL POSITION THAT WHERE THE A.O, HAS N OT COMPUTED THE CORRECT TOTAL INCOME OR ALLOWABLE CLAIM OR DEDUCTION AND WH ERE NO PROPER ENQUIRIES, INVESTIGATIONS OR EXAMINATION OF THE MAT ERIALS HAS BEEN CARRIED OUT, SUCH ASSESSMENT ORDER IS ERRONEOUS IN SO FAR A S PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THAT CALLS FOR ACTION U /S. 263 OF THE ACT IF THE A.O HAD DONE SO, THE COMPUTATION OF INCOME OR ALLOW ANCE WOULD HAVE BEEN IN CONFORMITY OF FACTS AS WELL AS IN !AW. IT IS NOT ICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S, 35(2AB) ON ACCOUNT OF R & D REVENUE AND CAPITA! EXPENDITURE @ 50% & 150% RESPECTIVELY. THE ASSESSEE HAS WRONGLY CLAIMED AND WAS ALLOWED WEIGHTED DEDUCTION FOR R & D EXPENDITURE BY THE A.O,, THOUGH THE ASSESSEE DID NOT SUBMIT REPORT OF THE PRESCRIBED AUTHORITY I.E. D.S.I.R. IN FORM 3CL. THIS SHOWS THAT THE AO H AS FAILED TO TAKE NOTICE OF THE CLAIM OF THE ASSESSEE AND ERRONEOUSLY ALLOWE D THE WRONG CLAIM MADE BY THE ASSESSEEE, WHICH MEANS THAT THE ORDER SO PAS SED IS ERRONEOUS WITHIN THE MEANING OF SECTION 263 OF THE ACT. FURTHER EXCE SS WEIGHTED DEDUCTION ALLOWED WAS NOT IN ACCORDANCE WITH LAW AS LAID DOWN BY ACT AND JUDICIAL PRONUCEMENT, THEERFORE THE ORDER PASSED BY THE AO I S PREJUDCIAL TO THE ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 5 - INERREST OF REVENUE. THUS THE TWIN CONDITION AS LAI D DOWN IN THE DECISION OF MALABAR INDUSTRIAL CASE ( SUPRA) ARE SATISFIED IN T HIS CASE. HENCE, THE ORDER SOUGHT TO BE REVISED IS ERRONEOUS AS WELL PREJUDICI AL TO THE INTEREST OF REVENUE. HENCE , THE CONTENTION OF THE ASSESSEE IS NOT TENABLE IN LAW. 6. WITH REGARDS TO THE SUBMISSIONS ON MERIT ON WEI GHTED DEDUCTION CLAIMED BY THE ASSESSEE U/S. 35(2AB) , IT WAS SUBMI TTED BY THE ASSESSEE THAT IT WAS NOT A DEVIATION FROM THE LAW, OUT WAS IN ACC ORDANCE WITH THE PROVISION OF SECTION 35(21AB) R.W.S. R. 6 OF THE IN COME TAX RULES. RELYING ON THE PROVISIONS OF SECTION 35(2AB) OF THE ACT AND VARIOUS JUDICIAL DECISIONS, THE ASSESSEE CONTENDED THAT THE A.O AFTE R VERIFYING THE ANNUAL ACCOUNTS, RETURN OF INCOME AND TAX AUDIT REPORT, TH E ASSESSING OFFICER HAD DECIDED TO ACCEPT THE CONTENTION OF THE ASSESSEE. I T WAS THE ASSESSEESSEE'S VIEW THAT THERE IS NO REQUIREMENT UNDER THE INCOME TAX ACT OR THE INCOME TAX RULES FOR EITHER THE ASSESSEE TO PRODUCE FORM 3 CL AND THE A.O. TO ALLOW DEDUCTION ONLY ON THE PRODUCTION OF FORM 3CL. THE ASSSESSEE ALSO CONTENTED THAT THE ISSUANCE OF FORM 3CL WAS NOT THE OBLIGATION OF THE ASSESSEE AND IT CANNOT BE DENIED OF BENEFITS WHICH IT WAS 3CL WAS NOT THE OBLIGATION OF THE ASSESSEE AND IT CANNOT BE DENIED OF BENEFITS WHICH IT WAS OTHERWISE ENTITLED TO BECAUSE OF NON ISSUANCE OF FO RM 3CL WHICH WAS THE RESPONSIBILITY OF THE DSIR. IT WAS THE ASSESSEE'S C ONTENTION THAT THE ASSESSING OFFICER AFTER CONSIDERING ALL THE RELEVAN T FACTUAL DETAILS AND AFTER CONSIDERING THE JUDICIAL