DCIT, Bangalore V. M/s Karnataka State Seeds Corporation Ltd., Bangalore

ITA 1570/BANG/2013

• Counselvise Citation: 157021114 RSA 2013
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 18-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI ADD
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI , JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 1 570 / BANG/20 13 (ASSESSMENT YEAR: 20 10 - 11 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 11(5) , BANGALORE. APPELLANT VS. KARNATAKA STATE SEEDS CORPORATION LTD., BEEJ BHAVAN, BELLARY ROAD, BANGALORE - 56002 4 RESPONDENT PAN: AA CCK1985D APPELLANT BY: DR. P.K.SRIHARI, ADD.CIT(DR) RESPONDENT BY: NONE DATE OF HEARING : 2 0 / 10/2014. DATE OF PRONOUNCEMENT: 31 /10/2014. O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) - I, BANGALORE, DATED 16/8/2013 FOR THE ASSESSMENT YEAR 2010 - 11. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER (AO) TO ALLOW DEDUCTION AT 100% I.E. AT RS.33.71 LAKHS U/S 35 OF THE INCOME - TAX ACT, 1961[HEREINAFTER REFERRED TO AS 'THE ACT'] BY FOLLOWING THE ORDER OF HIS PREDECESSOR EVEN THOUGH THE SAME HAS ITA NO . 1 570 /BANG/20 1 3 KARNATAKA STATE SEEDS CORPORATION LTD. PAGE 2 OF 4 NOT BEEN ACCEPTED BY THE REVENUE AND AN APPEAL IS FILED BEFORE THE TRIBUNAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WHICH IS IN TRADING OF SEEDS, FILED ITS RETURN OF INCOME ON 15/10/2010 DECLARING AN INCOME OF RS.6,90,32,005/ - FOR THE ASSESS MENT YEAR 2010 - 11. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS. 50,56,473/ - U/S 35 OF THE ACT. THE ASSESSEE, VIDE ITS LETTER DATED 10 - 1 - 2013 SUBMITTED THAT BASED ON THE ORDER OF THE GOVERNMENT OF KARNATAKA DATED 19 - 6 - 2006 , AGRICULTURAL DEVELOPMENT CENTRE, DHARWAD WAS TRANSFERRED TO THE ASSESSEE ON 25 YEARS LEASE BASIS FOR ESTABLISHMENT OF VARIETALS RESEARCH & DEVELOPMENT CENTRE (VRDC) WHICH HAS BEEN ESTABLISHED DURI NG 2006 - 07 AND EVERSINCE ITS TRANSFER ASSESSEE IS CARRYING ON THE ACTIVITIES AND THAT THE ASSESSEE HAS INCURRED EXPENDITURE TOWARDS R&D ACTIVITIES DURING THE RELEVANT PREVIOUS YEAR WHICH HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE ALSO F ILED A COPY OF THE CERTIFICATE ISSUED BY THE UNIVERSITY OF AGRICULTURAL SCIENCE, DHARWAD TO PROVE THAT THE ASSESSEE POSSESSES THE REQUISITE INFRASTRUCTURE FACILITY AND LABORATORY FOR CARRYING ON R&D ACTIVITIES IN SEED PRODUCTION. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE ASSESSEE HAS NOT SATISFIED THE CONDITIONS LAID DOWN IN ANY OF THE SUB - SECTION S OF SEC.35 UNDER WHICH THE DEDUCTION HAS BEEN CLAIMED ITA NO . 1 570 /BANG/20 1 3 KARNATAKA STATE SEEDS CORPORATION LTD. PAGE 3 OF 4 AND THAT NECESSARY APPROVALS FROM THE PRESCRIBED AUTHORITY VIZ., THE SECRETARY , DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, GOVT. OF INDIA FOR CLAIMING DEDUCTION U/S 35 HAVE ALSO NOT BEEN FURNISHED. THUS, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE U/S 35 OF THE ACT. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT(A) WHO ALLOWED THE SAME IN PART BY ALLOWING 100% OF EXPENDITURE AS AGAINST THE CLAIM OF 150% BY THE ASSESSEE AND THE REVENUE IS IN APPEAL BEFORE US. 4. THE NOTICE OF HEARING OF THE APPEAL HAS BEEN SERVED ON THE ASSESSEE ON 25 / 9 / 2014. HOWEVER, NONE APPEARED FOR THE ASSESSEE. THEREFORE, AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE EXPARTE QUA THE ASSESSEE, WE DISPOSE OF THE APPEAL AS UNDER: WE FIND THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS BEFORE THE AO IN SUPPORT OF ITS CLAIM O F DEDUCTION U/S 35 BUT BEFORE THE CIT(A), IT HAS FILED THE CERTIFICATE S DATED 29 / 12 / 2007 AND 11 / 9 / 2012 ISSUED BY THE UNIVERSITY OF AGRICULTURAL SCIENCES, BANGALORE AND UNIVERSITY OF AGRICULTURAL SCIENCES, DHARWAD, RESPECTIVELY TO THE EFFECT THAT THE ASSES SEE HAS FACILITIES FOR RESEARCH AND DEVELOPMENT ACTIVITY. UNDER SECTION 35(1)(I), AN ASSESSEE SHALL BE ALLOWED DEDUCTION OF ANY EXPENDITURE (NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED ITA NO . 1 570 /BANG/20 1 3 KARNATAKA STATE SEEDS CORPORATION LTD. PAGE 4 OF 4 ON SCIENTIFIC RESEARCH RELATED TO THE BUSINES S. THE CIT(A) HAS MERELY FOLLOWED THE DECISION OF HIS PREDECESSOR WITHOUT EVEN VERIFYING THE CERTIFICATES FILED BY THE ASSESSEE. HOWEVER, FOR THIS PURPOSE, ASSESSEE HAS TO PROVE THE NATURE OF EXPENDITURE I.E. THAT IT WAS INCURRED BY THE ASSESSEE ON RESEARC H AND DEVELOPMENT . IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE ISSUE NEEDS RE - CONSIDERATION DE NOVO BY THE AO. IN VIEW OF THE SAME, THE ORDER OF THE CIT(A) IS SET ASIDE AND THE ISSUE IS REMANDED TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION, THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 5. IN THE RESULT, THE REVENUE S APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST OF OCTOBER, 2014. S D/ - S D/ - (J ASON P BOAZ) (SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGIST RAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE.