B.A. Research India Ltd.( Now known as Cliantha Research Ltd. ), Ahmedabad V. The CIT, A'bad- I, Ahmedabad

ITA 1623/AHD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89775 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS VIBHA BHALLA
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Assessment record
• Section: 143(3); 80IB; 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND S.S. GODARA JUDICIAL MEMBER I.T.A. NO.1915/AHD/2012 (ASS TT. YEAR 2009-10) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, AHMEDABAD. VS B.A. RESEARCH INDIA LTD., BA RESEARCH HOUSE, OPP. PUSHPARAJ TOWERS, NEAR JUDGES BUNGALOWS, AHMEDABAD. (APPELLANT) (RESPONDENT) I.T.A. NO.1623/AHD/2014 ( ASS TT. YEAR 2008-09) B.A. RESEARCH INDIA LTD., BA RESEARCH HOUSE, OPP. PUSHPARAJ TOWERS, NEAR JUDGES BUNGALOWS, AHMEDABAD. VS THE DEPUTY COMMISSIO NER OF INCOME TAX, CIRCLE-1, AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI MUKESH M. PATEL REVENUE BY MRS. VIBHA BHALLA, CIT (DR) / DATE OF HEARING :08-07-2015 / DATE OF PRONOUNCEMENT: 31-7-2015 / O R D E R PER S.S. GODARA JUDICIAL MEMBER: ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 2 THIS IS A SET OF TWO APPEALS. THE ASSESSEE HAS FIL ED ITA NO.1623/AHD/2014 FOR A.Y. 2008-09, AGAINST ORDER OF THE CIT-I, AHMEDABAD DATED-29-3-2014, ANNULLING A REGULAR ASSE SSMENT FRAMED ON 31-1-2010 WITH DIRECTIONS TO REDO IT AFRESH, IN PROCEEDINGS U/S. 263 OF THE INCOME TAX ACT,1961 FOR SHORT THE ACT. THE R EVENUES APPEAL ITA NO.1915/AHD/2012 FOR A.Y. 2009-10 ARISES FROM ORDER OF THE CIT (A)-6 AHMEDABAD IN CASE NO.CIT(A)-VI/DCIT.CIR.1/266/11-12 , ALLOWING ASSESSEES CLAIM OF SEC.80IB (8A DEDUCTION) OF RS.2 2,22,47,186/-, IN PROCEEDINGS U/S. 143(3)OF THE ACT. 2. WE COME TO THE FORMER ASSESSMENT YEAR FIRST. TH E ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF CLINICAL TEST ING OF DRUGS AND FORMULATIONS ON HUMAN BEINGS. IT FILED ITS RETURN ON 15-9-2008 ADMITTING INCOME OF RS.3,32,270/-. IT HAD CLAIMED S ECTION80IB (8A) DEDUCTION OF RS.11,79,98,690/- BY PROJECTING ITSELF TO BE AN ENTITY ENGAGED IN RESEARCH AND DEVELOPMENT. THE ASSESSING OFFICER COMPLETED A REGULAR ASSESSMENT ON 31-10-2012 ACCEPTING THE AB OVESTATED DEDUCTION THEREBY EXCLUDING ONLY A SUM OF RS.22.82 LACS FROM SAMPLE STORAGE INCOME AS NOT TO HAVE BEEN DERIVED FROM RES EARCH AND DEVELOPMENT U/S. 80 IB(8A) OF THE ACT. THEREAFTER, THE CIT FORMED AN OPINION THAT THE ABOVESTATED ASSESSMENT WAS ERRONEO US AND CAUSED PREJUDICE TO INTEREST OF THE REVENUE SINCE THE ASSE SSING OFFICER HAD ACCEPTED THE ABOVESTATED DEDUCTION CLAIM WITHOUT VE RIFYING ITS ELIGIBILITY CONDITIONS STIPULATED THEREIN. AND ALSO THAT THE AS SESSEE WAS ONLY A CONTRACT RESEARCH ORGANIZATION WITHOUT ANY TRANSFER OF THE TECHNOLOGY DEVELOPED. HE ACCORDINGLY ISSUED A SECTION 263 NOT ICE DT. 13-2-2013. 3. THE ASSESSEE FILED ITS REPLY CONTESTING THE CIT S JURISDICTION INVOKING REVISIONAL JURISDICTION ON THE GROUND THAT THE ASSESSING OFFICER HAD NEITHER COMMITTED ANY ERROR IN FRAMING ASSESSME NT IN QUESTION NOR ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 3 THE SAME CAUSED PREJUDICE TO INTEREST OF THE REVENU E. IT REFERRED THE ASSESSING OFFICERS LETTER DT.4-10-2010 ISSUED IN T HE COURSE OF SCRUTINY SPECIFICALLY QUOTING SEC. 80IB(8A) R.W. RULE 18DA S EEKING TO SATISFY THE CONDITIONS ENUMERATED THEREIN I.E. THE COMPLETE DET AILS OF INFRASTRUCTURE FACILITIES AND MANPOWER DEPLOYED UNDER RULE 18DA (1 )(C), RELEVANT DETAILS OF RESEARCH AND DEVELOPMENT PROGRAMME FORMU LATED WITH PROJECTS UNDERTAKEN, DETAILS OF RESEARCH AND DEVELO PMENT ACTIVITIES LEADING TO TECHNOLOGY DEVELOPMENT AND IMPROVEMENT T HEREOF ALONG WITH ANNUAL RETURNS FILED WITH THE PRESCRIBED AUTHORITY (DSIR I.E. DEPARTMENT OF SCIENTIFIC INDUSTRIAL AND RESEARCH). IT HIGHLIGH TED ITS RESPONSE DT. 3- 11-2010 CLAIMING ITSELF TO HAVE SATISFIED ALL THE C ONDITIONS UNDER THE ABOVESTATED SECTION AND RULE BY WAY OF PLACING ON R ECORD ITS ANNUAL RETURNS FOR F.Y. 2007-08 AND 2008-09 FILED ON 20-8- 2008. THE ASSESSING OFFICER WAS STATED TO HAVE ISSUED ANOTHER NOTICE DT. 8-011- 2010 REITERATING HIS EARLIER SHOW CAUSE SEEKING FUR THER INFORMATION AS TO HOW THE ASSESSEES RESEARCH AND DEVELOPMENT ACTIVIT Y HAD LED TO TECHNOLOGY DEVELOPMENT IMPROVEMENT, TRANSFER THEREO F ALONG WITH PATENT RIGHTS ACQUIRED. THE ASSESSEE QUOTED ITS FUR THER REPLY DT. 16-11- 2010 PLACING ON RECORD ALL NECESSARY DOCUMENTS FILE D WITH DSIR RETURNS, SUBSEQUENT DELIBERATIONS IN THE COURSE OF SCRUTINY AND ITS PATENT APPLICATION FILED WITH REFERENCE TO THE RELATED PRO DUCTS AND JUSTIFIED THE ASSESSING OFFICERS ACTION IN GRANTING SEC. 80IB(8A ) DEDUCTION IN QUESTION. IT RAISED A LEGAL PLEA THAT THE ASSESSING OFFICER HAD TAKEN ONE OF THE POSSIBLE VIEW, RATHER THE ONLY POSSIBLE VIEW WHICH COULD NOT BE SUBJECTED TO SEC. 263 PROCEEDINGS AND PRAYED FOR DR OPPING THE CITS SHOW CAUSE. 4. THE CASE FILE REVEALS THAT THE CIT WAS NOT IMPRE SSED BY THE ABOVESTATED CONTENTIONS. HE REJECTED THE SAME IN HI S ORDER DT. 31-12- 2010 AND DIRECTED THE ASSESSING OFFICER TO REDO ASS ESSMENT IN ASSESSEES CASE AS UNDER:- ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 4 '5. / HAVE CONSIDERED THE SUBMISSIONS OF LD. ARS AND THE FACTS OF THE CASE. IT IS SEEN THAT ONE OF THE CONDITIONS IS THAT THE ASSESSEE SHOULD, BE 'ENGAGED EXCLUSIVELY IN SCIENTIFIC RESEA RCH AND DEVELOPMENT ACTIVITIES LEADING TO TECHNOLOGY DEVELO PMENT, IMPROVEMENT OF TECHNOLOGY AND TRANSFER OF TECHNOLOG Y DEVELOPED BY THEMSELVES' [RULE 18DA(L)(E)]. HOWEVER, IT IS SEEN THAT THE ASSESSEE HAS ONLY APPLIED, FOR PATENT AND NO PATENT WAS GRANTED, TO IT. THUS, THE FACT WHETHER ANY NEW TECHNOLOGY WAS D EVELOPED OR NOT WAS FAR FROM ESTABLISHED. THE PATENT APPLICATION MA Y ULTIMATELY BE REJECTED AND IT COULD NOT BE SAID THAT ANY NEW TECH NOLOGY WAS ACTUALLY DEVELOPED BY THE ASSESSEE. FURTHER, IT HAS BEEN STATED THAT THE LIST OF PARTIES TO WHOM SUCH TECHNOLOGY WAS TRA NSFERRED IS AS PER ANNCXURE 2 TO THE LETTER DATED 26-11-2010. HOWEVER, HAVING CALLED FOR ASSESSMENT RECORDS FOR A.Y. 2008-09, IT IS FOUN D THAT ALTHOUGH