The DCIT, Circle-1(1)(1), Ahmedabad V. M/s. B.A. Research India Ltd., Ahmedabad

ITA 160/AHD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5754 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Keywords: Recovery proceedings; Double taxation relief; Opportunity of being heard; Deemed to accrue or arise in india; Retrospective amendment; Advance ruling
• Section: 143(3); 80IB; 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, VICE-PRESIDENT AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 160/AHD/2015 / ASSESSMENT YEAR: 2010-11 DCIT, CIRCLE 1(1)(1), AHMEDABAD VS. M/S. B A RESEARCH INDIA LTD, B A RESEARCH HOUSE, OPP. PUSHPARAJ TOWER, NR. JUDGES BUNGLOWS, AHMEDABAD-59 PAN : AACCB 4535 A [ / (APPELLANT) / (RESPONDENT) REVENUE BY : MS. VIBHA BHALLA, CIT-DR ASSESSEE BY : SHRI MUKESH PATEL, AR WITH SHRI JIGAR M PATEL / DATE OF HEARING : 13/06/2017 / DATE OF PRONOUNCEMENT: 20/06/2017 / O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER: THIS APPEAL OF REVENUE FOR ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XVI, AHMEDABAD DATED 03.11. 2014 VIDE APPEAL NO.CIT(A)-XVI/CCIT/CIR.1/112/13-14, ARISING OUT OF ORDER UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT), FRAMED ON 21.03.2013 BY THE DCIT, CIRCLE-1, AHMEDABAD. 2. BRIEFLY STATED FACTS, AS CULLED OUT FROM THE REC ORD, ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN CLINICAL TESTING OF DRUG S AND FORMULATIONS ON HUMAN BEINGS. IT FILED ITS RETURN OF INCOME ON 14. 09.2010 DECLARING TOTAL INCOME AT RS.53,33,240/- AFTER CLAIMING DEDUCTION UNDER S ECTION 80IB(8A) OF THE ACT AT RS.29,29,88,657/-. CASE WAS SELECTED FOR SCRUTINY AND NOTICES UNDER SECTION 143(2)/142(1) OF THE ACT WERE ISSUED AND DULY SERVE D UPON THE ASSESSEE ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 2 ALONGWITH QUESTIONNAIRE. NECESSARY DETAILS, AS CAL LED FOR, WERE SUBMITTED. DURING THE COURSE ASSESSMENT PROCEEDINGS, LD. ASSES SING OFFICER EXAMINED THE CLAIM OF DEDUCTION UNDER SECTION 80IB(8A) OF THE AC T; FOR WHICH NECESSARY INFORMATION AND DETAILS WERE PROVIDED. HOWEVER, LD . ASSESSING OFFICER DISALLOWED THE CLAIM BY OBSERVING THAT THE ASSESSEE IS NOT A COMPANY HAVING ITS MAIN OBJECTIVE AS SCIENTIFIC AND INDUSTRIAL RESEARC H AND DEVELOPMENT AND TRANSFER OF SUCH TECHNOLOGY AS ENVISAGED IN SECTION 80IB(8A)(II) OF THE ACT AND RULE 18DA(1)(E) OF THE IT RULES. LD. ASSESSING OFF ICER ALSO MADE DISALLOWANCE OF RS.1,54,55,000/- UNDER SECTION 40(A)(I) FOR NON -DEDUCTION OF TDS ON CLINICAL AND ANALYTICAL STUDY EXPENSES PAID OUTSIDE INDIA. L D. ASSESSING OFFICER ALSO MADE AN ADDITION TOWARDS UNUTILIZED CENVET CREDIT O F RS.1,63,967/-, WHICH, AS PER HIM, WAS LIABLE TO BE INCLUDED IN CLOSING ST OCK AS PER SECTION 145(A) OF THE ACT. AFTER MAKING THE ABOVE DISALLOWANCES, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT RS.31,49,27,888/-. 3. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE TH E LD. CIT(A) AND SUCCEEDED IN GETTING RELIEF AS THE LD. CIT(A) ALLOW ED THE ASSESSEES CLAIM UNDER SECTION 80IB(8A) OF THE ACT BY FOLLOWING THE DECISI ON OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN PRECEDING YEARS. THE LD. CIT(A) ALSO DELETED THE DISALLOWANCE OF RS.1,64,42,023/- MADE BY THE ASSESS ING OFFICER UNDER SECTION 40(A)(I) OF THE ACT AS WELL AS DELETED THE AMOUNT O F RS.1,63,967/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNUTILIZED CENVAT C REDIT. 4. AGGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE T HE TRIBUNAL RAISING THREE GROUNDS WHICH WE WILL ADJUDICATE ONE BY ONE H EREUNDER. 5. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDER :- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT OF RS.29 ,29,88,657/- DESPITE THE FACT THAT THE ASSESSEE HAD NOT FULFILLED ALL THE CONDITI ONS LAID DOWN U/S 80IB(10) OF THE ACT. THE ASSESSEES MAIN OBJECT IS EARNING PROFIT FROM CONTRACT PAYMENTS AND ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 3 NOT SCIENTIFIC /INDUSTRIAL RESEARCH/DEVELOPMENT AS ENVISAGED U/S 80IB(10). THE SAID DEDUCTION CANNOT BE ALLOWED MERELY BECAUSE THE APPROVAL BY THE PRESCRIBED AUTHORITY IS IN FORCE, SINCE IT IS JUST ONE OF THE CONDITIONS FOR CLAIMING DEDUCTION. 6. LD. DR, AT THE OUTSET, SUBMITTED THAT IN VIEW OF THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FO R AYS 2008-09 AND 2009-10 HOLDING THAT ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTIO N U/S 80IB(8A) OF THE ACT AS ITS MAIN OBJECTIVE IS OF SCIENTIFIC AND INDUSTRIAL RESEARCH AND DEVELOPMENT AND TRANSFER OF TECHNOLOGY AS ENVISAGED IN SECTION 80IB (8A)(II)(E) OF THE ACT. HOWEVER, SHE POINTED OUT TO THE FINDINGS OF THE HON BLE JURISDICTIONAL HIGH COURT CLARIFYING THAT THE POWER OF THE ASSESSING OF FICER TO VERIFY THE CLAIM OF DEDUCTION IS NOT TAKEN AWAY. REFERRING TO THIS FIN DING, SHE REQUESTED THAT THE MATTER MAY BE SET ASIDE TO THE FILE OF LD. ASSESSIN G OFFICER FOR THE PURPOSE OF VERIFICATION OF THE CALCULATION OF IMPUGNED CLAIM O F DEDUCTION U/S 80IB(8A) OF THE ACT. 7. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE OBJECTED TO THIS PLEA OF THE LD. DR BY SUBMITTING THAT THE ASSESSEE HAS BEEN CON SISTENTLY GETTING THE BENEFIT OF DEDUCTION UNDER SECTION 80IB(8A) OF THE ACT SINC E AY 2007-08 AND NO MISTAKE HAS BEEN POINTED OUT IN THE CALCULATION OF DEDUCTIONS CLAIMED. FURTHER, NECESSARY CERTIFICATE BY THE CHARTERED ACCOUNTANT H AS BEEN PLACED BEFORE THE LD. ASSESSING OFFICER IN SUPPORT OF THE CLAIM MADE BY T HE ASSESSEE-COMPANY. LD. COUNSEL FURTHER SUBMITTED THAT EVEN IN SUBSEQUENT Y EARS, NO DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER. HE REFERRED TO PAGE NO.47 & 48 OF THE PAPER-BOOK, WHEREIN ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT IN ASSESSEES OWN CASE FOR AY 2014-15 HAS BEEN PLACED AND IN THE SAID ASSESSMENT ORDER FOR AY 2014-15, NO DISALLOWANCE HAS BEEN MADE TOWARDS DEDUCTION CLAIMED UNDER SECTION 80IA(8A) OF THE ACT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE REVENUES GRIEVANCE IN THIS GROUND IS AGAINST ALLOWING THE ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 4 BENEFIT OF DEDUCTION UNDER SECTION 80IB(8A) OF THE ACT OF RS.29,29,88,657/- MADE BY THE ASSESSING OFFICER. WE OBSERVE THAT THE ASSESSEES MAIN OBJECT IS OF CARRYING OUT SCIENTIFIC RESEARCH AND DEVELOPMENT WO RK AND HAS CLAIMED 100% DEDUCTION OF THE PROFITS AND GAINS OF SUCH BUSINESS UNDER SECTION 80IB(8A) OF THE ACT. DURING THE YEAR UNDER CONSIDERATION, THI S CLAIM OF THE ASSESSEE IS AT RS.29,29,88,657/-. LD. CIT(A) DELETED THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER BY EXAMINING THE ACTIVITIES CARRIED OUT BY THE ASSESSEE IN THE LIGHT OF PROVISIONS OF SECTION 80IB(8A) OF THE ACT BY OBSERV ING AS FOLLOWS:- 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS MADE BY THE APPELLANT. IN ORDER TO PROVIDE INCENTIVE FOR RESEAR CH AND DEVELOPMENT, THE FINANCE ACT, 2000 INSERTED A PROVISION UNDER SUB-SE CTION 8A AFTER SUB SECTION (8) OF SECTION 80-IB OF THE INCOME TAX ACT, 1961 FO R COMPANIES CARRYING OUT SCIENTIFIC RESEARCH AND DEVELOPMENT ACTIVITIES. THE RELEVANT PORTIONS OF THE PROVISION OF THE SECTION 80-IB AND THE SUB-SECTION (8A) READS AS FOLLOWS : '......DEDUCTION IN RESPECT OF PROFITS AND GAINS FR OM CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS. 80-IB (1). (2) 80-IB (8A), THE AMOUNT OF DEDUCTION IN THE CASE OF ANY COMPANY CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENTS SHALL BE HU NDRED PER CENT OF THE PROFITS AND GAINS OF SUCH BUSINESS FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS, BEGINNING FROM THE INITIAL ASSESS MENT YEAR, IF SUCH COMPANY:- IS REGISTERED IN INDIA; HAS ITS MAIN OBJECT THE SCIENTIFIC AND INDUSTRIAL R ESEARCH AND DEVELOPMENT; IS FOR THE TIME BEING APPROVED BY THE PRESCRIBED AU THORITY AT ANY TIME AFTER THE 31ST DAY OF MARCH, 2000 BUT BEFORE THE 1S T DAY OF APRIL 2003; FULFILS SUCH OTHER CONDITIONS AS MAY BE PRESCRIBED; FOR THE PURPOSES OF THIS PROVISION 'INITIAL ASSESSM ENT YEAR' MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE COMPANY IS APPROVED BY THE PRESCRIBED AUTHORITY ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 5 2. SECRETARY, DSIR, MINISTRY OF SCIENCE & TECHNOLOG Y HAS BEEN DESIGNATED AS THE PRESCRIBED AUTHORITY AS PER NOTIF ICATION. NO.S.O.85 (E) DATED 31ST JANUARY 2001. THE NOTIFICATION READS AS FOLLOWS: S.O.85(E) IN EXERCISE OF THE POWERS CONFERRED BY SE CTION 295, READ WITH SUB-SECTION (8A) OF SECTION 80-IB, OF THE INCOME-TA X ACT, 1961 (43 OF 1961), THE CENTRAL BOARD OF DIRECT TAXES HEREBY MAK ES THE FOLLOWING RULES FURTHER TO AMEND THE INCOME-TAX RULES, 1962, NAMELY :- 1. (1) THESE RULES MAY BE CALLED THE INCOME-TAX ( 1ST AMENDMENT) RULES, 2001. (2) THEY SHALL COME INTO FORCE ON THE DATE OF THEIR PUBLICATION IN THE OFFICIAL GAZETTE. 2. IN THE INCOME-TAX RULES, 1962, IN PART IV, AF TER RULE 18C, THE FOLLOWING RULE SHALL BE INSERTED, NAMELY:- '18D. PRESCRIBED AUTHORITY FOR APPROVAL OF COMPANIE S CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT: - FOR THE PURPOSE OF SUB-SECTION 8(A) OF SECTION 80-I B THE PRESCRIBED AUTHORITY SHALL BE THE SECRETARY, DEPARTMENT OF SCI ENTIFIC AND INDUSTRIAL RESEARCH, MINISTRY OF SCIENCE & TECHNOLOGY, GOVERNM ENT OF INDIA. THE PRESCRIBED AUTHORITY SHALL INITIALLY GRANT APPR OVAL TO A COMPANY CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT FOR A PERIOD OF THREE ASSESSMENT YEARS AND SUBJECT TO SATISFACTORY PERFOR MANCE OF THAT COMPANY ON PERIODIC REVIEW EXTEND THE SAID APPROVAL FOR A F URTHER PERIOD OF THREE ASSESSMENT YEARS SO THAT THE TOTAL PERIOD OF APPROV AL IS FOR TEN CONSECUTIVE ASSESSMENT YEARS, BEGINNING FROM THE INITIAL ASSESS MENT YEAR. 18DA. PRESCRIBED CONDITIONS FOR DEDUCTION UNDER SUB -SECTION (8A) OF SECTION 80-IB:- ANY. COMPANY CARRYING ON SCIENTIFIC RESEARCH AND DE VELOPMENT SHALL BE ELIGIBLE FOR DEDUCTION SPECIFIED IN SUB-SECTION (8A ) OF SECTION 80-IB, IF SUCH COMPANY - IS REGISTERED IN INDIA; HAS ITS MAIN OBJECT THE SCIENTIFIC AND INDUSTRIAL R ESEARCH AND DEVELOPMENT; HAS ADEQUATE INFRASTRUCTURE SUCH AS LABORATORY FACI LITIES, QUALIFIED MANPOWER, SCALE-UP FACILITIES AND PROTOTYPE DEVELOP MENT FOR UNDERTAKING SCIENTIFIC RESEARCH AND DEVELOPMENT OF ITS OWN; ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 6 HAS A WELL FORMULATED RESEARCH AND DEVELOPMENT PROG RAMME COMPRISING OF TIME BOUND RESEARCH AND DEVELOPMENT PROJECTS WITH P ROPER MECHANISM FOR SELECTION AND REVIEW OF THE PROJECTS OR PROGRAMME; IS ENGAGED EXCLUSIVELY IN SCIENTIFIC RESEARCH AND D EVELOPMENT ACTIVITIES LEADING TO TECHNOLOGY DEVELOPMENT, IMPROVEMENT OF T ECHNOLOGY AND TRANSFER OF TECHNOLOGY DEVELOPED BY THEMSELVES; SUBMITS THE ANNUAL RETURN ALONG WITH STATEMENT OF A CCOUNTS AND ANNUAL REPORT WITHIN EIGHT MONTHS AFTER THE CLOSE OF EACH ACCOUNTING YEAR TO THE PRESCRIBED AUTHORITY..... .......IF, AT ANY STAGE, IT IS FOUND THAT- THE APPROVAL GRANTED TO THE COMPANY REFERRED TO IN SUB-RULE (2) OF RULE 18D IS TO AVOID PAYMENT OF TAXES BY ITS GROUP COMPA NIES OR COMPANIES RELATED TO ITS DIRECTORS OR MAJORITY OF ITS SHAREHO LDERS; ANY PROVISION OF THE ACT OR THE RULES HAVE BEEN VIO LATED, THE PRESCRIBED AUTHORITY SPECIFIED MAY WITHDRAW THE APPROVAL SO GR ANTED.......' PROVIDED FURTHER THAT NO APPROVAL SHALL BE REFUSED UNLESS THE APPLICANT HAS BEEN GIVEN AN OPPORTUNITY OF BEING HEARD'. THUS SINCE THE APPELLANT IS ENGAGED IN THE BUSINESS OF SCIENTIFIC RESEARCH AND DEVELOPMENT, IT BECOMES ELIGIBLE TO CLAIM DEDUC TION UNDER THE PROVISIONS OF THE ACT. MOREOVER, THE SECTION ITSELF READ WITH RUL E 18DA OF THE IT RULES LAYS DOWN THE PRESCRIBED CONDITIONS FOR CLAIMING DEDUCTI ON UNDER THIS SECTION. THE PRESCRIBED AUTHORITY FOR GRANTING APPROVAL TO THE E LIGIBLE COMPANY IS SECRETARY, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH (DSI R), MINISTRY OF SCIENCE & TECHNOLOGY, GOVERNMENT OF INDIA, WHICH CAN GRANT AP PROVAL TO THE COMPANY FOR AN INITIAL PERIOD OF 3 ASSESSMENT YEARS, AND SUBJEC T TO SATISFACTORY PERFORMANCE, CAN EXTEND IT FOR A FURTHER PERIOD OF 3 MORE ASSESS MENT YEARS, UPTO A TOTAL PERIOD OF 10 CONSECUTIVE ASSESSMENT YEARS. RULE 18DA(3) AL SO PROVIDES THAT IF AT ANY STAGE IT IS FOUND THAT THE PROVISIONS OF THE ACT OR RULES HAVE BEEN VIOLATED, THEN THE PRESCRIBING AUTHORITY CAN WITHDRAW THE APPROVAL SO GRANTED. THE APPELLANT WAS GRANTED INITIAL APPROVAL BY THE P RESCRIBED AUTHORITY ON 01.02.07 FOR AY'S 2007-08. 