PRECEDENTS ON THE SUBJECT HAD DECIDED TO ALLOW DEDUCTION U/S. 35(2AB) EVEN WHERE THE ASSESSEE HAD NOT RECEIVED FORM 3CL, THE ASSESSEE FURTHER CONTENDED THAT IT HAD FUL FILLED ALL THE CONDITIONS FOR CLAIMING DEDUCTION U/S. 35(2AB) OF THE ACT. THE ASSESSEE COMPANY VIDE ITS ABOVE REFERRED LETTER DATED 21-03-2016, HAS FIL ED FORM NO. 3CH (ORDER OF APPROVAL OF IN HOUSE RESEARCH AND DEVELOPMENT FA CILITY) ISSUED BY SECRETARY, D.S.R.I.R, NEW DELHI ON 11-06-2009. 6.1 I HAVE CONSIDERED THE FACTS OF THE CASE ON MER IT AND OF THE VIEW THAT THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE . ON A PLAIN READING OF SECTION 35(2AB), OF THE ACT, IT IS CRYSTAL CLEAR TH AT EXPENDITURE ON SCIENTIFIC RESEARCH OR IN HOUSE RESEARCH FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY I.E.. D.S.I.R SHALL BE ALLOWED AS DEDUCTI ON. FURTHER RULE 6(7A) OF THE I.T. RULES READ AS UNDER : 'RULE 6(7A) APPROVAL OF EXPENDITURE INCURRED ON IN HOUSE RESEARCH AND DEVELOPMENT FACILITY BY A COMPANY UNDER SUB-SECTION 2(AB) OF SECTION (1AB) SHALL BE SUBJECT TO THE FOLLOWING CONDITIONS NAMELY : (A) THE FACILITY SHOULD NOT RELATE PURELY TO MARKET RESEARCH, SALES PROMOTION QUALITY CONTROL, TESTING, COMMERCIAL PROD UCTION, STYLE CHANGES, ROUTING DATA COLLECTION OR ACTIVITIES OF A LIKE NATURE (B) THE PRESCRIBED AUTHORITY SHALL SUBMIT ITS REPO RT IN RELATION TO THE APPROVAL OF IN HOUSE RESEARCH AND DEVELOPMENT FACIL ITY IN FORM NO. 3CL TO THE DIRECTOR GENERAL (INCOME TAX EXEMPTI ON) WITHIN 60 DAYS OF ITS GRANTING APPROVAL ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 6 - (C) THE COMPANY SHALL MAINTAIN A SEPARATE ACCOUNT FOR EACH APPROVED FACILITY, SHALL BE AUDITED ANNUALLY AND A COPY THER EOF SHALL BE FURNISHED TO THE SECRETARY, DEPARTMENT OF SCIENTIFI C AND INDUSTRIAL RESEARCH BY 31 ST DAY OF OCTOBER OF EACH SUCCEEDING YEAR (D) ASSETS ACQUIRED IN RESPECT OF DEVELOPMENT OF SCIENTIFIC RESEARCH AND DEVELOPMENT FACILITY SHALL NOT BE DISPOSED OF W ITHOUT THE APPROVAL OF THE SECRETARY, DEPARTMENT OF SCIENTIFI C AND INDUSTRIAL RESEARCH 6.2. THE ASSESSEE COMPANY, VIDE ITS ABOVE REFERRED LETTER DATED 21-03- 2016 HAS SUBMITTED COPY OF ORDER OF APPROVAL OF TN- HOUSE RESEARCH AND DEVELOPMENT FACILITY IN FORM 3CM, BUT HAS NOT FILED FORM NO. 3CL I.E. APPROVAL OF EXPENDITURE ISSUED BY THE SECRETARY, D. S.I.R. 6.3 FROM THE ABOVE IT IS CLEAR THAT APPROVAL OF EX PENDITURE ON IN HOUSE RESEARCH AND DEVELOPMENT FACILITY BY D.S.I.R, IS A PRE CONDITION FOR CLAIMING DEDUCTION U/S. 35(2AB) OF THE ACT,. IT THU S IMPLIES DEDUCTION U/S. 35(2AB) OF THE ACT IS DETERMINED AND ALLOWABLE TO T HE EXTENT OF EXPENDITURE ON SCIENTIFIC RESEARCH OR ON IN HOUSE RESEARCH AND DEVELOPMENT FACILITY APPROVED BY D.S.I.R. HAD IT NOT BEEN SO, WHEN WORDS 'EXPENDITURE INCURRED' WOULD NOT HAVE FIND PLACE IN THE CONTENTS OF RULE_6(7A) OF I.T. RULES. THE PROVISION OF SECTION 35(2AB) MANDATES TH AT