ANNEXURE 1 HAS INDEED BEEN ANNEXED TO THE SAID LETT ER, THERE IS NO ANNEXURE 2 CONTAINING THE LIST OF PARTIES ON THE RE CORD, LT APPEARS, THEREFORE, THAT NO SUCH LIST OF PARTIES TO WHOM THE TECHNOLOGY WAS TRANSFERRED WAS PROVIDED AT THE ASSESSMENT STAGE. O NE OF THE CONDITIONS IS THAT THE TECHNOLOGY DEVELOPED SHOULD BE TRANSFERRED. IN THE INSTANT CASE, THERE WAS NO EVIDENCE ON RECOR D, TO SHOW THAT THIS CONDITION HAD BEEN FULFILLED. ACCORDINGLY, IT IS HELD THAT THE A.O. HAD ACCEPTED, THE CONTENTION OF THE ASSESSEE WITHOU T MAKING PROPER ENQUIRIES AND VERIFICATION IN THIS REGARD. THE ALLO WANCE OF DEDUCTION WITHOUT ANY EVIDENCE IS UNSUSTAINABLE IN THE EYES O F LAW. ACCORDINGLY, IT IS HELD THAT THE ORDER DATED 31-12- 2010 PASSED BY 143(3) BY DCIT, CIRCLE-1, AHMEDABAD. WAS ERRONEOUS AND. PREJUDICIAL TO THE INTERESTS OF REVENUE. THE SAID O RDER IS, THEREFORE, CANCELLED AND THE A.O. IS DIRECTED TO MAKE AFRESH A SSESSMENT OF THE TOTAL INCOME OF THE ASSESSEE.' 5. THE ASSESSEE FILED ITA NO.1095/AHD/2013 BEFORE T HE TRIBUNAL. A COORDINATE BENCH IN ITS ORDER DT. 19-7-2013 OBSERVE D THAT SEC. 80IB(8A) DEDUCTION PROVISION NOWHERE REQUIRED ACQUISITION OF ANY PATENT RIGHTS AS A PRECONDITION FOR ALLOWING THE RELIEF. IT HELD TH AT THE CIT HAD NOT GIVEN ANY OPPORTUNITY TO ASSESSEE FOR PLACING ON RECORD A NNEXURE -2 COMPRISING LIST OF ASSESSEES CLIENTAL FOR THE PURP OSE OF TECHNOLOGY TRANSFER. THE COORDINATE BENCH ACCORDINGLY RESTORE D THE ISSUE BACK TO THE CIT FOR DECISION AFRESH. ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 5 6. THE CIT TOOK UP CONSEQUENTIAL PROCEEDINGS AND IS SUED A FRESH SHOW CAUSE NOTICE DT.7-1-2014. THE ASSESSEE FILED ITS RESPONSE ON 21- 2-2014, QUOTED TRIBUNALS DIRECTIONS ON THE LIMITE D ISSUE OF ANNEXURE-2 HEREINABOVE AND PRAYED FOR DROPPING SECTION 263 PRO CEEDINGS. IT REFERRED TO DSIRS LETTER DT. 20-3-2013 REJECTING T HE REVENUES REQUEST PUT UP BY THE ADDL. CIT RANGE-1, AHMEDABAD SEEKING WITHDRAWAL OF ITS APPROVAL GRANTED U/S. 80IB(8A). IT ALSO REITERATED THE SUBMISSIONS MADE IN FIRST ROUND OF PROCEEDINGS HEREINABOVE. THE ASSESSEE ALSO RAISED A LEGAL PLEA THAT IT HAD ALREADY TAKEN UP TH E ISSUE OF IMPUGNED DEDUCTION BEFORE THE CIT (A) AGAINST THE ASSESSING OFFICERS ACTION EXCLUDING ITS SAMPLE STORAGE INCOME FROM THE DEDUCT ION CLAIMED HEREINABOVE. (SUPRA). THE CIT REJECTED ALL THESE PL EAS. HE INTERALIA OBSERVED ON LEGALITY ASPECT THAT THE CIT (A) WAS ON LY DEALING WITH THE ISSUE AS TO WHETHER THE SAMPLE STORAGE INCOME WAS E LIGIBLE FOR SECTION 80-IB(8A) DEDUCTION AND NOT ON THE QUESTION OF ELIG IBILITY AS A WHOLE, THE PRESENT WAS NOT A CASE OF TWO POSSIBLE VIEWS FO RMED BY THE ASSESSING AUTHORITY BUT THAT OF DECIDING FULFILLMEN T OF CONDITIONS ENUMERATED FOR THE PURPOSE OF GRANTING DEDUCTION WH ICH HAD NOWHERE BEEN EXAMINED IN THE COURSE OF ASSESSMENT TO BE REV ISED WITH SECTION263 JURISDICTION OF VERY WIDE AMPLITUDE AND THE ABOVESTATED ASSESSMENT FRAMED WAS WITHOUT A PROPER INQUIRY AND INVESTIGATION WHICH WAS REVISABLE U/S. 263 BEING ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. THEREAFTER, HE CONSIDERED DSIRS LETTER HEREINABOVE REJECTING THE REVENUES CASE FOR WITHDR AWING SECTION 80IB(8A) APPROVAL AND DIRECTING THE ASSESSING OFFIC ER TO REDO THE ASSESSMENT AS UNDER:- 9 . PROPOSAL FOR WITHDRAWAL OF APPROVAL U/S 80IB (8A), IT IS EVIDENT THAT THE ASSESSEE HAS NOT GONE INTO THE ANA LYSIS OF THE CONTENTS OF THE SAID LETTER DATED 20-3-2013 FROM DS IR. IT HAS ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 6 BEEN MENTIONED IN THE LETTER THAT THE APPROVAL U/S 80IB(8A) HAS BEEN GIVEN AFTER EXAMINING THE FACILITIES AT TH E PREMISES OF THE ASSESSEE AND DISCUSSION REGARDING R&D ACTIVITY UNDERTAKEN BY THEM. THE OFFICE OF THE DSIR HAS THUS COMMUNICAT ED THAT THERE IS NOTHING ON RECORD AGAINST THE COMPANY FOR WITHDRAWAL OF APPROVAL, IT CAN, THEREFORE BE INFERRED THAT THE DSIR APPROVAL HAS BEEN GRANTED ON THE BASIS OF THE AVAIL ABLE FACILITIES AND DISCUSSION REGARDING R&D ACTIVITY. W HILE GRANTING APPROVAL, THE DSIR HAS NOT MENTIONED ANYTHING ABOUT THE ACTUAL ACTIVITIES UNDERTAKEN BY THE ASSESSEE AFTER THE GRANT OF APPROVAL IN EACH OF THE SUCCEEDING YEARS. FOR THE P URPOSE OF I.T. ACT EACH AND EVERY PREVIOUS YEAR IS CONSIDERED AS EXCLUSIVE. IN ORDER TO CLAIM A PARTICULAR DEDUCTION UNDER THE I.T. ACT, THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE FOR A PARTICULAR YEAR WILL DECIDE WHETHER A DEDUCTION UND ER THE ACT CAN BE GRANTED FOR THAT YEAR OR NOT. IN THIS CASE, IT WAS FOUND THAT THE ASSESSEE IS MERELY A CONTRACT RESEARCH ORG ANIZATION WHICH PROVIDE SERVICES OF CONDUCTING CLINICAL TRIAL S OF VARIOUS DRUGS AND FORMULATION OF CLIENTS WHICH MAINLY COMPR ISES PHARMACEUTICAL COMPANIES. AS PER THE INCOME-TAX ACT , 1961, IN ORDER TO CLAIM DEDUCTION U/S 80IB(8A), THE FOLLOWIN G CONDITIONS ARE REQUIRED TO BE SATISFIED:- (I) THE COMPANY SHOULD BE REGISTERED IN INDIA . (II) THE COMPANY'S MAIN OBJECT SHOULD BE SCIENTIF IC AND INDUSTRIAL RESEARCH AND DEVELOPMENT. (III) FOR THE TIME BEING, THE COMPANY SHOULD B E APPROVED BY THE PRESCRIBED AUTHORITY, (IV) THE COMPANY SHOULD FULFILL THE CONDITIONS P RESCRIBED UNDER RULE 18DA. 9.1 HERE IT IS PERTINENT TO POINT OUT THAT ONLY IF ALL THE FOUR CONDITIONS ARE SATISFIED, THEN THE ASSESSEE IS ELIG IBLE FOR CLAIMING DEDUCTION U/S 80IB(8A). IN THE CASE OF THE ASSESSEE, ONLY CONDITION NO.(I) & (III) ARE SATISFIED. THE AS SESSEE DOES NOT SATISFY CONDITION NO.(II) SINCE ITS MAIN OBJECT IS CONTRACT RESEARCH AND CONDUCTING CLINICAL TRIAL ON BEHALF OF CLIENTS AND NOT INDEPENDENT SCIENTIFIC RESEARCH AND DEVELOPMENT. IN OTHER WORDS, THE ASSESSEE SIMPLY PROVIDES THE INFRASTRUCTURE REQ UIRED FOR CONDUCTING RESEARCH TO OUTSIDE AGENCIES. ON THE SAM E LINES, THE ASSESSEE ALSO DOES NOT SATISFY CONDITION NO. (IV) A S THE VARIOUS CLAUSES OF RULE 18DA ARE NOT FULFILLED IN THE CASE OF THE ASSESSEE. AS PER THE PROVISIONS OF RULE 18DA (L)/(2), THE COM PANY IS EXPECTED TO BE EXCLUSIVELY ENGAGED IN SCIENTIFIC RE SEARCH AND ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 7 DEVELOPMENT LEADING TO DEVELOPMENT/IMPROVEMENT OF N EW TECHNOLOGY AND TRANSFER OF SUCH TECHNOLOGY DEVELOPE D BY THEMSELVES TO CUSTOMERS. AS PER RULE 18 DA(2), THE COMPANY SHALL DEVELOP AND SELL PROTOTYPE FROM ITS LABORATOR Y AFTER TAKING PRIOR PERMISSION OF THE PRESCRIBED .AUTHORITY. HERE NO PROTOTYPE IS DEVELOPED BY THE ASSESSEE. IT IS THEREFORE CLEAR TH AT THE ASSESSEE CANNOT CLAIM DEDUCTION U/S 80IB(8A) MERELY ON THE B ASIS OF APPROVAL GIVEN BY DSIR SINCE IT IS ONLY ONE OF THE CONDITION FOR CLAIMING DEDUCTION. IF THIS WAS THE ONLY CONDITION THEN THE REMAINING CONDITIONS PRESCRIBED IN RULE 80IB(8A) AN D RULE 18DA WOULD BE RENDERED REDUNDANT. THE CONTENTION OF THE ASSESSEE THAT 80IB (8A) SHOULD BE CONSIDERED AS CORRECTLY GRANTED ON THE BASIS OF DSIR APPROVAL IS THEREFORE MISPLACED. 10. ON EXAMINATION OF THE ANNEXURE-II SUBMITTED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS NOT DEVE LOPED ANY NEW TECHNOLOGY OR IMPROVED ANY EXISTING TECHNOLOGY NOR SOLD ANY PROTOTYPE DEVELOPED IN ITS LABORATORY ON ITS OWN. T HE ASSESSEE HAS MERELY CONDUCTED CLINICAL RESEARCH FOR CLIENTS WHICH MAINLY COMPRISES OF ITS GROUP COMPANIES. IN VIEW OF THESE FACTS, IT CAN BE CONSTRUED THAT THIS IS NOT A CASE WHERE THE ASSESSE E ITSELF DEVELOPED TECHNOLOGY OR A PROTOTYPE AND TRANSFERRED THE SAME TO CLIENTS. THIS IS ACTUALLY A CASE WHERE A PARTICULAR DRUG ALREADY IN EXISTENCE AND DEVELOPED BY ITS CLIENTS IS TESTED BY PERFORMING CLINICAL TRIALS. THE INTENTION OF THE LEGISLATURE B EHIND GRANTING 100% DEDUCTION OF PROFITS TO ELIGIBLE ASSESSES IS T HAT SCIENTIFIC RESEARCH IS AN INHERENTLY RISKY VENTURE SINCE POSIT IVE OUTCOME IS NOT GUARANTEED AND THE EXPENDITURE INCURRED IS LIKE LY TO GO IN VAIN DUE TO FAILURE. HERE, THE ELEMENT OF RISK IS NOT IN VOLVED SINCE THE' ASSESSEE IS NOT CONDUCTING INDEPENDENT RESEARCH. TH ERE IS NO RATIONALE ON THE BASIS OF WHICH DEDUCTION U/S 80IB( 8A) R.W.R 18DA(L)/(2) CAN BE CLAIMED BY THE ASSESSEE. THE ASS ESSEE IS THUS NOT ELIGIBLE FOR CLAIMING ANY DEDUCTION U/S 80IB(8A ) IRRESPECTIVE OF THE FACT THAT ANY PATENT IS GRANTED TO THE ASSES SEE OR NOT. 11. FROM THE ASSESSMENT ORDER, IT IS EVIDENT THAT T HE AO HAS NOT EXAMINED THE FACTS OF THE CASE WITH THE APPLICABLE PROVISIONS OF LAW BEFORE GRANTING DEDUCTION U/S 80IB(8A) R.W.R 18 DA(L)/(2). THE AO ALSO DID NOT HAVE THE OPPORTUNITY TO EXAMINE ANN EXURE-II WHICH WAS NOT SUBMITTED BY THE ASSESSEE DURING ASSE SSMENT PROCEEDINGS. THEREFORE, THE AO HAD NOT FORMED ANY O PINION ON THE BASIS OF THE CONTENTS OF ANNEXURE-II WHICH WAS NOT PRESENTED BEFORE HIM. ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 8 12. CONSIDERING THE ABOVE FACTS AND FINDINGS, IT IS AMPLY CLEAR THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80IB(8A) AS IT DOES NOT SATISFY ALL THE PROVISIONS ENLISTED IN SEC TION U/S 80IB(8A) AND RULE 18DA. SINCE THE AO HAD ALLOWED DEDUCTION U /S 80IB(8A) AMOUNTING TO RS.11.79 CRORES WITHOUT THOROUGHLY EXA MINING THE REQUISITE DOCUMENTS AND CONDUCTING INDEPENDENT INQU IRY, THERE WAS SUBSTANTIAL LOSS OF REVENUE TO THE EXCHEQUER SI NCE THE INCOME OF THE ASSESSEE WAS ASSESSED AT A LOWER FIGURE DUE TO GRANTING OF EXCESSIVE DEDUCTION. IN LIGHT OF THESE FACTS, IT IS HELD THAT THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 31-12-2010 FOR AY 2008-09 WAS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF REVENUE. ACCORDINGLY, THE AO IS DIRECTED TO PASS A FRESH ASS ESSMENT ORDER AFTER CONSIDERING THE ISSUE INVOLVED AND AFTER ALLO WING OPPORTUNITY TO THE ASSESSEE AS PER LAW. 7. THIS LEAVES THE ASSESSEE AGGRIEVED. IT HAS FILED ITA NO.1623/AHD/2014 AGAINST THIS CITS ORDER DT. 29-3- 2014 IN PROCEEDINGS U/S. 263 OF THE ACT. 8. NOW WE COME TO THE LATTER ASSESSMENT YEAR 2009-1 0 INVOLVING THE REVENUES APPEAL ITA NO.1915/AHD/2012. THE ASSESSE E FILED ITS RETURN THIS TIME ON 23-3-2009 ADMITTING INCOME OF RS.25,97 ,840/- FOLLOWED A REVISED ONE STATING THE SAME AMOUNT. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE NOTICED ASSESSEES CLAIM OF SEC. 80IB( 8A) DEDUCTION OF RS.22,12,47,186/-. IT HAD PLACED ON RECORD ITS AUDI T REPORT IN FORM 10CCB ALONG WITH THE RETURN. THE ASSESSEE HAD COMM ENCED ITS OPERATION ON 4-12-2004 AND 14-3-2007 AT AHMEDABAD A ND BARODA; RESPECTIVELY. IT CARRIED OUT ANALYSIS OF CLINICAL SAMPLES FOR BIOEQUILENCE, BIO-AVAILABILITY AND CLINICAL TRIAL STUDIES FOR ITS CLIENTS/PHARMACEUTICALS COMPANIES NAMELY M/S. CADILA HEALTH CARE LTD., LUPI N, APOTEX RESEARCH PVT. LTD., IPCL LABORATORIES AND DR. REDDYS LAB. T HE ASSESSING OFFICER FORMED AN OPINION THAT THE ASSESSEES ROLE WAS ONLY THAT OF MERELY PROVIDING PROFESSIONAL SERVICE OF ANALYSIS OF CLINI CAL SAMPLES AND NOT OF ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 9 SCIENTIFIC AND INDUSTRIAL RESEARCH AND DEVELOPMENT U/S. 80- IB (8A). HE ISSUED A SHOW CAUSE PROPOSING TO DISALLOW THE SAME. 9. THE ASSESSEE FILED ITS REPLY ON 21-10-2011 WITH A RIGHT UP IN DETAIL RELATING TO ITS ACCOUNTS, MEMORANDUM OF ASSOCIATION , TECHNOLOGY DEVELOPED, NATURE OF BUSINESS CARRIED OUT OF FULL P LEDGE SERVICE CONTRACT ORGANIZATION ENGAGED IN RESEARCH AND DEVELOPMENT AC TIVITY OF CLINICAL RESEARCH CREATING CLINICAL TRIAL PROTOCOL AND NOVEL ANALYTIC METHODS. IT SUBMITTED SCOPE OF RESEARCH COVERED UNDER ANNUAL RE TURN FOR F.Y. 2008- 09 SUBMITTED TO DSIR, LIST OF ITS INFRASTRUCTURAL F ACILITIES, SKILLED STAFF EMPLOYED, BREAK UP OF PARTYWISE RECEIPTS WITH ALL N ECESSARY DETAILS. COPY OF THE DSIR APPROVAL IN ITS ONGOING FIELD OF R ESEARCH WAS ALSO PLACED ON RECORD IN SUPPORT. THE ASSESSING OFFICER DID NOT AGREE TO THE SAME. HE PASSED ASSESSMENT ORDER ON30-12-2011 INTER ALIA DISCUSSING THE NECESSARY CONDITIONS OF SEC. 80IB(8A) DEDUCTION READ WITH RULE 18DA OF THE INCOME TAX RULES. HE OBSERVED THAT THE ASSESSEE DID NOT FULFILL THE SAID CONDITIONS; MORE PARTICULARLY THAT OF 80IB (8A)(II) READ WITH RULE 18DA (1)(E) BEING AN ENTITY ENGAGED IN RE SEARCH AND DEVELOPMENT FIELD AS ITS BUSINESS ACTIVITY IN THE R ELEVANT ACCOUNTING PERIOD WAS THAT OF ANALYSIS OF BIOLOGICAL SAMPLES F OR PHARMACEUTICALS INDUSTRIES WHICH WAS ONLY AN INCIDENTAL OBJECT AND NOT THE MAIN ONE OF CONTRACT RESEARCH SERVICES TO INDUSTRIES. HE HELD T HAT THE ASSESSEES ENTIRE RECEIPTS WERE FROM BIO-EQUILANCE STUDY AND N OT FROM TRANSFER OF ANY TECHNOLOGY. THE ASSESSEES PAYEES HAD DEDUCTED TDS U/S. 194C AND 194J. THE ASSESSING OFFICER ACCORDINGLY VIEWED IT AS A CASE OF CONTRACTUAL PAYMENT WHEREIN ITS PAYERS WERE ALSO EL IGIBLE FOR SECTION 35 DEDUCTION RELATING TO THE RESEARCH DEVELOPMENT EXPE NSES WHICH COULD NOT BE THE LEGISLATIVE INTENTION. HE REFERRED TO AS SESSEES ACCOUNTING POLICY ON RECORD NOT SHOWING TRANSFER OF ANY TECHNO LOGY. THE ASSESSING ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 10 OFFICER ACCORDINGLY DISALLOWED ASSESSEES CLAIM OF SEC. 80IB (8A) DEDUCTION AMOUNTING TO RS.2,12,47,186/-. 10. THE ASSESSEE PREFERRED APPEAL. THE CIT (A) HAS ACCEPTED ITS CONTENTIONS AS UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESSMENT ORDER, APPELLANT'S WRITTEN SUBMISSION AND ARGUMENTS MADE B Y AUTHORIZED REPRESENTATIVE AS WELL AS ADDITIONAL CIT. IT IS NOT IN DISPUTE THAT APPELLANT WAS GRANTED APPROVAL UNDER RULE 18D FOR C ARRYING ON OF SCIENTIFIC RESEARCH AND DEVELOPMENT BY THE PRESCRIB ED AUTHORITY I.E. THE DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RE SEARCH, MINISTRY OF SCIENCE AND TECHNOLOGY, GOVERNMENT OF INDIA. THE APPROVAL WAS INITIALLY GRANTED FOR A PERIOD OF THREE ASSESSMENT YEARS WHICH WAS FURTHER EXTENDED. AS PER RULE 18D, PRESCRIBED AUTHO RITY GRANTS APPROVAL FOR FURTHER PERIOD SUBJECT TO SATISFACTORY PERFORMANCE OF THAT COMPANY ON PERIODIC REVIEW. CONDITIONS PRESCRI BED FOR DEDUCTION UNDER SECTION 80 IB(8A) ARE GIVEN IN RULE 18DA. THE RELEVANT PARA OF THE GUIDELINES FOR GRANT OF SUCH A PPROVAL ISSUED BY GOVERNMENT OF INDIA IS AS UNDER- '4- THE APPROVAL OF THE PRESCRIBED AUTHORITY SHALL BE GRANTED INITIALLY FOR A PERIOD UP FO 3 YEARS PROVIDED ALL THE 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 FULFILMENT OF PRESCRIBED CONDITIONS SET OUT IN THE INCOME TAX ACT/RULES. APPELLANT'S COUNSEL STRESSED ON THIS ASPECT AND CLAIMED THAT AL L THE CONDITIONS MENTIONED IN RULE 18DA READ WITH SECTION 80N$(8AJ/A RE FULFILLED. EVEN AFTER GRANTING THE APPROVAL BY THE PRESCRIBED AUTHORITY, SUB- RULE (3) OF RULE 18 DA GIVES POWER TO DSIR TO WITHD RAW THE APPROVAL SO GRANTED. ONE OF THE CONDITIONS FOR SUCH WITHDRAWAL OF APPROVAL IS - IF ANY PROVISIONS OF INCOME TAX ACT OR RULES HAVE BEEN VIOLATED. THEREFORE TO CHECK ANY MISUSE OF THE BENEFICIAL PROVISION, POWER TO WITHDRAW SUCH APPROV AL IS GIVEN TO PRESCRIBED 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 COND ITION MENTIONED IN INCOME TAX ACT OR RULES, HE IS SUPPOSE D TO BRING IT TO THE NOTICE OF THE PRESCRIBED AUTHORITY AND REQUEST FOR WITHDRAWAL OF APPROVAL SO GRANTED. ONCE APPROVAL SO GRANTED IS WITHDRAWN BY THE PRESCRIBED AUTHORITY, THE ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 11 APPELLANT WILL NOT BE ENTITLED TO CLAIM DEDUCTION U NDER SECTION 80IB(8A). HOWEVER WITHOUT GETTING THE APPROVAL WITH DRAWN, ASSESSING OFFICER HAD DISALLOWED THE CLAIM ON THE G ROUND THAT THE CONDITION MENTIONED IN RULE 18 DA(1)(E) IS NOT FULF ILLED. THE ARGUMENTS OF THE ASSESSING OFFICER ARE THAT THE BIO EQUIVALENT STUDY DONE BY THE APPELLANT IS NOT DEVELOPMENT OF T ECHNOLOGY AND SINCE APPELLANT WAS DOING THE SAME FOR VARIOUS CLIE NTS ON CONTRACT BASIS, THERE WAS NO TRANSFER INVOLVED. HOWEVER THE RESEARCH AND DEVELOPMENT ACTIVITIES OF THE APPELLANT WERE APPROV ED BY DSIR, THE PRESCRIBED AUTHORITY AND THEREFORE CLAIMING THA T THE SAME IS NOT DEVELOPMENT OF TECHNOLOGY OR TRANSFER OF TECHNO LOGY IS NOT APPROPRIATE TILL THE PRESCRIBED AUTHORITY 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 T HE CONDITIONS PRESCRIBED BY IT ACT/RULES ARE FULFILLED. IF ASSESS ING OFFICER FINDS THAT APPELLANT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB (8A) THEN THE BEST COURSE IS TO GET THE APPROVAL FR OM PRESCRIBED AUTHORITY CANCELLED ON THE GROUND OF VIOLATION OF S UCH CONDITIONS. THERE IS NO DOUBT THAT DSIR HAS THE TECHNICAL COMPE TENCE TO JUDGE THE ELIGIBILITY OF ANY COMPANY THEREFORE ASSE SSING OFFICER SHOULD HAVE MADE OUT THE CASE OF WITHDRAWAL OF APPR OVAL BEFORE THE PRESCRIBED AUTHORITY. WITHOUT DOING SO, ASSESSI NG OFFICER'S VIEW 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 UPHEL D AGAINST THE APPROVAL OF ELIGIBILITY GRANTED BY PRESCRIBED AUTHO RITY. I AGREE WITH THE APPELLANT'S COUNSEL THAT ASSESSING OFFICER SHOULD REFER THE VIOLATION -OF ANY CONDITION TO THE PRESCRIBED AUTHORITY BEFORE DISALLOWING THE CLAIM BASED ON SUC H APPROVAL. OTHER OBJECTION OF THE ASSESSING OFFICER THAT APPEL LANT RECEIVED CONTRACTUAL SERVICE CHARGES ON DEVELOPMENT OF BIO EQUIVALENT STUDY ON WHICH TDS WAS ALSO DEDUCTED AND THEREFORE THERE WAS NO SALE AND TRANSFER OF TECHNOLOGY INVOLV ED. APPELLANT SUBMITTED THAT THE MODE OF COLLECTING TECHNOLOGY TR ANSFER CHARGES IS NOT RELEVANT TILL SUCH TIME THERE IS DEVELOPMENT OF TECHNOLOGY AND THE SAME IS HANDED OVER TO THE CLIENTS. OTHER O BJECTION OF THE AO IS THAT THERE IS CLAIM OF WEIGHTED DEDUCTION UND ER SECTION 35 BY THE PAYING COMPANY IN ADDITION TO APPELLANT'S CL AIM OF DEDUCTION UNDER SECTION 80 IB. THE DEDUCTION CLAIME D BY THE PAYING COMPANY IS NOT RELEVANT AS FAR AS DEDUCTION UNDER SECTION 80 IB BY THE APPELLANT IS CONCERNED. THESE TWO DEDU CTIONS ARE FOR ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 12 TWO DIFFERENT ASSESSEES UNDER TWO DIFFERENT PROVISI ONS THEREFORE IT IS NOT THE CASE OF DOUBLE DEDUCTION. THE DECISIONS RELIED UPON BY THE ADDITIONAL CIT IN APPEAL HEARING ARE ON DIFFERENT FACTS AND DO NOT DRAW ANY SIMILARITY TO THE ISSUE INVOLVED. APPELLANT'S ENTIRE METHODOLOGY HAS BEEN BEFORE THE PRESCRIBED AUTHORITY WHO IN THEIR WISDOM CONSIDERED THE SAME AS DEVELOPMENT OF TECHNOLOGY AN D TRANSFER THEREOF THEREFORE THE NARROW INTERPRETATIO N PROPOSED BY THE ASSESSING OFFICER DO NOT HOLD GOOD. APPELLANT RELIED UPON THE DECISION OF HONOURABLE BO MBAY HIGH COURT IN THE CASE OF INDIAN PLANETARY SOCIETY VERSU S CBDT REPORTED IN 318 ITR 102. IN THE SAID DECISION IT IS HELD THAT REJECTION OF ASSESSEE'S APPLICATION FOR APPROVAL UN DER SECTION 35 (1) (II) CANNOT BE MADE BY CBDT BUT THE SAME IS TO BE DECIDED BY MINISTRY OF SCIENCE AND TECHNOLOGY. SINCE FOR THE P URPOSE OF GRANTING APPROVAL FOR BEING ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB(8A) DEPARTMENT OF SCIENCE AND TECHNOLOGY IS MADE THE PRESCRIBED AUTHORITY, ANY REJECTION OF CLAIM WITHOU T SERIOUS VIOLATION OF THE CONDITIONS OR WITHDRAWAL OF APPROV AL IS NOT SUSTAINABLE. ACCORDINGLY IT IS HELD THAT APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA (8) TILL SUCH TIME IT HOLDS APPROVAL FROM THE PRESCRIBED AUTHORITY. ACCORDINGLY THE DISA LLOWANCE OF DEDUCTION MADE BY THE ASSESSING OFFICER IS DELETED. 11. THE REVENUE HAS FILED ITS APPEAL ITA 1915/AHD/2012 AGAINST THIS ORDER. 12. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILES. THE ASSESSEES ARGUMENTS IN ITS APPEAL NO.1623/AHD/ 2014 INTERALIA ARE THAT THE CIT HAS WRONGLY ASSUMED JURISDICTIONAL U/S . 263 OF THE ACT WITHOUT BEING ERRONEOUS CAUSING PREJUDICE TO INTERE ST OF THE REVENUE, THE TRIBUNALS DIRECTIONS (SUPRA) HAVE NOT BEEN COM PLIED WITH IN LETTER AND SPIRIT LIMITED TO THE ISSUE OF ANNEXURE-2, THE ASSESSING OFFICER HAD TAKEN ONE OF THE POSSIBLE VIEW NOT REVISABLE AS PER LAW, THE CITS JURISDICTION EXERCISED IS AGAINST THE EXPRESSION PR OVISION SEC. 263 EXPLANATION C IN THE ACT SINCE THE MATTER WAS IN AP PEAL BEFORE THE CIT (A) (SUPRA) AND THE LAST ONE BEING THAT IT FULFILLS ALL CONDITIONS FOR ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 13 AVAILING DEDUCTION U/S. 80IB (8A) R.W. RULE 18 DA(1 )(2) OF THE INCOME TAX RULES. THE REVENUE STRONGLY SUPPORTS THE CITS ORDER UNDER CHALLENGE AND PRAYS FOR AFFIRMING THE SAME. 13. THE REVENUE IN ITS APPEAL ITA 1915/AHD/2012 SUB MITS THAT ASSESSING OFFICER HAD RIGHTLY DISALLOWED THE ASSESS EES CLAIM OF 80IB (8A) DEDUCTION WHICH HAS BEEN ACCEPTED IN THE LOWER APPELLATE ORDER. THE ASSESSEE OPPOSES THE SAME BY PLACING RELIANCE O N THE CIT (A)S ORDER. 14. AFTER HEARING BOTH THE PARTIES AND THEIR DIVERS ION STANDS, WE FIND THAT THE QUESTION THAT ARISES FOR OUR ADJUDICATION IS AS TO WHETHER THE ASSESSEE CAN BE HELD ENTITLED FOR THE IMPUGNED SEC. 80IB (8A) DEDUCTIONS IN QUESTION, IN THE TWO ASSESSMENT YEARS IN QUESTION. WE FIND FROM THE PAPER BOOK THE DSIR (SUPRA) GRANTED A PPROVAL TO THE ASSESSEE FOR ASSESSMENT YEARS 2007-08 TO 2009-10 BY SPECIFICALLY DECLARING IT AS A RESEARCH AND DEVELOPMENT COMPANY U/S. 80 IB( 8A) READ WITH PROVISIONS OF RULES 18D AND 18DA OF THE INCOME TAX RULES . THE SAME STOOD EXTENDED ON 19-2-2009 FOR THE NEXT 3 ASSESSMENT YEARS I.E. UPTO A.Y. 2012-13. THE DSIR THEREAFTER, GRANTED YET ANOTHER EXTENSION UPTO A.Y. 2015-16. WE INFER THEREFORE THA T THERE IS NO BREAK IN ASSESSEE GETTING THE SAID APPROVALS RIGHT FROM A .Y.2007-08 TILL 2015- 16. THE ADDL. CIT RANGE-1, AHMEDABAD APPLIED TO TH E DSIR FOR REVOKING ASSESSEES APPROVAL ON 17-1-2013. THE SAID AUTHORITY DECLINED THIS RELIEF VIDE LETTER DT.20-3-2013. WE FIND THIS LETTER TO BE A PART OF PAGES 14 & 15 CLEARLY STATING THAT ASSESSEES ACTIV ITY TO BE COVERED AS A COMPANY IN COMMERCIAL RESEARCH AND DEVELOPMENT. TH IS LETTER FURTHER CONTAINS THE DESIGNATIONS OF EMINENT EXPERTS IN THI S ENTIRE EPISODE. WE OBSERVING THESE FACTS THAT ONCE THE REVENUE SOUGHT FOR REVOKING ASSESSEES APPROVAL U/S. 80IB (8A)OF THE ACT TO THE DSIR WHICH STANDS REFUSED, IT CANNOT TURN BACKWARDS AND QUESTION THE ASSESSEES STATUS AS ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 14 AN ENTITY ENGAGED IN RESEARCH AND DEVELOPMENT; BE I T IN SECTION 263 PROCEEDINGS OR IN A REGULAR ASSESSMENT FRAMED U/S. 143(3) OF THE ACT. WE FIND FROM THE CASE FILE THAT AN IDENTICAL QUESTI ON AROSE BEFORE A CO- ORDINATE BENCH OF THE TRIBUNAL REPORTED AS (2014) 4 9 TAXMAN.COM (MUMBAI TRIB) AND THE SAME STANDS DECIDED IN ASSE SSEES FAVOUR AS UNDER: 17. IN GROUND NOS.1 AND 2 OF ITS APPEAL FOR ASSESSM ENT YEAR 2007-08, A COMMON ISSUE RAISED BY THE ASSESSEE RELA TES TO THE DISALLOWANCE OF ITS CLAIM FOR DEDUCTION UNDER SEC. 80IB OF THE ACT AMOUNTING TO RS.6,11,26,795/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT (A). 18 . AS ALREADY NOTED, THE CLAIM OF THE ASSESSEE FOR DED UCTION UNDER SEC.. 8 0 - IB(8A) OF THE ACT WAS DISALOWED BY THE AO AS, ACC ORDING TO HIM, THE ACTIVITY OF THE ASSESSEE OF CLINICAL TRIALS OF THE PHARMACEUTICALS COULD NOT BE TERMED AS RESEARCH AND DEVELOPMENT. HE ALSO HELD TH AT THE ACTIVITY OF THE ASSESSEE WAS NOT LEADING TO TECHNOLOGY DEVELOPMENT OR IMPROVEMENT OF TECHNOLOGY AND IN THE ABSENCE OF ADEQUATE INFRASTR UCTURE AS WELL AS TRANSFER OF TECHNOLOGY, THE CONDITONS STIPULATED IN RULE 18DA(L)(E) WERE NOT SATISFIED. BEFORE THE LEARNED CIT (A), IT WAS SUBMI TTED ON BEHALF OF THE ASSESSEE THAT WHILE DISALLOWING ITS CLAIM FOR DEDUC TION UNDER S. 80IB (8A), THE AO COMPLETELY OVERLOOKED THE IMPORTANT FACT THA T THE ASSESSEE'S ACTIVITY OF CLINICAL TRIALS WAS DULY APPROVED BY THE PRESCRI BED AUTHORITY UNDER R. 18D NAMELY THE SECRETARY DEPARTMENT OF SCIENTIFIC, AND INDUSTRIAL RESEARCH, MINISTRY OF SCIENCE AND TECHNOLOGY GOVERNMENT OF IN DIA. IT WAS CONTENDED THAT THE SAID APPROVAL WAS GRANTED ONLY AFTER THE C OMPLETE SATISFACTION AS TO THE NATURE OF ACTIVITY, INFRASTRUCTURE OF THE COMPA NY AND ITS PAST RECORD. IT WAS CONTENDED THAT WHEN SUCH APPROVAL UNDER RULE 18 DA WAS ALREADY GRANTED TO THE ASSESSEE, THE AO HAD NO RIGHT TO JUD GE AFRESH WHETHER THE ACTIVITY OF THE ASSESSEE COMPANY WAS IN THE NATURE OF RESEARCH AND DEVELOPMENT. IT WAS ALSO CONTENDED THAT THE ACTION OF THE A.O. IN DENYING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S. 80 -IB(8A) OF THE ACT DISREGARDING THE APPROVAL GIVEN BY THE PRESCRIBED A UTHORITY WAS NOT GOOD IN LAW ESPECIALLY WHEN THE SAID APPROVAL WAS GRANTED A FTER EXAMINING ALL THE RELEVANT ASPECTS. 19. THE LEARNED CIT (A) DID NOT FIND MERIT IN THE S UBMISSIONS MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE AND UPHELD TH E ACTION OF THE A.O. IN DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION S. 8 0 IB (8A) OF THE ACT FOR THE FOLLOWING REASONS GIVEN IN PARA NOS.3.3 TO 3.8 OF HIS IMPUGNED ORDER: ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 15 3.3. I HAVE CONSIDERED THE FACTS OF THE CASE. SEC . 