2008-09 AND 2009-10. THI S APPROVAL WAS EXTENDED FOR A FURTHER PERIOD OF 3 YEARS, IE AY'S 2010-11, 2 011-12 AND 2012-13 VIDE LETTER DATED 19.02.2009. THUS IT IS CLEAR THAT THE APPELLA NT FULFILLED THE CONDITIONS WHICH WERE REQUIRED UNDER THE PROVISIONS OF SECTION 80-IA(8A). FURTHER, THE ID CIT(APPEALS)-VI, AHMEDABAD IN HIS O RDER NO CIT(A)- VI/DCIT.CIR-1/266/2011-12 DATED 26-6-2012 HAS CONSI DERED THE IDENTICAL ISSUE ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 7 IN THE APPELLANT'S OWN CASE FOR AY 2009-10. THE MAT TER HAS BEEN EXAMINED AT LENGTH AND THE FINDING OF THE ID CIT(A) IS REPRODUC ED AS UNDER- '..,..2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESSMENT ORDER, APPELLANT'S WRITTEN SUBMISSION AND ARGUMENTS MADE B Y THE AUTHORIZED REPRESENTATIVE AS WELL AS ADDITIONAL CIT. IT IS NOT IN DISPUTE THAT APPELLANT WAS GRANTED APPROVAL UNDER RULE 18D FOR CARRYING ON OF SCIENTIFIC RESEARCH AND DEVELOPMENT BY THE PRESCRIBED AUTHORIT Y I.E. THE DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, MINISTRY OF SCIENCE AND TECHNOLOGY, GOVERNMENT OF INDIA. THE APPROVAL WAS INITIALLY GRA NTED FOR A PERIOD OF THREE ASSESSMENT YEARS WHICH WAS FURTHER EXTENDED. AS PER RULE 18D, PRESCRIBED AUTHORITY GRANTS APPROVAL FOR FURTHER PE RIOD SUBJECT TO SATISFACTORY PERFORMANCE OF THAT COMPANY ON PERIODI C REVIEW. CONDITIONS PRESCRIBED FOR DEDUCTION UNDER SECTION 80IB(8A) ARE GIVEN IN RULE 18DA, THE RELEVANT PARA OF THE GUIDELINES FOR GRANT OF SU CH APPROVAL ISSUED BY GOVERNMENT OF INDIA IS AS UNDER- . '4- THE APPROVAL OF THE PRESCRIBED AUTHORITY SHALL BE GRANTED INITIALLY FOR A PERIOD UP OF 3 YEARS PROVIDED ALL T HE CONDITIONS SET OUT IN THE INCOME TAX ACT/RULES ARE FULFILLED' FROM THE ABOVE IT IS CLEAR THAT APPROVAL TO ELIGIBL E COMPANY IS GRANTED BY THE DSIR ONLY ON FULFILLMENT OF PRESCRIBED CONDITIO NS SET OUT IN THE INCOME TAX ACT/RULES. APPELLANT'S COUNSEL STRESSED ON THIS ASPECT AND CLAIMED THAT ALL THE CONDITIONS MENTIONED IN RULE 1 8 DA READ WITH SECTION 801 A (8A) ARE FULFILLED. EVEN AFTER GRANTING THE A PPROVAL BY THE PRESCRIBED AUTHORITY, SUB-RULE (3) OF RULE 18 DA GI VES POWER TO DSIR TO WITHDRAW THE APPROVAL SO GRANTED. ONE OF THE CONDIT IONS FOR SUCH WITHDRAWAL OF APPROVAL IS - IF ANY PROVISIONS OF IN COME TAX ACT/RULES HAVE BEEN VIOLATED. THEREFORE TO CHECK ANY MISUSE OF THE BENEFICIAL PROVISION, POWER TO WITHDRAW SUCH APPROVAL IS GIVEN TO PRESCRI BED AUTHORITY WHICH IS DEPARTMENT OF SCIENCE AND TECHNOLOGY, GOVERNMENT OF INDIA IN THIS CASE. IN VIEW OF THIS, IF ASSESSING OFFICER NOTICED ANY VIOLATION OF THE CONDITION MENTIONED IN INCOME TAX ACT OR RULES, HE IS SUPPOSED TO BRING IT TO THE NOTICE OF THE PRESCRIBED AUTHORITY AND REQUE ST FOR WITHDRAWAL OF APPROVAL SO GRANTED. ONCE APPROVAL SO GRANTED IS WI THDRAWN BY THE .PRESCRIBED AUTHORITY, THE APPELLANT WILL NOT BE EN TITLED TO CLAIM DEDUCTION UNDER SECTION 80IB(8A). HOWEVER WITHOUT GETTING THE APPROVAL WITHDRAWN, ASSESSING OFFICER HAD DISALLOWED THE CLA IM ON THE GROUND THAT THE CONDITION MENTIONED IN RULE 18 DA(1)(E) IS NOT FULFILLED. THE ARGUMENTS OF THE ASSESSING OFFICER ARE THAT THE BIO EQUIVALENT STUDY DONE BY THE APPELLANT IS NOT DEVELOPMENT OF TECHNOLOGY A ND SINCE APPELLANT WAS DOING THE SAME FOR VARIOUS CLIENTS ON CONTRACT BASI S, THERE WAS NO TRANSFER INVOLVED. HOWEVER THE RESEARCH AND DEVELOPMENT ACTI VITIES OF THE APPELLANT WERE APPROVED BY DSIR, THE PRESCRIBED AUT HORITY AND THEREFORE CLAIMING THAT THE SAME IS NOT DEVELOPMENT OF TECHNO LOGY OR TRANSFER OF ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 8 TECHNOLOGY IS NOT APPROPRIATE TILL THE PRESCRIBED A UTHORITY CONSIDERS THE SAME AS VIOLATION OF THE CONDITION. VARIOUS ARGUMENTS TAKEN BY THE ASSESSING OFFICER WH ILE REJECTING THE CLAIM OF APPELLANT WERE ADDRESSED BY THE APPELLANT IN ITS SUBMISSION. IT IS ALSO MENTIONED AS TO HOW THE CONDITIONS PRESCRIBED BY IT ACT/RULES ARE FULFILLED. IF ASSESSING OFFICER FINDS THAT APPELLANT IS NOT EL IGIBLE FOR DEDUCTION UNDER SECTION 801 A (8A) THEN THE BEST COURSE IS TO GET T HE APPROVAL FROM PRESCRIBED AUTHORITY CANCELLED ON THE GROUND OF VIO LATION OF SUCH CONDITIONS. THERE IS NO DOUBT THAT DSIR HAS THE TEC HNICAL COMPETENCE TO JUDGE THE ELIGIBILITY OF ANY COMPANY THEREFORE ASSE SSING OFFICER SHOULD HAVE MADE OUT THE CASE OF WITHDRAWAL OF APPROVAL BE FORE THE PRESCRIBED AUTHORITY. WITHOUT DOING SO, ASSESSING OFFICER'S VI EW ON THE ISSUE WHETHER BIO EQUIVALENT STUDY IS A DEVELOPMENT OF TECHNOLOGY OR NOT OR IN THE SCHEME OF APPELLANT'S THINGS, IS THERE ANY TRANSFER INVOLVED OR NOT, CANNOT BE UPHELD AGAINST THE APPROVAL OF ELIGIBILITY GRANT ED BY PRESCRIBED AUTHORITY. I AGREE WITH THE APPELLANT'S COUNSEL THAT ASSESSING OFFICER SHOULD REFER THE VIOLATION OF ANY CONDITION TO THE PRESCRIBED AUTHOR ITY BEFORE DISALLOWING THE CLAIM BASED ON SUCH APPROVAL. OTHER OBJECTION OF THE ASSESSING OFFICER THAT APPEL LANT RECEIVED CONTRACTUAL SERVICE CHARGES ON DEVELOPMENT OF BIO EQUIVALENT ST UDY ON WHICH IDS WAS ALSO DEDUCTED AND THEREFORE THERE WAS NO SALE AND T RANSFER OF TECHNOLOGY INVOLVED. APPELLANT SUBMITTED THAT THE MODE OF COLL ECTING TECHNOLOGY TRANSFER CHARGES IS NOT RELEVANT TILL SUCH TIME THE RE IS DEVELOPMENT OF TECHNOLOGY AND THE SAME IS HANDED OVER TO THE CLIEN TS. OTHER OBJECTION OF THE AO IS THAT THERE IS CLAIM OF WEIGHTED DEDUCTION UNDER SECTION 35 BY THE PAYING COMPANY IN ADDITION TO APPELLANT'S CLAIM OF DEDUCTION UNDER SECTION 80 I A. THE DEDUCTION CLAIMED BY THE PAYING COMPANY IS NOT RELEVANT AS FAR AS THE DEDUCTION UNDER SECTION 801 A BY THE APPELLANT IS CONCERNED. THESE TWO DEDUCTIONS ARE FOR TWO DIFFERE NT ASSESSEES UNDER TWO DIFFERENT PROVISIONS THEREFORE IT IS NOT THE CASE O F DOUBLE DEDUCTION. THE DECISIONS RELIED UPON BY THE ADDITIONAL CIT IN APPEAL HEARING ARE ON DIFFERENT FACTS AND DO NOT DRAW ANY SIMILARITY TO T HE ISSUE INVOLVED. APPELLANT'S ENTIRE METHODOLOGY HAS BEEN BEFORE THE PRESCRIBED AUTHORITY WHO IN THEIR WISDOM CONSIDERED THE SAME AS DEVELOPM ENT OF TECHNOLOGY AND TRANSFER THEREOF THEREFORE THE NARROW INTERPRET ATION PROPOSED BY THE ASSESSING OFFICER DO NOT HOLD GOOD. APPELLANT RELIE D UPON THE DECISION OF HONOURABLE BOMBAY HIGH COURT IN THE CASE OF INDIAN PLANETARY SOCIETY VERSUS CBDT REPORTED IN 318ITR. 102. IN THE SAID DECISION IT IS HELD THAT REJECTION OF ASSESSEE'S APPLICATION FOR APPROVAL UNDER SECTION 35 (1)(II) CANNOT BE MAD E BY CBDT BUT THE ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 9 SAME IS TO BE DECIDED BY MINISTRY OF SCIENCES AND T ECHNOLOGY. SINCE FOR THE PURPOSE OF GRANTING APPROVAL FOR BEING ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80 IA(8A) DEPARTMENT OF SCIENCE AND TECHNOL OGY IS MADE THE PRESCRIBED AUTHORITY, ANY REJECTION OF CLAIM WITHOU T SERIOUS VIOLATION OF THE CONDITIONS OR WITHDRAWAL OF APPROVAL IS NOT SUS TAINABLE. ACCORDINGLY IT IS HELD THAT APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(8) TILL SUCH TIME IT HOLDS APPROVAL FROM THE PRESCRIBED AUT HORITY. ACCORDINGLY THE DISALLOWANCE OF DEDUCTION MADE BY T HE ASSESSING OFFICER IS DELETED....' IN THE PRESENT APPEAL ALSO, IT IS CLEAR THAT ALL TH E CONDITIONS MENTIONED IN RULE 18DA READ WITH SECTION 80-LB(8A) HAVE BEEN MET. NEV ERTHELESS IF ANY PROVISION OF THE I T ACT OR RULES WAS VIOLATED, FURTHER EXTEN SION WOULD NOT HAVE BEEN GIVEN TO THE APPELLANT BY THE PRESCRIBED AUTHORITY. IN VI EW OF THE FACTS OF THE CASE AS DISCUSSED ABOVE AND THE DECISION OF THE CIT(A) FOR AY 2009-10 ON THE SAME ISSUE, IT IS HELD THAT THE APPELLANT WAS ENTITLED T O CLAIM DEDUCTION U/S 