APPROVAL OF D.S.I.R., IS THE APPROPRIATE AUTHORITY VESTED WITH THE POWERS TO DETERMINE THE EXTENT TO WHICH APPROVAL OF EXPENDITURE CAN BE ACCORDED TO AN ASSESSEE WHO HAS INCURRED EXPENDITURE ON R & D FACILITY, AFT ER CONSIDERING AIL THE ISSUES INVOLVED., AFTER PURSUING THE REPORT OF THE ASSESSEE IN THE MATTER. THE INTENTION OF THE LEGISLATURE IN INTRODUCING THE CON CEPT OF APPROVAL OF EXPENDITURE ON R & D IN SECTION 35(2AB) R.W.R 6 OF THE ACT IS TO ENABLE THE ASSESSEE TO ACHIEVE THE OBJECTIVE OF ENJOYING FRUIT S OF R & D FACILITY FOR FURTHERANCE OF ITS BUSINESS ACTIVITY AND AT THE SAM E TIME TO ENSURE THAT THE ASSESSEE IS NOT ALLOWED TO CLAIM EXCESS WEIGHTED DE DUCTION U/S, 35(2AB) OF THE ACT. THUS THE APPROVAL OF EXPENDITURE ACCORDED BY D.S.I.R. IN FORM 3CL IS A GUIDING FACTOR TO THE A.O. TO DETERMINE AS TO WHETHER THE ASSESSEE HAD CORRECTLY CLAIMED WEIGHTED DEDUCTION U/S. 35(2AB) O F THE ACT OR NOT. IN THE INSTANT CASE, THE ASSESSEE HAS NOT PRODUCED ANY EVI DENCE TO PROVE THAT IT HAD FILED ALL REQUISITE DOCUMENTS AND SUBMITTED REP ORT FOR PURPOSE OF CERTIFICATION OF CLAIM OF R & D EXPENDITURE BY ITS STATUTORY AUDITOR TO THE D.S.I.R. TO ENABLE THE D.S.I.R. TO ISSUE ORDER OF A PPROVAL OF SAID EXPENDITURE IN FORM 3CL. THE ASSESSEE COMPANY CANNO T BE ALLOWED TO CLAIM WEIGHTED DEDUCTION U/S. 356(2AB) OF THE ACT, WITHOUT PRODUCTION OF APPROVAL OF EXPENDITURE ON R & D IN FORM NO. 3CL. 6.4. THE ASSESSEE HAS CLAIMED WEIGHTED DEDUCTION FOR R & D EXPENDITURE OF CAPITAL EXPENDITURE MENTIONED HEREUN DER DEDUCTION CLAIMED OF R & D EXPENDITURE @ 50% OF REVENUE DEBITED IN P & L A/C. REVENUE EXPENDITURE RS. 2,03,86,37,456/- ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 7 - DEDUCTION CLAIMED OF R & D CAPITAL EXPENDITURE 150% RS. 33,90,67,854/- TOTAL, WEIGHTED DEDUCTION CLAIMED RS. 2,37,77,05,310/- 6.5. THE A.O. HAD SIMPLY ACCEPTED THE ASSESSEE'S C ONTENTION ON CLAIM OF WEIGHTED DEDUCTED U7S. 35(2AB) OF THE ACT PERTAININ G TO R & D CAPITAL EXPENDITURE AS WELL AS REVENUE EXPENDITURE ON FACE VALUE WITHOUT GOING INTO MERITS OF ASSESSEE'S SUBMISSION IN THIS REGARD . THE ABOVE FACTS REVEAL THAT THE A.O. BY NOT MAKING DISALLOWANCE OF WEIGHTE D DEDUCTION U/S. 35(2AB) OF THE ACT TO THE TUNE OF RS. 2,37,77,05,31 07- IN HIS ORDER U/S. 1433(3) R.W.S. 144C OF THE ACT, FAILED TO ANALYSE T HE FACTS CORRECTLY IN PROPER PERSPECTIVE. THEREFORE, THE ORDER OF THE A. O. IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE 6. WE HAVE HEARD BOTH THE PARTIES. CASE FILE PERUS ED. THERE DOES NOT APPEAR TO BE ANY DISPUTE THAT THE ASSESSEE IS ADMIT TEDLY AN ENTITY RUNNING THE SPECIFIED IN HOUSE RESEARCH AND DEVELOPMENT FACILIT IES. THE PRESCRIBED AUTHORITY IN THE INSTANT CASE IS THE DSIR I.E. DE PARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH, MINISTRY OF SCIENCE & TECHNOLO GY, GOVERNMENT OF INDIA. THIS PRESCRIBED AUTHORITY HAS UNDISPUTEDLY ISSUED