80-IB (8A) READS AS UNDER:- THE AMOUNT OF DEDUCTION IN THE CASE OF ANY COMPANY CARRYING ON SCIENTIFIC RESEARCH AND DEVELOPMENT SHALL BE HUNDR ED 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 (I) IS REGISTERED IN INDIA; (II) HAS ITS MAIN OBJECT THE SCIENTIFIC AND INDUSTR IAL RESEARCH AND DEVELOPMENT; (III) IS FOR THE TIME BEING APPROVED BY THE PRESCRI BED AUTHORITY AT ANY TIME AFTER THE 31 ST DAY OF MARCH, 2000 BUT BEFORE THE 1 ST DAY OF APRIL, 2007. (IV) FULFILS SUCH OTHER CONDITIONS AS MAY BE PRESCR IBED. THE PRESCRIBED AUTHORITY FOR THE CONDITION (III) AB OVE IS SECRETARY, DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, M INISTRY OF SCIENCE AND TECHNOLOGY, GOVERNMENT OF INDIA AND THE CONDITI ONS AS PER (IV) ABOVE ARE PROVIDED IN R. 18DA OF THE I.T. RULES. 3.4. RULE 18DA(1) PROVIDES THE FOLLOWING CONDITIONS : ANY COMPANY CARRYING ON SCIENTIFIC RESEARCH AND DEV ELOPMENT SHALL BE ELIGIBLE FOR DEDUCTION SPECIFIED IN SUB-SEC. 8(A) O F SEC. 80IB, IF SUCH COMPANY- (A) IS REGISTERED IN INDIA; (B) HAS ITS MAIN OBJECT THE SCIENTIFIC AND INDUSTRI AL RESEARCH AND DEVELOPMENT; (C) HAS ADEQUATE INFRASTRUCTURE SUCH AS LABORATOR Y FACILITIES, QUALIFIED MANPOWER, SCALE-UP FACILITIES AND PROTOTYPE DEVELOP MENT-FACILITIES FOR UNDERTAKING SCIENTIFIC RESEARCH AND DEVELOPMENT OF ITS OWN; (D) HAS A WELL FORMULATED RESEARCH AND DEVELOPM ENT PROGRAMME COMPRISING OF TIME BOUND RESEARCH AND DEVELOPMENT P ROJECTS WITH PROPER MECHANISM FOR SELECTION AND REVIEW OF THE PR OJECTS OR PROGRAMME. (E) IS ENGAGED EXCLUSIVELY IN SCIENTIFIC RESEAR CH AND DEVELOPMENT LEADING TO TECHNOLOGY DEVELOPMENT, IMPROVEMENT OF TECHNOLOG Y AND TRANSFER OF TECHNOLOGY DEVELOPED BY THEMSELVES; (F) SUBMITS THE ANNUAL RETURN ALONG WITH STAT EMENT OF ACCOUNTS AND ANNUAL REPORT WITHIN EIGHT MONTHS AFTER THE CLOSE OF EACH ACCOUNTING YEAR TO THE PRESCRIBED .AUTHORITY. ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 16 3.5 THE ASSESSEE IS REQUIRED TO FULFIL ALL THE A BOVE-MENTIONED FOUR CONDITIONS OF S.80 IB(8A) AND ALSO R. 18DA TO BE EL IGIBLE FOR DEDUCTION. THE APPROVAL BY THE PRESCRIBED AUTHORITY I.E. SECRETARY, DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, M INISTRY SCIENCE AND TECHNOLOGY, GOVERNMENT OF INDIA IS JUST ONE OF THE CONDITIONS. THE PRESCRIBED AUTHORITY MAY HAVE ITS OWN RULES, CR ITERIA AND CONDITIONS FOR APPROVAL. IT IS FOR THE AO TO EXAMIN E THE FULFILMENT OF ALL THESE CONDITIONS. THEREFORE, I DO NOT ACCEPT THE AP PELLANT'S ARGUMENT THAT SINCE THE COMPANY IS APPROVED BY PRESCRIBED AU THORITY I.E. SECRETARY, DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, MINISTRY OF SCIENCE AND TECHNOLOGY, GOVERNMENT OF INDIA, THE RE WAS NO REASON OR BASIS FOR THE A.O. TO EXAMINE THE ISSUE. * 3.6 NOW THE QUESTION IS WHETHER THE ASSESSES FULFI LS ALL THE CONDITIONS. FROM THE FACTS, THERE IS NO DOUBT THAT THE ASSESSEE FULFILS CONDITIONS (I) AND (III). THE AO HAS ALSO NOT DENIE D IT. THE ISSUE IS WHETHER THE OBSERVATION OF THE AO THAT THE ASSESSEE COMPANY DOES NOT FULFIL CONDITIONS (II) AND (IV) IS CORRECT OR N OT. 3.7 FALLOWING IMPORTANT RELEVANT ASPECTS, IN APPELL ANT'S OWN WORDS, EMERGE FROM THE PAPER BOOK SUBMITTED DURING THE APP ELLATE PROCEEDINGS : (1) THE PRIMARY OBJECTIVE OF THE COMPANY IS TO UNDE RTAKE SCIENTIFIC AND MEDICAL STUDIES ON BEHALF OF VARIOUS COMPANIES BELONGING TO PHARMACEUTICAL INDUSTRY. (2) IT AIMS TO BE PREMIER RESEARCH ORGANIZATION IN DELIVERY OF SUPERIOR SERVICES IN THE CONDUCT AND MANAGEMENT OF CLINICAL TRIALS. IT STRIVES TO PRODUCE HIGH QUALITY ACCEPTAB LE TO REGULATORY AUTHORITY WORLDWIDE. IT WANTS TO EVALUAT E NEWER MEDICINES AND TECHNIQUES TO STRIVE TO UPLIFT THE QU ALITY OF LIFE. (3) ITS TEAM CARRIES OUT 'CLINICAL TRIALS FOR PHASE II TO PHASE IV IN ACCORDANCE WITH THE REQUIREMENTS OF REGULATORY AUTH ORITIES AND THE INTERNATIONAL CONFERENCE ON HARMONIZATION O F TECHNICAL REQUIREMENTS FOR REGISTRATION OF PHARMACE UTICALS FOR HUMAN USE (IHICH) GUIDELINES FOR GOOD CLINICAL PRACTICE. (4) IT HAS SET UP CENTRAL LABORATORIES 'SIRO PRO LOGO' WHERE DATA COLLECTED FROM VARIOUS DATA COLLECTION CENTRES ARE TESTED FOR UNIFORMITY IN CLINICAL TRIAL RESULTS. (5) ALL ITS ACTIVITIES R ESULT IN PROVIDING 'CLINICAL STUDY REPORT' TO THE SPONSOR. THERE IS NO ACTIVITY OTHER THAN THE WORK G IVEN BY THE SPONSOR. (6) BEFORE STARTING ANY PROJECT FOR CLINICAL STUDY REPORT, A STUDY BUDGET IS PREPARED. THERE IS SPECIFIC METHODOLOGY F OR COSTING ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 17 OF EACH PROJECT AND THE COST OF EACH PROJECT UNDERT AKEN IS DETERMINED BY THE VARIOUS FACTORS SUCH AS NUMBER OF PATIENTS, TIME FRAME FOR RECRUITMENT OF PATIENTS, NUMBER OF I NVESTIGATION SITES AND COST OF INVESTIGATORS INSTITUTIONS, TIME FRAME OF TREATMENT UNDER PROTOCOL AND COMPLEXITIES, METHOD A ND TYPE AND COST OF PATHOLOGICAL AND OTHER INVESTIGATIONS R EQUIRED FOR EACH PATIENT. (7) THE APPELLANT HAS FILED DETAILS OF PROJECT S PROGRAMMES COMPLETED DURING LAST THREE YEARS, ONGOING AND PLAN NING FOR THE FUTURE' TO GIVE AN IDEA ABOUT ITS ACTIVITIES. I T HAS A COLUMN FOR ''A BRIEF WRITE UP ON THE PROJECT GIVING OBJECT IVES, METHODOLOGY, PROGRESS SO FAR, RESULTS EXPECTED AND BALANCE FOR TECHNOLOGY, TRANSFER ETC. SOME SAMPLES OF REMAR KS GIVEN IN THIS COLUMN ARE- THE OBJECTIVE IS TO PROVIDE QUALITY ASSURANCE FOR THE STUDY', 'DATA HAS BEEN COLLECTED BY THE SPONSOR, THE OBJECT IVE IS TO VALIDATE DATA, UNDERTAKE QUERY MANAGEMENT AND STATISTICAL AN ALYSIS OF THE SAME 1 , THE OBJECTIVE IS TO PROVIDE CLINICAL TRIAL SUPPLIES TO THE SITES WHERE THE SPONSOR IS CONDUCTING THE CLINICAL TRIALS', THE OBJECTIVE IS TO PROVIDE PROJECT MANAGEMENT FOR THE STUDY 1 , 'SPONSOR IS CARRYING OUT A STUDY WITH NP02 IN INFAN TS WITH PRE-NATAL EXPOSURE TO HEPATITIS B SURFACE ANTIGEN POSITIVE MO THERS', THE OBJECTIVE IS TO PROVIDE QUALITY ASSURANCE REVIE W AND REPORT ON SPONSOR'S STUDY', . 