80-IA(8A), AND THE AO WAS NOT JUSTIFIED IN NOT ALLOWING THE SA ME IN VIEW OF THE FACT THAT THE PRESCRIBED AUTHORITY COMPETENT TO GIVE APPROVAL FOR CLAIMING THE SAID DEDUCTION, HAD DONE SO AFTER DUE VERIFICATION OF THE ELIGIBILI TY OF THE COMPANY. I AM ALSO OF THE VIEW THAT IF THE A O WAS OF THE OPINION THAT TH E APPELLANT DID NOT SATISFY THE CONDITIONS OF CLAIMING DEDUCTION 80-IB(8A), THE MAT TER SHOULD HAVE BEEN REFERRED TO THE PRESCRIBED AUTHORITY FOR REVIEW WHI CH HAD GIVEN APPROVAL TO THE APPELLANT IN THE FIRST PLACE. ACCORDINGLY IT IS HE LD THAT APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(8A) TILL SUCH TIME IT HOLDS APPROVAL FROM THE PRESCRIBED AUTHORITY. IN VIEW OF THE DISCUSSION AB OVE AND THE RULING OF THE LD CIT(A) IN THE APPELLANTS OWN CASE FOR THE AY 2009- 10, THE APPELLANTS GROUND IS ALLOWED AND THE ADDITION MADE BY THE AO IS DELET ED. 8.1 WE FURTHER OBSERVE THAT IN THE PRECEDING YEARS, I.E. AYS 2008-09 AND 2009- 10, THE ISSUE OF ASSESSEES CLAIM UNDER SECTION 80I B(8A) OF THE ACT TRAVELLED UP TO THE HONBLE JURISDICTIONAL HIGH COURT AND THE RE VENUES APPEALS WERE DISMISSED BY THE HONBLE COURT BY OBSERVING AS UNDE R:- 15. IT CAN THUS BE SEEN THAT DETAILED PROVISIONS H AVE BEEN MADE UNDER RULE 18D AND RULE 18DA OF THE RULES FOR THE PRESCRIBED AUTHO RITY TO EXAMINE THE NATURE OF RESEARCH AND SCIENTIFIC DEVELOPMENT, PROPOSED TO BE OR BEING CARRIED OUT BY THE COMPANY WHO SEEKS APPROVAL OR EXTENSION OF APPROVAL . FOR EXAMPLE, UNDER SUB- RULE (2), APPROVAL ONCE GRANTED HAS VALIDITY FOR A PERIOD OF THREE YEARS AND NO MORE. IT COULD BE EXTENDED ONLY UPON SATISFACTORY P ERFORMANCE OF THE COMPANY WHICH WOULD BE JUDGED ON PERIODIC REVIEW BY THE PRE SCRIBED AUTHORITY. WHILE GRANTING APPROVAL IN ADDITION TO INFORMATION PRESCR IBED UNDER SUB-RULE (5) OF RULE 18DA, THE PRESCRIBED AUTHORITY IS EMPOWERED TO CALL FOR SUCH OTHER INFORMATION OR DOCUMENTS, WHICH MAY BE FOUND NECESS ARY FOR CONSIDERATION OF ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 10 THE APPLICATION FOR GRANT OF APPROVAL. EVEN DURING THE CURRENCY OF THE APPROVAL GRANTED BY THE PRESCRIBED AUTHORITY, IN TERMS OF SU B-RULE (2) OF RULE 18DA, THE COMPANY HAS TO SATISFY SEVERAL CONDITIONS INCLUDING , AS NOTED ABOVE, TO SELL ITS PROTOTYPE OR OUTPUT, ONLY WITH THE PERMISSION OF TH E PRESCRIBED AUTHORITY AND INTIMATE ANY CHANGE IN ITS MEMORANDUM OF ASSOCIATIO N AND ARTICLES OF ASSOCIATION. THIS LATER CONDITION WOULD ENABLE THE PRESCRIBED AUTHORITY TO EXAMINE WHETHER IN VIEW OF ANY CHANGE IN MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION RELATING TO THE MAIN OBJECT S OF THE COMPANY, THE FUNDAMENTAL REQUIREMENT I.E. THE COMPANY'S MAIN OBJ ECT OF SCIENTIFIC AND INDUSTRIAL RESEARCH AND DEVELOPMENT HAS BEEN MAINTA INED. 16. AS NOTED, IF AT ANY STAGE, THE PRESCRIBED AUTHO RITY FINDS EITHER THAT THE APPROVAL GRANTED TO THE COMPANY WAS TO AVOID PAYMEN T OF TAXES BY ITS GROUP COMPANIES OR COMPANIES RELATED TO ITS DIRECTORS OR MAJORITY OF ITS SHAREHOLDERS OR THAT THERE HAS BEEN BREACH OF ANY OF THE PROVISIONS OF THE ACT OR THE RULES, THE PRESCRIBED AUTHORITY WOULD BE EMPOWERED TO WITHDRAW THE APPROVAL. 17. THUS THE STATUTORY SCHEME ENVISAGES THE PRESCRI BED AUTHORITY AS A BODY WHICH CAN MINUTELY EXAMINE ALL THESE HIGHLY TECHNIC AL AND SCIENTIFIC REQUIREMENTS IN CASE OF A COMPANY. WE MAY RECALL TH AT THE PRESCRIBED AUTHORITY IS THE DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESE ARCH, MINISTRY OF SCIENCE AND TECHNOLOGY, GOVERNMENT OF INDIA. IT HAS EXPERTS AT ITS COMMAND IN THE FIELD OF SCIENTIFIC RESEARCH TO ADVISE IT ON VARIOUS EXTREME LY COMPLEX SCIENTIFIC ISSUES WHICH MAY ARISE WHILE GRANTING, EXTENDING OR RECALL ING THE APPROVAL. IN THIS CONTEXT, THE REQUIREMENTS CONTAINED IN CLAUSES (C) TO (E) OF SUB-RULE (1) OF RULE 18DA WOULD ALSO HAVE TO BE NECESSARILY EXAMINED BY THE SAID AUTHORITY. WHEN THESE CLAUSES REFER TO REQUIREMENT OF ADEQUATE INFR ASTRUCTURE SUCH AS LABORATORY FACILITIES, WELL FORMULATED RESEARCH AND DEVELOPMEN T PROGRAMME AND ENGAGEMENT OF THE COMPANY EXCLUSIVELY IN SCIENTIFIC RESEARCH A ND DEVELOPMENT ACTIVITIES, THE SAME WOULD BE WITHIN THE REALM OF THE SAID PRESCRIB ED AUTHORITY. 18. UNDER THE CIRCUMSTANCES, ONCE SUCH AUTHORITY GR ANTS APPROVAL AND SUCH APPROVAL HOLDS THE FIELD, IT WOULD NOT BE OPEN FOR THE ASSESSING OFFICER OR ANY OTHER REVENUE AUTHORITY TO GO BEHIND SUCH APPROVAL CERTIFICATE AND RE-EXAMINE FOR HIMSELF, THE FULFILMENT OF THE CONDITIONS CONTAINED IN SUB-RULE (1) OF RULE 18DA. THESE CONDITIONS ARE PRESCRIBED IN TERMS OF CLAUSE NO.(IV) OF SUB-SECTION (8A) OF SECTION 80-IB OF THE ACT. THE COMMISSIONER WAS THER EFORE, COMPLETELY IN ERROR IN OBSERVING THAT EVEN THOUGH THE ASSESSEE COMPANY HAD VALID APPROVAL ISSUED BY THE PRESCRIBED AUTHORITY, THE ASSESSING OFFICER STI LL HAD TO EXAMINE WHETHER SUCH COMPANY HAD FULFILLED THE CONDITIONS REFERRED TO IN CLAUSE (IV), AS SUCH OTHER CONDITIONS AS MAY BE PRESCRIBED, REFERENCE TO WHICH WE FIND IN RULE 18DA. ANY OTHER VIEW WOULD CREATE CONFLICT OF DECISION MAKING PROCESS. EVEN COUNSEL FOR THE REVENUE COULD NOT DISPUTE THAT MANY OF THESE REQUIR EMENTS PRESCRIBED UNDER RULE 18DA ARE TO BE EXAMINED BY THE PRESCRIBED AUTH ORITY. IF ONCE THE PRESCRIBED AUTHORITY EXAMINES SUCH CONDITIONS AND UPON BEING S ATISFIED THAT THE CONDITIONS ARE FULFILLED, GRANTS APPROVAL, CAN THE ASSESSING O FFICER TAKE A DIFFERENT VIEW? ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 11 THE ANSWER OBVIOUSLY HAS TO BE IN THE NEGATIVE. FIR ST AND FOREMOST, THE PRESCRIBED AUTHORITY IS A SPECIALISED BODY HAVING E XPERTISE IN THE FIELD OF SCIENTIFIC RESEARCH AND DEVELOPMENT. THE REQUIREMENTS ARE EXTR EMELY COMPLEX SCIENTIFIC REQUIREMENTS AND HAVE THEREFORE, BEEN RIGHTLY PLACE D IN THE HANDS OF AN EXPERT BODY TO JUDGE. SECONDLY, THERE IS NO REASON WHY ONC E AN AUTHORITY WHICH IS PRESCRIBED UNDER THE RULES FOR A SPECIFIC PURPOSE H AS BEEN INVESTED WITH STATUTORY FUNCTIONS, THE ASSESSING OFFICER SHOULD B E ALLOWED TO OVERRULE THE DECISION OF THE SAID BODY. THIRDLY, THERE ARE MULTI PLE INDICATIONS WITHIN THE RULES THEMSELVES. WE MAY RECALL, UNDER SUB-RULE (2) OF RU LE 18D, EXTENSION OF APPROVAL ONCE GRANTED IS SUBJECT TO SATISFACTORY PERFORMANCE OF THE COMPANY, TO BE JUDGED ON PERIODIC REVIEW. FURTHER, SUB-RULE (3) OF RULE 1 8DA GIVES WIDE POWERS TO THE PRESCRIBED AUTHORITY TO WITHDRAW THE APPROVAL IF IT IS FOUND THAT THE SAME WAS TO AVOID PAYMENT OF TAXES BY ITS GROUP COMPANIES OR CO MPANIES RELATED TO ITS DIRECTORS OR MAJORITY OF ITS SHAREHOLDERS OR THAT A NY PROVISIONS OF THE ACT OR THE RULES HAVE BEEN VIOLATED. THUS ONCE AGAIN THE TASK OF JUDGING WHETHER THE PROVISIONS OF THE ACT OR THE RULES HAVE BEEN VIOLAT ED OR NOT, HAS ENTRUSTED TO THE PRESCRIBED AUTHORITY WITH MATCHING POWERS FOR WITHD RAWAL OF THE APPROVAL, IF THE AUTHORITY IS SATISFIED ABOUT SUCH BREACH. 19. THE WORD 'MAY' USED WHILE EMPOWERING THE PRESCR IBED AUTHORITY, ACCORDING TO THE COUNSEL FOR THE REVENUE, WOULD BE OF SOME SI GNIFICANCE. HE CONTENDED THAT EVEN IF THERE HAS BEEN A VIOLATION OF THE ACTS AND THE RULES, THE PRESCRIBED AUTHORITY IS NOT DUTY-BOUND TO WITHDRAW THE APPROVA L SINCE THE LEGISLATURE HAS USED THE WORD 'MAY' AND NOT 'SHALL'. ACCORDING TO H IM THEREFORE, IT WOULD BE OPEN TO THE ASSESSING OFFICER TO DISALLOW THE DEDUC TION ON THE GROUND OF BREACH OF THE PROVISIONS OF THE ACT AND THE RULES EVEN IF THE PRESCRIBED AUTHORITY HAS NOT WITHDRAWN THE APPROVAL ON THAT BASIS. TO OUR MIND, THIS IS NOT THE CORRECT POSITION. SUB-RULE (3) IS AN ENABLING POWER EMPOWER ING THE PRESCRIBED AUTHORITY TO WITHDRAW THE APPROVAL, IF IT FINDS VIOLATION OF PROVISIONS OF THE ACT OR THE RULES. HOWEVER, THE ACT AND THE RULES MAKE VARIOUS PROVISIONS, BREACH OF MANY OF THEM MAY BE PURELY TECHNICAL. IT IS NOT NECESSAR Y THEREFORE, IN EVERY SUCH BREACH, IRRESPECTIVE OF THE NATURE OF THE BREACH, T HE PRESCRIBED AUTHORITY MUST WITHDRAW THE APPROVAL, THE MOMENT IT IS POINTED OUT THAT THERE HAS BEEN A VIOLATION OF ANY OTHER PROVISIONS OF THE ACT OR THE RULES. IT IS POSSIBLY THEREFORE, THAT THE LEGISLATURE HAS WHILE CLOTHING THE PRESCRI BED AUTHORITY WITH SUFFICIENT POWERS TO WITHDRAW THE APPROVAL, USED THE WORD 'MAY ' RATHER THAN 'SHALL' GIVING DISCRETION IN APPROPRIATE CASES TO THE AUTHORITY NO T TO WITHDRAW THE APPROVAL. THIS HOWEVER, WOULD NOT MEAN THAT THE ASSESSING OFF ICER WOULD HAVE ANY ROLE IN THE CONTEXT OF VERIFYING REQUIREMENTS RELATABLE TO GRANT, EXTEND OR WITHDRAW THE APPROVAL. THESE ISSUES SOLELY REST WITHIN THE JURIS DICTION OF THE PRESCRIBED AUTHORITY. 20. JUDGED FROM SUCH ANGLE, IN OUR OPINION, ONCE TH E APPROVAL IS GRANTED BY THE PRESCRIBED AUTHORITY AND SUCH APPROVAL IS VALID, IT WOULD NO LONGER BE OPEN FOR THE ASSESSING OFFICER TO VERIFY THE SATISFACTION OF THE CONDITIONS PRESCRIBED UNDER RULE 18DA IN ORDER TO REFUSE DEDUCTION UNDER SUB-SE CTION (8A) OF SECTION 80-IB ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 12 OF THE ACT. THIS HOWEVER, DOES NOT MEAN THAT OTHER ISSUES RELEVANT TO THE CLAIM OF DEDUCTION BY THE ASSESSEE WOULD BE TAKEN AWAY FROM THE JURISDICTION OF THE ASSESSING OFFICER. WE DO NOT SHARE THE ANXIETY OF T HE COUNSEL FOR THE REVENUE THAT INTERPRETATION THAT WE HAVE ADOPTED WOULD DIVE ST THE ASSESSING OFFICER FROM EXAMINING ANY CLAIM OF DEDUCTION UNDER THE SAID PRO VISIONS AND GRANT DEDUCTION MECHANICALLY WITHOUT VERIFYING THE CLAIM. FOR EXAMP LE, IN THIS VERY CASE, THE ASSESSING OFFICER HAD DOUBT ABOUT THE SAMPLE STORAG E INCOME BEING PART OF THE INCOME FROM ELIGIBLE BUSINESS. AFTER HEARING THE AS SESSEE, HE DISALLOWED THE DEDUCTION HOLDING THAT THE SAME DOES NOT FORM PART OF THE INCOME OF THE ASSESSEE'S BUSINESS OF SCIENTIFIC RESEARCH AND DEVE LOPMENT. 21. BEFORE CLOSING, WE MAY REFER TO THE DECISION CI TED BY SHRI BHATT FOR THE REVENUE. IN CASE OF SOUTHERN TECHNOLOGIES LTD.(SUPR A), THE ISSUE WAS REGARDING THE TAXABILITY OF INCOME IGNORING THE PROVISIONS CO NTAINED IN THE COMPANIES ACT CONCERNING NON BANKING FINANCIAL COMPANY WHICH PERM ITTED ADJUSTMENT OF A PROVISION FOR POSSIBLE DIMINUTION OF VALUE OF ASSET S OF THE COMPANY ALLOWING THE COMPANY TO SHOW ONLY THE NET FIGURE IN THE BALANCE SHEET. 22. IN THE RESULT, WHILE ANSWERING THE QUESTION IN FAVOUR OF THE ASSESSEE, WE CLARIFY THAT THE POWER OF THE ASSESSING OFFICER TO VERIFY THE CLAIM OF DEDUCTION IS NOT TAKEN AWAY. HE CAN CERTAINLY VERIFY THE ACCOUNT S AND REFUSE DEDUCTION WHICH DOES NOT FORM PART OF SECTION 80-IB(8A) AND THE INC OME WHICH DOES NOT ARISE OUT OF THE ELIGIBLE BUSINESS. 8.2 FROM GOING THROUGH THE ABOVE JUDGMENT OF HONBL E JURISDICTIONAL HIGH COURT, IT IS ESTABLISHED BEYOND DOUBT THAT THE ASSE SSEES ACTIVITIES OF SCIENTIFIC AND INDUSTRIAL RESEARCH AND DEVELOPMENT ARE COVERED UNDER SECTION 80IB(8A) OF THE ACT AND THE PROFITS AND GAINS FROM THESE ACTIVI TIES ARE ELIGIBLE FOR DEDUCTION @ 100%. TO THIS EXTENT, WE FIND NO ERROR IN THE OR DER OF LD. CIT(A). 8.3 AS FAR AS THE PLEA OF THE LD. DR OF SETTING ASI DE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE CALCULATION OF THE DEDUCTIONS CLAIMED, WE ARE OF THE VIEW THAT ALL THE DETAILS AND EVIDENCES INCL UDING CERTIFICATES ISSUED BY THE CHARTERED ACCOUNTANT WERE VERY MUCH BEFORE THE ASSE SSING AUTHORITY FOR THE PURPOSE OF VERIFICATION OF CALCULATION OF DEDUCTION . ASSESSEE HAS BEEN CONSISTENTLY GETTING THE BENEFIT OF DEDUCTION UNDER SECTION 80IB(8A) OF THE ACT IN PRECEDING YEARS AS WELL AS SUBSEQUENT YEARS AND NO ERROR HAS BEEN NOTICED IN ITS CALCULATION OF PROFITS DERIVED FROM THE ACTIVIT IES ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(8A) OF THE ACT. WE ALSO OBSERVE THAT T HE HONBLE HIGH COURT IN ITS ORDER FOR AYS 2008-09 AND 2009-10 IN THE CASE OF AS SESSEE HAS ALLOWED THE ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 13 ASSESSEES APPEAL WITHOUT GIVING ANY SPECIFIC DIREC TIONS TO THE ASSESSING OFFICER TO VERIFY CALCULATION OF DEDUCTION CLAIMED U/S 80IB (8A) OF THE ACT. THE HONBLE COURT IN THE LAST PARAGRAPH OF THEIR ORDER HAS DISC USSED ABOUT THE POWERS OF THE ASSESSING OFFICER TO VERIFY THE ACCOUNTS SO AS TO C HECK THE CALCULATION OF SUCH DEDUCTION CLAIMED BY VARIOUS ASSESSEES APART FROM E XAMINING THE OBJECTS. IN OUR VIEW, THIS OBSERVATION OF THE HONBLE HIGH COUR T IS GENERAL IN NATURE AND NOT SPECIFICALLY RELATED TO THE ASSESSEE. WE, THE REFORE, ARE UNABLE TO ACCEPT THE PLEA OF THE LD. DR FOR SETTING ASIDE THE ISSUE FOR CALCULATION AND VERIFICATION TO THE FILE OF THE ASSESSING OFFICER. WE ACCORDINGLY FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND DISMISS THIS G ROUND OF THE REVENUE. 9. THE SECOND GROUND RAISED BY THE REVENUE READS AS UNDER:- 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,64,42, 023/- MADE BY THE AO U/S 40(A)(I) OF TH E ACT. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT IN THIS CASE THE AO HAS O BSERVED THAT AS THE ASSESSEE COMPANY HAS NOT DEDUCTED TDS ON THE INCOME ACCRUED AND AROSE IN INDIA AS PER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT AND HENCE THE PROVISIONS OF SECTION 195 WERE APPLICABLE. 10. BRIEF FACTS RELATING TO THIS GROUND ARE THAT DU RING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DEBITED RS.1,54,55,0 00/- IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF CLINICAL AND ANALYTICAL STUDY EXPENSES PAID TO FOREIGN PARTIES. THE ASSESSEE CLAIMED THESE EXPENSES TO BE OUT OF PURVIEW OF SECTION 195 OF THE ACT AS THEY WERE NOT FOR TECHNICAL SERVI CES AND WERE PAID TO NON- RESIDENT PARTIES VIZ, BA RESEARCH INTERNATIONAL, US A; ALLIED RESEARCH INTERNATIONAL INC., CANADA AND MDS PHARMA SERVICES, USA. THE ASSESSEE PLEADED THAT THESE PAYMENTS WERE MADE TO THE FOREIG N AGENTS AND ARE NOT IN THE NATURE OF TECHNICAL SERVICES AS THE FOREIGN AGENTS HAVE NO BUSINESS CONNECTION IN INDIA AND SUCH TYPE OF INCOME IS NOT TAXABLE UNDER SECTION 9(1)(VII) OF THE ACT AND THEREFORE, NOT LIABLE TO DEDUCT TAX UNDER THE P ROVISIONS OF SECTION 40(A)(I) OF THE ACT. HOWEVER, LD. ASSESSING OFFICER DISALLOWED THE EXPENSES OF RS.1,54,55,000/- AND ALSO ADDED THE AMOUNT OF TDS W HICH WAS NOT DEDUCTED ON THESE PAYMENTS OF RS.9,87,023/- AND THUS, A TOTAL D ISALLOWANCE OF ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 14 RS.1,64,42,023/- WAS MADE ON THIS ACCOUNT. WHEN TH E MATTER CAME UP BEFORE THE LD. CIT(A), HE DELETED THE DISALLOWANCE IN THE LIGHT OF THE PROVISIONS OF ARTICLE 15 OF THE DTAA BETWEEN INDIA AND USA, AND A LSO RELIED ON THE DECISION OF THE CO-ORDINATE BENCH OF MUMBAI IN THE CASE OF C HADBOURNE AND PARK LLP, REPORTED IN 2 SOT 434 (MUM). 11. AGGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 12. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT PROVIDED PROPER EXPLANATION FOR THE IMPUGNED TRANSA CTIONS BEFORE THE ASSESSING AUTHORITY AND THE MATTER NEEDS TO BE SET ASIDE TO THE FILE OF ASSESSING OFFICER FOR RE-EXAMINATION. 13. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE OBJECTED TO THE PLEA RAISED BY THE LD. DR BY REFERRING TO LETTER DATED 21.03.20 13 SUBMITTED BEFORE THE ASSESSING AUTHORITY IN RESPONSE TO NOTICE U/S 142(1 ) OF THE ACT, WHICH ALSO CONTAINED DETAILED EXPLANATION REGARDING NON-DEDUCT ION OF TDS RELATING TO CLINICAL AND ANALYTICAL RESEARCH EXPENSES. LD. COU NSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ISSUE RAISED IN THIS GROUND IS S QUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH I N ASSESSEES OWN CASE FOR THE SAME ASSESSMENT YEAR VIDE ITA NO.3106/AHD/2011. TH IS ISSUE CAME UP BEFORE THE CO-ORDINATE BENCH WITH REGARD TO THE ORDER OF A SSESSING OFFICER U/S 201(1) AND 201(1A) R.W.S. 195 OF THE ACT AND THE ISSUE ST ANDS DECIDED IN FAVOUR OF THE ASSESSEE. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE RAISED BY THE REVENUE IS REGA RDING DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 40(A)(I) OF THE ACT OF RS.1,64,42,023/- TOWARDS NON-DEDUCTION OF TDS ON CL INICAL AND ANALYTICAL CHARGES PAID TO PARTIES OUTSIDE INDIA WITHOUT DEDUC TION OF TAX U/S 195 OF THE ACT. WE OBSERVE THAT THE ASSESSEE INCURRED CERTAIN EXPENDITURE TOWARDS CLINICAL AND ANALYTICAL STUDY EXPENSES AT RS.1,54,55,000/- P AID THROUGH FOREIGN AGENTS TO PARTIES BASED AT USA AND CANADA. WE FURTHER OBS ERVE THAT THE ISSUE AS TO ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 15 WHETHER TAX WAS DEDUCTIBLE ON SUCH PAYMENTS U/S 195 OF THE ACT OR NOT HAS ALREADY BEEN DEALT WITH BY THE CO-ORDINATE BENCH IN ITA NO. 3106/AHD/2011 IN ASSESSEES OWN CASE FOR THE VERY SAME ASSESSMENT YEAR WHEN THE REVENUE CAME IN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDE R OF LD. CIT(A) DELETING THE DEMAND RAISED BY THE ASSESSING OFFICER IN THE ORDER PASSED BY THE ASSESSING OFFICER U/S 201(1) AND 201(1A) R.W.S. 195 OF THE A CT. WE OBSERVE THAT THE CO- ORDINATE BENCH DISMISSED THE REVENUES APPEAL AND C ONFIRMED THE FINDINGS OF THE LD. CIT(A) BY OBSERVING AS FOLLOWS:- 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AS WELL AS THE JUDGEMENTS/DECISIONS RELIED UPON BY THE ASSESSEE. T HERE IS NO DISPUTE WITH REGARD TO THE FACT THAT UNDER THE CONTRACT, THE NON-RESIDE NT ENTITY HAS CARRIED OUT BIO- ANALYTICAL SERVICES ON THE SAMPLE SUPPLIED BY THE S PONSOR AND SUBMITTED ITS REPORT ON THE BIO-ANALYSIS OF THE TABLETS STUDIES. THE SAID SERVICES HAVE BEEN PERFORMED OUTSIDE INDIA. THE NON-ENTITIES HAVE NO P ERMANENT ESTABLISHMENT IN INDIA. IT IS THE CONTENTION OF THE ASSESSEE THAT TH E SERVICES SO RENDERED ARE NOT MADE AVAILABLE TO THE ASSESSEE. IN THIS BACKGROUND, THE LD. CIT (A) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UND ER: 5. I HAVE GONE THROUGH THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE. THE GROUND OF APPEAL AGAINST DEMAND RAISE D U/S.201(L) REQUIRES CONSIDERATION OF THE FOLLOWING 3 ISSUES: (A) WHETHER THE PAYMENTS MADE TO THE NON RESIDENTS ARE INCOME DEEMED TO ACCRUE OR ARISE IN INDIA UNDER THE PROVIS IONS OF SECTION 9(2)(VII) AS BEING 'FEES FOR TE CHNICAL SERVICES'. (B) WHETHER THE INCOME EVEN IF DEEMED TO ACCRUE OR ARIS E IN INDIA UNDER SECTION 9(2)(VII) IS OF THE NATURE WHICH IS E XEMPT FROM TAXATION IN INDIA UNDER THE DTA AGREEMENTS WITH THE USA AND CANADA RESPECTIVELY. (C) WHETHER THE TAX HAS TO BE DEDUCTED U/S.195 EVEN WHEN THE INCOME IN THE HAND OF NON-RESIDENT IS NOT TAXABLE. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSES SEE HAS MADE PAYMENTS TO CONCERNS TO (I) B.A. RESEARCH INTERNATIONAL (USA), (II) ALLIED RESEARCH INTERNATIONAL INC. (CANADA) AND (III) MDS PHARMA SE RVICES INC. (USA), WHO ARE RESIDENTS OF USA AND CANADA FOR PROVIDING A NALYTICAL SERVICES AND TESTING CHARGES. THE NON-RESIDENT COMPANIES HAD NO PE IN INDIA. THESE ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 16 SERVICES WERE UNDISPUTEDLY PROVIDED OUTSIDE INDIA, BUT WERE UTILIZED FOR EARNING INCOME FROM SOURCE IN INDIA WHICH IS MANUFA CTURING OF DRUGS IN INDIA AND SUBSEQUENT SALES. NOW, COMING TO THE FIRST ISSUE, I.E. WHETHER THE PA YMENTS MADE TO THE NON RESIDENTS ARE INCOME DEEMED TO ACCRUE OR ARISE IN I NDIA UNDER THE PROVISIONS OF SECTION 9(2)(VII) AS BEING 'FEES FOR TECHNICAL S ERVICES'. THE SERVICES ARE DEFINITELY OF THE NATURE OF TECHNICAL SERVICES AND AS THE SERVICES ARE UTILIZED FOR EARNING INCOME FROM SOURCE IN INDIA, THESE ARE NOT EXEMPTED U/S.9(2)(VII)(B). THE APPELLANT HAS PLEADED THAT EV EN AFTER THE INTRODUCTION OF THE EXPLANATION TO SEC. 9(2) INSERTED BY THE FIN ANCE ACT 2007 W.E.F. 1.6.1976, THE RATIO OF THE SUPREME COURT DECISION I N THE CASE OF 'ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. V. DIT, 158 TAXMAN 259 (SC)' IS APPLICABLE. THE APPELLANT HAD PLACED RELIA NCE ON THE DECISION OF 'JINDAL THERMAL POWER COMPANY LIMITED V. DOT[2009] 225 CTR 220', WHEREIN IT HAS BEEN CLEARLY HELD 'THAT THE CRITERIA OF RENDERING SERVICE IN INDIA AND THE UTILIZATION OF SERVICE IN INDIA LAID DOWN BY THE SUPREME COURT IN ISHIKAWAJIMA'S CASE (SUPRA) TO ATTRACT TAX LIABILITY U/S. 9(L)(VII) REMAINS UNTOUCHED AND UNAFFECTED BY EXPLANATION TO SEC. 9(2). IT IS SEEN THAT THE APPELLANT HAS NOT NOTED THE FAC T THAT THE EXPLANATION TO SECTION 9 HAS BEEN AGAIN SUBSTITUTED BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1/6/1976. NOW, THE INCOME IS TO BE INCLUDED IN THE TOTAL INCOME OF THE NON-RESIDENT, WHETHER OR NOT TH E NON-RESIDENT HAS RENDERED SERVICES IN INDIA. THE DECISION IN THE CAS E OF 'JINDAL THERMAL POWER COMPANY LIMITED V. DOT[2009] 225 CTR 220', ON THE ISSUE THEREFORE IS NO LONGER GOOD LAW. AFTER THE AMENDMEN T WITH RETROSPECTIVE EFFECT, THE PAYMENTS MADE BY THE APPELLANT ARE DEFI NITELY FALLING UNDER THE DEFINITION OF FEES FOR TECHNICAL SERVICES' AND THE INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA UNDER THE PROVISIONS OF SECTION 9 (2)(VII). THE NEXT ISSUE TO BE DECIDED IS WHETHER THE INCOME WHICH HAS BEEN DECIDED TO BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER SECT ION 9(2)(VII) IS OF THE NATURE WHICH IS EXEMPT FROM TAXATION IN INDIA UNDER THE DTA AGREEMENTS WITH THE USA AND CANADA RESPECTIVELY. AS THERE IS N O PE IN INDIA IT WOULD HAVE TO BE SEEN WHETHER, IN WHICH COUNTRY AND HOW T HE 'FEES FOR TECHNICAL SERVICES' ARE TAXABLE AS PER THE DTA AGREEMENTS. TH E APPELLANT'S CONTENTION IS THAT ARTICLE 12(4)(B) OF THE DTAA BET WEEN INDIA AND USA/CANADA IS NOT APPLICABLE SINCE THE NON-RESIDENT PARTIES DID NOT 'MAKE AVAILABLE' ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKI LL, KNOW-HOW OR PROCESSES. IN THIS CASE THE CONCERNS IN USA AND CAN ADA WERE CONDUCTING TESTS ON THE DRUGS WHICH WERE ALREADY RESEARCHED AN D AFTER ANALYZING THE DRUGS ON THE REQUIRED PARAMETERS FINAL REPORTS WERE SUBMITTED TO THE ASSESSEE. I HAVE PERUSED THE SUBMISSIONS MADE BY TH E APPELLANT AS WELL AS THE ORDER PASSED BY THE AO. ON PERUSAL OF THE DECIS IONS CITED BY THE APPELLANT IT CAN BE CONCLUDED THAT SERVICE, WHICH I S TECHNICAL IN NATURE CAN ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 17 BE SAID TO BE 'FEES FOR INCLUDED SERVICES' ONLY WHE N IT 'MAKE AVAILABLE' TECHNICAL KNOWLEDGE OR SKILLS TO THE RECIPIENT OF S ERVICES IE ONLY WHEN RECIPIENT OF SERVICES CAN APPLY THE SAME ON HIS OWN . IN THIS CONNECTION OBSERVATIONS MADE BY THE AUTHORITY FOR ADVANCE RULI NG (AAR) AS LAID DOWN IN THE CASE OF ANAPHARM INC. (2008) 305 JTR 39 4 SQUARELY APPLIES TO THE FACTS OF THE APPELLANT'S CASE, SINCE IT RELATED TO RENDERING OF BIO- ANALYTICAL SERVICES BY THE NON-RESIDENT APPLICANT A ND UNDER THE FRAMEWORK OF THE SAME LANGUAGE OF ARTICLE 12(4)(B) OF THE CAN ADA-INDIA DTAA, WHICH IS PARI-MATERIA WITH THE U.S.-INDIA DTAA AS WELL: 'PAYMENT OF CONSIDERATION WOULD BE REGARDED AS 'FEE FOR TECHNICAL/INCLUDED SERVICES' ONLY IF THE TWIN TEST OF RENDERING SERVIC ES AND MAKING TECHNICAL KNOWLEDGE AVAILABLE AT THE SAME TIME IS SATISFIED. IN THE PRESENT CASE, THE APPLICANT RENDERS BIO-ANALYTICAL SERVICES WHICH, NO DOUBT, ARE VERY SOPHISTICATED IN NATURE, BUT THE APPLICANT DOES NOT REVEAL TO ITS CLIENTS AS TO HOW IT CONDUCTS THOSE TESTS OR THE INPUTS THAT HAVE GONE INTO IT, SO AS TO ENABLE THEM TO CARRY OUT THOSE TESTS THEMSELVES IN FUTURE. A BROAD DESCRIPTION OR INDICATION OF THE TYPE OF TEST CARRI ED OUT TO REACH THIS CONCLUSION DOES NOT ENABLE THE APPLICANT'S CLIENT T O DERIVE REQUISITE KNOWLEDGE TO CONDUCT THE TESTS OR TO DEVELOP THE TE CHNIQUE BY ITSELF.' THEREFORE, THE SERVICES PROVIDED TO THE APPELLANT B Y THE NON-RESIDENT PARTIES OF USA AND CANADA DID NOT FALL WITHIN THE PURVIEW O F 'INCLUDED SERVICES' UNDER ARTICLE 12(4)(B) AND HENCE THERE WAS NO LIABI LITY ON THE APPELLANT TO DEDUCT TDS U/S. 195 OF THE I.T. ACT, WHILE MAKING P AYMENT FOR SUCH BIO- ANALYTICAL SERVICES RENDERED TO IT. FURTHER THE RATIO MUMBAI ITAT DECISION IN THE CASE OF WOCKHARDT LTD. V. ACIT (2010) 10 TAXMANN.COM 208 (MUM.), ALSO SQUARELY APPLIES TO THE FACTS OF THE APPELLANT'S CASE. THE SAME VIEW HAS BEEN FOLLOWED IN VARIOUS DECISION S INCLUDING DECISION OF MUMBAI SPECIAL BENCH IN THE CASE OF MAHINDRA & MAHI NDRA LIMITED (313 UR 263). IN VIEW OF THE PROVISIONS OF ARTICLE 12 OF DTAA READ WITH ABOVE REFERRED JUDICIAL PRECEDENTS, I AM INCLINED TO AGRE E WITH THE SUBMISSIONS THAT SERVICES CANNOT BE CATEGORISED AS 'FEES FOR IN CLUDED SERVICES' UNDER THE DTA AGREEMENTS WITH USA AND CANADA AND THEREFORE AR E NOT TAXABLE IN INDIA AS THE MORE FAVOURABLE DTA A PROVISIONS ARE T O BE APPLIED. THEREFORE, IT IS HELD THAT THE INCOME OF THE NON-RESIDENT CONC ERN IN THE FACTS AND CIRCUMSTANCES OF THE CASE ARE NOT TAXABLE IN INDIA. THE NEXT ISSUE TO BE DECIDED IS WHETHER THE TAX HAS TO BE DEDUCTED U/S. 195 EVEN WHEN THE INCOME IN THE HAND OF NON-RESIDENT IS NOT TAXABLE. AS THE REMITTANCE MADE IS NOT CHARGEABLE TO TAX IN INDIA, I AM OF THE VIEW THAT, IN THE GIVEN CASE PROVISIONS OF SECTION 195 ARE ALSO N OT APPLICABLE. ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 18 THE HON'BLE SUPREME COURT HAS DECIDED THE VERY ISSU E IN GE TECHNOLOGY CENTRE P. LTD.327 ITR 456. IT HAS HELD THAT U/S. S 195 PAYER IS BOUND TO DEDUCT TAX ONLY IF THE SUM PAYABLE IS ASSESSABLE TO TAX IN INDIA. FURTHER, AS PROVISIONS OF SECTION 195 OF THE ACT ARE NOT APPLIC ABLE THERE IS NO QUESTION OF RECOVERY OF TAX IN ACCORDANCE WITH PROVISIONS OF SECTION 201 OF THE ACT. RELIANCE PLACED BY THE AO ON THE DECISION OF TRANSM ISSION CORPORATION OF INDIA 239 ITR 587 IS MISPLACED. THEREFORE, THE APPE LLANT SUCCEEDS ON THE ISSUE OF CHARGEABILITY OF TAX UNDER THE PROVISIONS OF SEC. 201(L). 6. NEXT GROUND IS AGAINST THE CHARGING OF INTEREST U/S. 201(1A). THIS GROUND IS CONSEQUENTIAL TO THE RAISING OF DEMAND U/ S. 201(1) AND IS DECIDED ACCORDINGLY.' 4.1 FROM THE ABOVE, IT IS EVIDENT THAT THE LD. CIT (A) HAVE GIVEN A FINDING ON FACT THAT THE SERVICE WHICH IS TECHNICAL IN NATURE CAN B E SAID TO BE 'FEES FOR INCLUDED SERVICES' ONLY WHEN IT HAS 'MADE AVAILABLE' TECHNIC AL KNOWLEDGE OR SKILLS TO THE RECIPIENT OF SERVICES, I.E. RECIPIENT OF SERVICES C AN APPLY THE SAME ON HIS OWN. WE ARE IN FULL AGREEMENT OF THE ABOVE VIEW OF THE LD. CIT (A). IN THE PRESENT CASE, THE ASSESSEE HAD SENT SAMPLES TO THE EXPERTS OUTSIDE IN DIA AND THOSE EXPERTS SUBMITTED THEIR REPORT. THERE IS NOTHING ON RECORD SUGGESTING THAT THE SERVICES RENDERED TO THE ASSESSEE WERE MADE AVAILABLE TO THE ASSESSEE AND ALSO THE ASSESSEE WAS ABLE TO APPLY THE SAME OF HIS OWN. IN THE ABSEN CE OF THE SAME, SUCH SERVICE WOULD NOT FALSE WITHIN THE AMBIT OF THE INCLUDED SE RVICE IN THE LIGHT OF DECISION OF THE AUTHORITY FOR ADVANCE RULINGS (INCOME-TAX), NEW DELHI IN THE CASE OF ANAPHARM INC., INRE (SUPRA), THE DECISION OF THE COORDINATE BENCH IN THE CASE OF WOCKHARDT LTD. V. ACIT (SUPRA) AND THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF DE BERS INDIA MINERALS (P. ) LTD. (SUPRA). THE REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO REBUT THE FINDINGS OF THE LD. CIT (A) THAT THE SERVICES WERE ACTUALLY MADE AVAILABLE TO T HE ASSESSEE AND WOULD BE TAXABLE. UNDER THESE FACTS, WE DO NOT SEE ANY REASO N TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A), SAME IS HEREBY UPHELD. THUS, GR OUND RAISED BY THE REVENUE IS REJECTED. 15. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECIS ION OF THE CO-ORDINATE BENCH (SUPRA), ARE OF THE VIEW THAT ASSESSEE WAS NO T REQUIRED TO DEDUCT TDS ON THE EXPENSES RELATING TO CLINICAL AND ANALYTICAL ST UDY EXPENSES INCURRED DURING THE YEAR AND THEREFORE, NO DISALLOWANCE WAS CALLED FOR UNDER SECTION 40(A)(I) OF THE ACT. 16. AS REGARDS THE REQUEST OF THE LD. DR FOR SETTIN G ASIDE THE ISSUE FOR RE- VERIFICATION TO THE FILE OF THE LD. ASSESSING OFFIC ER, WE DO NOT FIND ANY MERIT IN ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 19 THIS PLEA AFTER GOING THROUGH THE DETAILED SUBMISSI ON DATED 21.03.2013 FILED BEFORE THE ASSESSING AUTHORITY INCORPORATING EXPLAN ATION REGARDING NON- DEDUCTION OF TDS ON CLINICAL AND ANALYTICAL STUDY E XPENSES. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CI T(A) ON THIS ISSUE AND ACCORDINGLY DISMISS THIS GROUND RAISED BY THE REVEN UE. 17. THE THIRD GROUND RAISED BY THE REVENUE READS AS UNDER:- 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,63,967/- BEING UNUTILIZED CENVAT CREDIT NOT I NCLUDED IN THE CLOSING STOCK. 18. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ISSUE RAISED IN THIS GROUND IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. INDO NIPPON CHEMICALS CO. LTD., REPORTED IN 261 ITR 275 (SC), RELATING TO ACCOUNTING TREATMENT OF CENVAT CR EDIT. LD. DR COULD NOT CONTROVERT THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. WE FIND THAT THE ISSUE RAISED IN THIS G ROUND IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF CIT VS. INDO NIPPON CHEMICALS LTD (SUPRA), WHERE IN THE HONBLE APEX COURT HELD AS UNDER:- 4. WE ARE UNABLE TO ACCEPT THE VIEW OF THE ASSESSI NG OFFICER THAT MERELY BECAUSE MODVAT CREDIT IS AN IRREVERSIBLE CREDIT AVAILABLE T O THE MANUFACTURERS UPON PURCHASE OF DUTY PAID RAW MATERIAL, IT WOULD AMOUNT TO INCOME WHICH IS LIABLE TO BE TAXED UNDER THE ACT. 5. MR. P.J. PARDIWALA, LEARNED COUNSEL FOR THE RESP ONDENT IN C.A. NO. 2161 OF 2002 AND 2164-2165 OF 2002, POINTS OUT THAT THE ASS ESSEES HAVE ALL UNIFORMLY ADOPTED THE 'NET METHOD', NAMELY, VALUING THE RAW M ATERIALS AT THE PURCHASE PRICE MINUS MODVAT CREDIT. THIS METHOD WAS ALSO ADO PTED BY THEM WHILE VALUING THE UNCONSUMED RAW MATERIALS AND THE WORK-IN-PROGRE SS AT THE END OF THE YEAR. WE, THEREFORE, DO NOT THINK THAT THEIR METHOD OF VA LUATION WAS WRONG. THE ASSESSING OFFICER ADOPTED THE 'GROSS METHOD' AT THE TIME OF PURCHASE, AND THE ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 20 'NET METHOD' OF VALUATION AT THE TIME OF VALUATION OF THE STOCK ON HAND. BY THIS METHOD, WHICH IS WHOLLY ERRONEOUS IN OUR VIEW, HE A SSUMED THAT THE INCOME, TO THE EXTENT OF THE MODVAT CREDIT ON THE UNCONSUMED R AW MATERIAL, WAS GENERATED, WHICH WAS NOT REFLECTED IN THE ACCOUNTS AND ATTEMPT ED TO BRING IT TO CHARGE UNDER THE ACT. 6. LEARNED COUNSEL FOR THE REVENUE REFERRED US TO T HE JUDGMENT OF THIS COURT IN CCE V. DAI ICHI KARKARIA LTD. [1999] 7 SCC 448 A ND, PARTICULARLY, THE OBSERVATIONS IN PARA 25 TO THE FOLLOWING EFFECT : '25. WE THINK IT IS APPROPRIATE THAT THE COST OF TH E EXCISABLE PRODUCT FOR THE PURPOSES OF ASSESSMENT OF EXCISE DUTY UNDER SEC TION 4(1)(B) OF THE ACT, READ WITH RULE 6 OF THE VALUATION RULES SHOULD BE R ECKONED AS IT WOULD BE RECKONED BY A MAN OF COMMERCE. WE THINK THAT SUCH R EALISM MUST INFORM THE MEANING THAT THE COURTS GIVE TO WORDS OF A COMM ERCIAL NATURE, LIKE COST, WHICH ARE NOT DEFINED IN THE STATUTES WHICH U SE THEM. A MAN OF COMMERCE WOULD, IN OUR VIEW, LOOK AT THE MATTER THU S : 'I PAID RS. 100 TO THE SELLER OF THE RAW MATERIAL A S THE PRICE THEREOF. THE SELLER OF THE RAW MATERIAL HAD PAID RS. 10 AS THE E XCISE DUTY THEREON. CONSEQUENT UPON PURCHASING THE RAW MATERIAL AND BY VIRTUE OF THE MODVAT SCHEME, I HAVE BECOME ENTITLED TO THE CREDIT OF RS. 10 WITH THE EXCISE AUTHORITIES AND CAN UTILISE THIS CREDIT WHEN I PAY EXCISE DUTY ON MY FINISHED PRODUCT. THE REAL COST OF THE RAW MATERIAL (EXCLUSIVE OF FREIGHT, INSURANCE AND THE LIKE) TO ME IS, THEREFORE, RS. 90 . IN RECKONING THE COST OF THE FINAL PRODUCT I WOULD INCLUDE RS. 90 ON THIS AC COUNT.' THIS, IN REAL TERMS, IS THE COST OF THE RAW MATERIA L (EXCLUSIVE OF FREIGHT, INSURANCE AND THE LIKE) AND IT IS THIS, IN OUR VIEW , WHICH SHOULD PROPERLY BE INCLUDED IN COMPUTING THE COST OF THE EXCISABLE PRODUCT.' (P. 461) 7. LEARNED COUNSEL EMPHAISED THESE OBSERVATIONS TO SUPPORT HIS CASE. IN OUR VIEW, THESE OBSERVATIONS HAVE BEEN MISUNDERSTOOD. THIS CO URT POINTED OUT IN THE SAID JUDGMENT THAT A MANUFACTURER WHO MANUFACTURES THE G OODS WOULD RECKON THE COST OF THE RAW MATERIAL AS EXCLUSIVE OF THE MODVAT CREDIT IN RECKONING THE COST OF THE 'FINAL PRODUCT'. THESE OBSERVATIONS DO NOT DEAL WITH THE MANNER OF VALUATION OF THE UNCONSUMED RAW MATERIAL OR WORK-IN-PROGRESS IN HAND. WE HAVE ALSO BEEN REFERRED TO THE JUDGMENT IN EICHER MOTORS LTD. V. U NION OF INDIA [1999] 106 ELT 3 (SC). IN OUR VIEW, THIS JUDGMENT DOES NOT SUP PORT THE REVENUE'S CASE. 8. WE ARE OF THE VIEW THAT THE HIGH COURT HAS CORRE CTLY APPRECIATED THE ARGUMENTS AND RENDERED A JUDGMENT WHICH IS UNEXCEPT IONABLE. THERE IS NO SUBSTANCE IN THE APPEALS OF THE DEPARTMENT. HENCE, WE DISMISS THESE APPEALS, HOWEVER, WITHOUT ANY ORDER AS TO COSTS. ITA NO. 160/AHD/2015 DCIT VS. BA RESEARCH INDIA LTD AY : 2010-11 - 21 20. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECIS ION OF THE HONBLE APEX COURT (SUPRA), ARE OF THE VIEW THAT THE UNUTILIZED CENVAT CREDIT SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND THE E XCISE DUTY OF RS.1,63,967/- IS NOT LIABLE TO INCLUDED IN CLOSING STOCK AS PER SECT ION 145(A) OF THE ACT. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORD ER OF THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY DISMISS THIS GROUND RAISED BY THE REVENUE. 21. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE COURT ON 20 TH JUNE, 2017 AT AHMEDABAD. SD/- SD/- (R.P. TOLANI) VICE-PRESIDENT (AZ) (MANISH BORAD) ACCOUNTANT MEMBER AHMEDABAD; DATED, 20/06/2017 **BT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ & / CONCERNED CIT 4. & ) ( / THE CIT(A)- 5. $ , $ , /DR,ITAT, AHMEDABAD, 6. 0 / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) $ ITAT, AHMEDABAD