ORDER OF APPROVAL OF IN HOUSE RESEARCH & DEVELOPMENT FACILITY U/S.35( 2AB) OF THE INCOME TAX ACT, 1961 IN FORM 3CM ON 11.06.2009 AS PERTAINING TO THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR. IT FURTH ER CONTAINS A LIST OF ASSESSEES VARIOUS IN HOUSE RESEARCH & DEVELOPMEN T FACILITIES. LD. PCITS CASE AS MADE OUT IN HIS ABOVE EXTRACTED FINDINGS IS THAT THE ASSESSEE HAS FAILED TO PRODUCE FORM 3CL WITH RESPECT TO APPROVAL OF ITS IMPUGNED REVENUE AND CAPITAL EXPENSES. HIS VIEW IS THAT THE ASSESSING O FFICER OUGHT NOT TO HAVE ACCEPTED ASSESSEES WEIGHTED DEDUCTION IN ABSENCE O F THE ABOVE APPROVAL FORM 3CL. 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS AS WELL AS LD. PCITS CONCERN EXPRESSED IN ORDER REVIS ING THE ABOVE REGULAR ASSESSMENT. WE DEEM ITS APPROPRIATE AT THIS STAGE TO THROW SOME LIGHT ON THE NATURE AND AMBIT OF FORM 3CL. THE SAME COMES UNDER RULE 6(7A) OF THE INCOME TAX RULES, 1962 FRAMED UNDER THE PROVISIONS OF THE ACT. THE ABOVE ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 8 - SUB RULE IS RELEVANT FOR APPROVAL OF EXPENDITURE IN CURRED ON IN HOUSE RESEARCH & DEVELOPMENT FACILITY BY A COMPANY U/S.35(2AB). S UB CLAUSE (B) THEREOF IS THE SPECIFIC PROVISION THERETO STIPULATING THAT THE PRESCRIBED AUTHORITY SHALL SUBMIT ITS REPORT IN RELATION TO THE APPROVAL OF IN HOUSE RESEARCH & DEVELOPMENT FACILITY IN FORM NO.3CL TO THE DIRECTOR GENERAL (INCOME TAX EXEMPTIONS) WITHIN 60 DAYS OF ITS GRANTING APPROVAL . THE SAME IS MERELY IN THE FORM OF INTIMATION TO BE SENT FROM PRESCRIBED A UTHORITYS END TO THE DEPARTMENT. AN ASSESSEE ENGAGED IN SUCH RESEARCH & DEVELOPMENT ACTIVITY HAVING ALREADY OBTAINED FORM 3CM APPROVAL OF ITS FA CILITY HAS NO ROLE TO PLAY IN SUCH CORRESPONDENCE. WE NOTICE THAT A CO-ORDINA TE BENCH OF THIS TRIBUNAL IN ACIT VS. M/S. TORRENT PHARMACEUTICALS ITA NO.356 9/AHD/2004 DECIDED ON 13.11.2009 HOLDS THAT THE IMPUGNED WEIGHTED DEDU CTION IS NOT TO BE RESTRICTED TO THE EXTENT OF THE AMOUNT OF THE NECES SARY EXPENDITURE INCURRED STATED IN SUCH FORM 3CL. WE FURTHER FIND THAT HON BLE JURISDICTIONAL HIGH COURTS DECISION IN CIT VS. CLARIS LIFESCIENCES LT D. (2010) 326 ITR 251 (GUJARAT) UPHOLDS THIS TRIBUNALS DECISION IN T HE VERY ASSESSEES CASE OBSERVING THAT EXPENSES INCURRED BEFORE FORM 3CM AP PROVAL CANNOT BE DENIED FOR THE PURPOSE OF SECTION 35(2AB) WEIGHTED DEDUCTION. WE FOLLOW THE VERY REASONING TO OPINE THAT FACTS OF THE INST ANT CASE RATHER GO A STEP FURTHER WHEREIN THE APPELLANT HAS ONLY CLAIMED THOS E EXPENSES WHICH RELATE TO THE TIME PERIOD AS APPROVED IN THE FORM 3CM. WE AC CORDINGLY HOLD THAT THE ASSESSEE IS VERY MUCH ENTITLED FOR CLAIMING THE ABO VE CAPITAL AND REVENUE EXPENSES INCURRED ON IN HOUSE RESEARCH AND DEVELOPM ENT AMOUNTING TO RS.237,77,05,310/-. THE ASSESSING OFFICER HAD RIGH TLY HELD IT ENTITLED FOR THE ABOVE WEIGHTED DEDUCTION AFTER VERIFYING ALL NECESS ARY PARTICULARS DURING THE COURSE OF SCRUTINY. 8. WE MAKE IT CLEAR BEFORE PARTING THAT THE LD. DEP ARTMENTAL REPRESENTATIVE HAS REFERRED TO VARIOUS CASE LAWS I .E. ADDL.CIT VS. MUKUR ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 9 - CORPORATION [1978] 111 ITR 312 (GUJ.), TEJAS NETWO RKS LTD. VS. DCIT [2015] 60 TAXMANN.COM 309 (KARNATAKA), ELECTRONICS CORPN. OF INDIA LTD. VS. ACIT [2012] 28 TAXMANN.COM 280 (HUD.), DCIT VS. MASTEK LTD. [2012] 25 TAXMANN.COM 133 (GUJ.) & EIMCO K.C.P. LTD. VS. C IT [2000] 242 ITR 659 (SC). WE HOWEVER FIND THAT THE FIRST ONE OF TH E ABOVE DECISION DEFINES THE SCOPE OF CITS JURISDICTION VESTED U/S.263 OF T HE ACT. WE REFER FACTS OF THE INSTANT CASE WHEN ONCE AGAIN WHEREIN THE LD. PC IT HAS OBSERVED IN PRECEDING PARAGRAPHS THAT THE SAID JURISDICTION IS TRIGGERED IF ANY ASSESSING OFFICER DOES NOT FRAME AN ASSESSMENT AS PER LAW. W E HAVE ALREADY HELD THAT THE ASSESSEES WEIGHTED DEDUCTION CLAIM RAISED U/S. 35(2AB) OF THE ACT IS VERY MUCH ALLOWABLE. THE FIRST DECISION CITED AT REVENU ES BEHEST IS ACCORDINGLY DISTINGUISHED. NEXT JURIDICAL PRECEDENT IS (2000) 242ITR 659(SC) EIMCO KCP LTD. VS. CIT WHEREIN AMBIT OF SECTION 263 JURIS DICTION IN CASE PENDENCY OF APPEAL PREFERRED BEFORE THE CIT(A) IS DISCUSSED. THE SAME IS ONCE AGAIN NOT RELEVANT. THIRD CASE LAW IS THAT OF MUKUL CORP ORATION (SUPRA) ONCE AGAIN THROWING LIGHT ON NATURE AND SCOPE OF SECTION 263 J URISDICTION. WE HAVE NO REASON TO DISAGREE WITH THE SAME EXCEPT THE FACT TH AT THE ASSESSEE HAS ALREADY MADE OUT ITS CASE FOR CLAIMING THE IMPUGNED WEIGHT ED DEDUCTION. LD. DEPARTMENTAL REPRESENTATIVE THEN INVITES OUR ATTENT ION TO MASTEK CASE LAWS INVOLVING SECTION 35 DEDUCTION CLAIM VIS--VIS SECTION 43(4) OF THE ACT DEFINING SCIENTIFIC RESEARCH WHICH IS NOT GERMANE T O THE ISSUE INVOLVED BEFORE US. LD. DEPARTMENTAL REPRESENTATIVE AT LAST CITES HONBLE KARNATKA HIGH COURTS DECISION IN (2015) 60 TAXMANN.COM 309 TEJAS NETWORKS LTD. VS. DCIT INVOLVING SECTION 35 DEDUCTION CLAIM IN LIGHT OF SECTION 43 ONCE AGAIN. WE HAVE ALREADY OBSERVED THAT HONBLE JURISDICTIONA L HIGH COURT HAS SETTLED THE VERY PROPOSITION IN CLARIS CASE (SUPRA). WE TH EREFORE FIND NO REASON FOR NOT FOLLOWING ON HONBLE JURISDICTIONAL HIGH CO URTS DECISION BINDING UPON US. LD. DEPARTMENTAL REPRESENTATIVE THEN INVITES O UR ATTENTION OF THIS TRIBUNALS HYDERABAD BENCHS DECISION IN ELECTRONIC S CORPORATION OF INDIA ITA NO. 1390/AHD/2016 (SUN PHARMACEUTICAL INDUSTRI ES LTD. VS. PR.CIT) A.Y. 2009-10 - 10 - LTD. NOT TAKING INTO CONSIDERATION THE ABOVE HONBL E JURISDICTIONAL HIGH COURTS DECISION WHICH IS ACCORDINGLY DISTINGUISHED . WE THUS DECLINE REVENUES ARGUMENTS. 9. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF DECEMBER, 2016.] SD/- SD/- (N. K. BILLAIYA) TRUE COPY (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD: DATED 22 /12/2016 S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0