'SPONSOR HAS COLLECTED THE DATA. THE OBJECTIVE IS T O MANAGE THE DATA, STATISTICAL ANALYSIS OF THE DATA AND WRITING A REPO RT USING RESULT OF THE ANALYSIS', THE OBJECTIVE IS TO PROVIDE AUDIT SUPPORT FOR THE S TUDY ETC. 3.8 FROM THE ABOVE, IT IS EVIDENT THAT .OBJECTIVE OF THE COMPANY IS TO UNDERTAKE, IN APPELLANT'S OWN WORDS 'SCIENTIFIC AND MEDICAL STUDIES' ON BEHALF OF PHARMACEUTICAL COMPANIES. THERE IS NOT HING LIKE SCIENTIFIC AND INDUSTRIAL RESEARCH AND DEVELOPMENT. THE ACTIVITY OF SCIENTIFIC AND INDUSTRIAL RESEARCH AND DEVELOPMENT INVOLVES VARIOUS STAGES SUCH AS IDEA CONCEPT, ARRANGEMENT OF MANPOWE R AND INFRASTRUCTURE, RESEARCH RESULTANT PRODUCT, TESTING OF THE PRODUCT, APPROVAL OF SUCH PRODUCT BY REGULATORY AUTHORITY AN D THEN TRANSFER OF THE PRODUCT TO EARN INCOME. OUT OF THESE, THE APPEL LANT IS INVOLVED ONLY IN THE STAGE OF TESTING OF THE PRODUCT AND THA T TOO ON BEHALF OF OTHERS. ITS ONLY JOB IS TO CONDUCT CLINICAL TRIALS ON BEHALF OF VARIOUS ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 18 PHARMACEUTICAL COMPANIES, COLLECT DATAS AS PER THEI R INSTRUCTIONS/REQUIREMENTS AND EARN INCOME IN THIS P ROCESS. IT IS A CASE OF EARNING THROUGH JOB WORK OF TRIAL/TEST OUTS OURCED FROM A PHARMA COMPANY WITH THE FINAL PRODUCT, IN APPELLANT 'S OWN WORDS, 'HIGH QUALITY DATA'. I AGREE WITH THE AO THAT THE C ONDITIONS PROVIDED UNDER S. 80-IB(8A)(II) AND (IV) ARE NOT FULFILLED A ND THEREFORE THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S. 80-IB(8A) IS RIOT ACCEPTABLE. THE ORDER OF THE AO ON THIS ISSUE IS CONFIRMED.' 20. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DEDUCTION UNDER S. 80-IB(8A) OF THE ACT IS ALLOWABLE TO THE C OMPANY CARRYING CAN SCIENTIFIC RESEARCH AND DEVELOPMENT IF SUCH COMPANY IS REGISTERED IN INDIA HAVING ITS MAIN OBJECT THE SCIENTIFIC AND INDUSTRIA L RESEARCH AND DEVELOPMENT PROVIDED IT IS FOR THE TIME BEING APPRO VED BY THE PRESCRIBED AUTHORITY AND FULFILS SUCH OTHER CONDITIONS AS MAY BE PRESCRIBED. HE SUBMITTED THAT THE PRESCRIBED AUTHORITY FOR THIS PU RPOSE I,E SECRETARY, DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH, M INISTRY OF SCIENCE AND TECHNOLOGY, GOVERNMENT OF INDIA AND THE CONDITIONS ARE PRESCRIBED IN R. 18DA OF THE IT RULES, 1962. HE SUBMITTED THAT THE P RESCRIBED AUTHORITY GIVES ITS APPROVAL ONLY AFTER HAVING SATISFIED THAT THE COMPANY IS HAVING THE SCIENTIFIC AND INDUSTRIAL RESEARCH AND DEVELOPMENT AS ITS MAIN OBJECTIVE AND FULFIL THE OTHER CONDITIONS AS PRESCRIBED IN R. 18D A. HE THEN INVITED OUR ATTENTION TO THE VOLUMINOUS PAPER BOOK FILED BY HIM CONTAINING DETAILS AND, DOCUMENTS SUBMITTED TO THE PRESCRIBED AUTHORITY \ WHILE PEEKING THE APPROVAL TO POINT OUT THAT ALL THE RELEVANT INFORMATION SUCH AS LIST OF SCIENTISTS AND PROFESSIONALS EMPLOYED BY THE ASSESSEE COMPANY, DET AILS OF INFRASTRUCTURE, INFORMATION ABOUT THE LABORATORY, LIST OF PRESENTAT IONS FILED, LIST OF CLIENTS AND RESEARCH CONTRACT ETC. WERE CALLED FOR AND EXAMINED BY THE PRESCRIBED AUTHORITY. HE ALSO POINTED OUT FROM P. 250 OF THE P APER BOOK THAT THE REPRESENTATIVES OF PRESCRIBED AUTHORITY HAD VISITED TO VERIFY THE FACILITY AVAILABLE WITH THE ASSESSEE COMPANY AND FURTHER DET AILS REQUIRED AFTER SUCH VISIT WERE ALSO FURNISHED BY THE ASSESSEE INCLUDING THE INCOME AND EXPENDITURE ACCOUNT FOR THE RELEVANT YEAR. HE SUBMI TTED THAT THE APPROVAL THUS WAS GRANTED BY THE PROPER AUTHORITY TO THE ASS ESSEE COMPANY ONLY AFTER HAVING SATISFIED THAT ALL THE RELEVANT CONDIT IONS PRESCRIBED IN R. 18DA WERE DULY SATISFIED AND SUCH APPROVAL WAS ALSO FURT HER RENEWED FOR A PERIOD OF THREE MORE YEARS. HE CONTENDED THAT THE PRESCRIB ED AUTHORITY HAVING GIVEN THE APPROVAL TO THE ASSESSEE COMPANY FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER S. 80-IB(8A) OF THE ACT AFTER HAVIN G EXAMINED AND SATISFIED THAT THE CONDITIONS PRESCRIBED IN R. 18DA WERE FULF ILLED, THE AO WAS NOT EMPOWERED TO SIT IN APPEAL AGAINST SUCH APPROVAL AN D DISALLOW THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER S. 80-IB(8A) O F THE ACT DISREGARDING SUCH APPROVAL. IN SUPPORT OF THIS CONTENTION, HE RE LIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF RUBICON RESEARCH (P.) LTD. V/S. ITO [IT APPEAL NO. 6122 (MUM.) OF 2009, DATED 24-2-2010] AS WELL AS TH E DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INDIAN PLANETARY SOCIETY V. CBDT [2009] 318 ITR 102/[2010] 187 TAXMAN 263. '. ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 19 21. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTH ER HAND, STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ASSESSEE' S CLAIM FOR DEDUCTION .UNDER S. 80-IB(8A) OF THE ACT. HE CONTENDED THAT T HE APPROVAL OF THE PRESCRIBED AUTHORITY IS ONE OF THE CONDITIONS TO BE SATISFIED FOR CLAIMING DEDUCTION UNDER S. 80-IB(8A) OF THE ACT AND THERE A RE OTHER CONDITIONS ALSO WHICH ARE REQUIRED TO BE SATISFIED CUMULATIVELY IN ORDER TO CLAIM THE SAID DEDUCTION. HE SUBMITTED THAT THE OTHER CONDITIONS T O BE SATISFIED ARE PRESCRIBED IN R. 18DA OF THE IT RULES, 1962 AND THE RE IS NO REFERENCE-TO THE PRESCRIBED AUTHORITY IN THE SAID RULE SO AS TO SAY THAT THE CONDITIONS STIPULATED IN R. 18DA ARE TO BE EXAMINED ONLY BY TH E PRESCRIBED AUTHORITY AND NOT BY AO. HE CONTENDED THAT THE AO HAS INHEREN T POWER TO EXAMINE WHETHER THESE CONDITIONS ARE SATISFIED BY THE ASSES SEE OR NOT WHILE GRANTING EXEMPTION UNDER S. 80-IB(8A) OF THE ACT AS RIGHTLY HELD BY THE LEARNED CIT(A). HE CONTENDED THAT SINCE THE CONDITIONS STIP ULATED IN R. 18DA WERE NOT SATISFACTORILY SATISFIED BY THE ASSESSEE AS FOU ND BY THE AO AS WELL AS LEARNED CIT(A), THE CLAIM OF THE ASSESSEE FOR DEDUC TION UNDER S. 80-IBFJ8A) OF THE ACT HAS RIGHTLY BEEN DISALLOWED. AS REGARDS THE DECISION OF THE TRIBUNAL IN THE CASE OF RUBICON RESEARCH (P) LTD. ( SUPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE LEARNED DEPAR TMENTAL REPRESENTATIVE CONTENDED THAT INTERPRETATION GIVEN BY THE TRIBUNAL THEREIN IS NOT IN CONSONANCE WITH THE RELEVANT PROVISIONS OF S. 80-IB (8A) R/W R. 18DA. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS PER SUB-S . (8A) OF S. 80-IB OF THE ACT, ANY COMPANY CARRYING ON SCIENTIFIC RESEARCH AN D DEVELOPMENT IS ENTITLED FOR DEDUCTION IN RESPECT OF 100 PER CENT O F THE PROFITS AND GAINS OF SUCH BUSINESS FOR A PERIOD OF TEN CONSECUTIVE ASSES SMENT YEARS BEGINNING FROM THE INITIAL ASSESSMENT YEAR IF SUCH COMPANY IS REGISTERED IN INDIA HAVING ITS MAIN OBJECT THE SCIENTIFIC AND INDUSTRIA L RESEARCH AND DEVELOPMENT PROVIDED IT IS APPROVED BY THE PRESCRIB ED AUTHORITY AND IT SATISFIES SUCH OTHER CONDITIONS AS MAY BE PRESCRIBE D. THE PRESCRIBED AUTHORITY IS SECRETARY, DEPARTMENT OF SCIENTIFIC AN D INDUSTRIAL RESEARCH, MINISTRY OF SCIENCE AND TECHNOLOGY, GOVERNMENT OF I NDIA AND THE OTHER CONDITIONS TO BE FULFILLED ARE PRESCRIBED IN R. 18D A OF THE IT RULES, 1962. WE HAVE ALREADY EXTRACTED THE SAID RULE IN THE FOREGOI NG PORTION OF THIS ORDER WHILE NARRATING THE RELEVANT FACTS OF THE CASE. THE MAIN ISSUE THAT ARISES FOR OUR CONSIDERATION IN THE PRESENT CONTEXT IS WHETHER THE PRESCRIBED AUTHORITY HAVING GRANTED THE APPROVAL TO THE ASSESSEE COMPANY AS REQUIRED FOR THE PURPOSE OF S. 80-IB(8A) OF THE ACT, THE AO IS EMPOW ERED TO SIT IN APPEAL ON SUCH APPROVAL AND RE-EXAMINE WHETHER THE CONDITIONS STIPULATED FOR CLAIMING DEDUCTION UNDER S. 80-IB(8A) OF THE ACT AR E SATISFIED BY THE ASSESSEE OR NOT. IT IS PERTINENT TO NOTE IN THIS CO NTEXT THAT THE VOLUMINOUS PAPER BOOK FILED BY THE ASSESSEE GIVING DETAILS AND DOCUMENTS FURNISHED BEFORE THE PRESCRIBED AUTHORITY IS SUFFICIENT TO SH OW THAT THE APPROVAL WAS NOT ONLY GRANTED BY THE PRESCRIBED AUTHORITY BUT WA S ALSO RENEWED/EXTENDED TWICE AFTER HAVING SATISFIED ABOUT THE MAIN OBJECTI VE OF THE ASSESSEE COMPANY, THE RESEARCH AND DEVELOPMENT ACTIVITIES CA RRIED ON BY IT AND ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 20 INFRASTRUCTURE FACILITIES AVAILABLE WITH IT SUCH AS LABORATORY, QUALIFIEDMANPOWERETC, WHICH CLEARLY SHOWS THAT THE CONDITIONS STIPULATED IN K 18DA WERE FOUND TO BE SATISFACTORILY FULFILLED BY THE ASSESSEE AND ON SUCH SATISFACTION, THE APPROVAL AS REQUIRED UNDER S. 80- LB(8A) OF THE ACT WAS GIVEN BY THE PRESCRIBED AUTHORITY AND EXTENDED FURT HER TWICE. 23. IN THE CASE OF RUBICON RESEARCH LTD, (SUPRA), A SIMILAR ISSUE AROSE FOR CONSIDERATION OF THE CO-ORDINATE BENCH OF THIS TRIB UNAL AND IT WAS HELD BY THE TRIBUNAL THAT WHEN THE APPROVAL WAS INITIALLY G RANTED AND 'FURTHER RENEWED ONLY WHEN THE ASSESSEE HAD SATISFIED THE PR ESCRIBED AUTHORITY THAT IT WAS CARRYING ON THE ACTIVITY OF SCIENTIFIC AND I NDUSTRIAL RESEARCH AND DEVELOPMENT AND WAS HAVING NECESSARY INFRASTRUCTURE TO DO SO, THE AO OR THE LEARNED CI.T(A) COULD NOT SIT ON APPEAL ON SUCH APPROVAL AND RE- EXAMINE WHETHER THE CONDITIONS STIPULATED FOR CLAIM ING DEDUCTION UNDER S. 80-IB(8A) OF THE ACT WERE SATISFIED BY THE ASSESSEE . FOR THIS CONCLUSION 1 , RELIANCE WAS PLACED BY THE TRIBUNAL IN THE CASE OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INDIAN PLANETARY SOCIETY (SUPRA] WHEREIN IT WAS HELD THAT WHEN THE LEGISLATURE HAD THOUGHT IT FIT TO ENT RUST THE RESPONSIBILITY WITH THE GOVERNMENT OF INDIA WHO WITH THE HELP OF THE BO DY OF PERSONS, WHO WOULD BE CONVERSANT WITH THE SUBJECT, WOULD APPLY I TS MIND BEFORE ISSUING SUCH CERTIFICATE, THE AO OR THE CIT(A) FOR THAT MAT TER CANNOT SIT IN APPEAL AGAINST THE ORDER OF SUCH AUTHORITY.., KEEPING IN V IEW OF THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RUBICON RESEARCH LTD, (SUPRA] AND THAT OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF INDIAN PLANETARY SOCIETY (SUPRA) AND HAVING REGARD TO THE FACTS OF THE CASE, WE SET ASIDE THE-ORDER OF THE LEARNED CIT(A) CONFIRMING TH E DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ASSESSEE'S CLAIM FOR DEDUCTION UNDER S. 80-IB(8A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSE E FOR SUCH DEDUCTION. GROUND NOS. 1 AND 2 OF ASSESSEE'S APPEAL FOR ASST. YR. 2007-08 ARE ACCORDINGLY ALLOWED. 15. IT IS ALSO TO BE SEEN THAT THE SAME VIEW IS ECH OED IN ANOTHER DECISION OF THE TRIBUNAL DCIT VS. FORTIS CLINICAL R ESEARCH LTD., (2012) 27 TAXMAN.COM.4 (DELHI). THE REVENUE FAILS TO POINT OU T ANY DISTINCTION ON LAW AND FACTS TO THE CONTRARY. WE DRAW SUPPORT THE REFROM AND HOLD THAT ONCE THE DSIR WHICH IS AN EXPERT BODY EXERCISES POW ER TO GRANT APPROVAL FOR THE PURPOSE OF THE IMPUGNED DEDUCTION U/S. 80 IB (8A) READ WITH RULE 18D & 18DA OF THE INCOME TAX RULES, THE REVENUE CANNOT DECLINE THE DEDUCTION CLAIMS ARISING THEREUN DER ON PRETEXT OR THE OTHER BY SIMPLY BRUSHING ASIDE THE APPROVALS OBTAIN ED. MORESO, WHEN THE REVENUES SEEKING TO GET APPROVAL CANCELLED FRO M THE DSIR STANDS ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 21 DECLINED. WE HOLD THE ASSESSEE ENTITLED FOR SECTION 80 IB (8A) DEDUCTION ACCORDINGLY ON MERITS IN BOTH THE ASSESSMENT YEARS. THE CITS ORDER DATED 29-3-2014 IN A.Y. 2008-09 PASSED U/S. 263 OF THE ACT STANDS REVERSED ON MERITS RENDERING THE ASSESSEES OTHER A RGUMENTS (SUPRA) AS TO HAVE BEEN RENDERED INFRUCTUOUS. THE REVENUES SO LE SUBSTANTIVE GROUND IN ITS APPEAL CHALLENGING CIT (A)S ORDER GR ANTING THE ASSESSEE IMPUGNED SECTION 80IB (8A) DEDUCTION FAILS ACCORDI NGLY. 16. THE ASSESSEES APPEAL NO.1623/AHD/2014 FOR A.Y. 2008-09 IS ACCORDINGLY ACCEPTED. AND THAT OF THE REVENUE ITA N O.1915/AHD/2012 FOR A.Y.2009-10 IS DISMISSED. ORDERED ACCORDINGLY. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 31 ST JULY,2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD. DATED 31/07 /2015 PATKI / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $%$&' # # ( / CONCERNED CIT 4. # # ( () / THE CIT(A), AHMEDABAD 5. +,# &', # # &' , ./% / DR, ITAT, AHMEDABAD 6. ,01 2 / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD ITA NO. 1915/ AHD/2012 ITA. 1623/AHD/2014 A.YS.2008-09 & 2009-10 22 1. DATE OF DICTATION- ON COMPUTER 28-7-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER :30-7-2015 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P .S./P.S.30-7-2015- 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 31-7-2015: 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31-7 -2015: 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER