Jubilant Biosys Ltd, Noida V. DCIT, Circle-1, Noida

ITA 1823/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0462 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 15-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Keywords: Business income; Depreciation; Source of fund; Bad and doubtful debts; Competent authority; Assessment record; Revenue expenditure
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: C, NEW DELHI BEFORE SHRI NK SAINI, VICE PRESIDENT AND SMT. BEENA A PILLAI, JUDICIAL MEMBE R ITA NO. 7302/DEL/17 A.Y.: 2011-12 ITA NO. 1822/DEL/18 A.Y.: 2013-14 ITA NO. 1823/DEL/18 A.Y.: 2014-15 ITA NO. 2759/DEL/18 A.Y.: 2013-14 ITA NO. 2760/DEL/18 A.Y.: 2014-15 JUBILANT BIOSYS LTD. PLOT NO.1A, SECTOR 16A G.B.NAGAR NOIDA, UP PAN: AAACJ9445P VS . DY.CIT, CIRCLE 1 NOIDA, UP ITA 1824/DEL/18 A.Y.:2012-13 ITA 1825/DEL/18 A.Y.:2013-14 ITA 2757/DEL/18 A.Y.: 2012-13 ITA 2758/DEL/18 A.Y.:2013-14 JUBILANT CHEMSYS LTD. PLOT NO.1A, SECTOR 16A G.B.NAGAR NOIDA, UP 201 301 PAN: AABCJ4392G VS . DY.CIT, CIRCLE 1 NOIDA, UP (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. KM GUPTA, ADV. SH. R ISHABH MALHOTRA, A.R. DEPARTMENT BY : SH. MANISH GUPTA, CIT,DR. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 2 DATE OF HEARING : 27/11/2018 DATE OF PRONOUNCEMENT : 28/11/2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEALS HAVE BEEN FILED BY ASSESSEE, AGAINS T FOLLOWING ORDERS PASSED BY LD.CIT(A), ARISING OUT O F QUANTUM AND PENALTY PROCEEDINGS: S. NO. ASSESSEE ITA NO./AY DATE OF IMPUGNED ORDER NATURE OF APPEAL 1. JUBILANT BIOSIS LTD 7302/D/17 2011-12 QUANTUM APPEAL 2. JUBILANT BIOSIS LTD 1822/D/18 2013-14 QUANTUM APPEAL 3. JUBILANT BIOSIS LTD 1823/D/18 2014-15 QUANTUM APPEAL 4. JUBILANT BIOSIS LTD 2759/D/18 2013-14 PENALTY APPEAL 5. JUBILANT BIOSIS LTD 2760/D/18 2014-15 PENALTY APPEAL 6. JUBILANT CHEMSYS LTD 1824/D/18 2012-13 QUANTUM APPEAL 7. JUBILANT CHEMSYS LTD 1825/D/18 2013-14 QUANTUM APPEAL 8. JUBILANT CHEMSYS LTD 2757/D/18 2012-13 PENALTY APPEAL 9. JUBILANT CHEMSYS LTD 2758/D/18 2013-14 PENALTY APPEAL AT THE OUTSET, LD.COUNSEL SUBMITTED THAT, ALL GROUN DS RAISED BY ASSESSEE IN QUANTUM PROCEEDINGS AND PENALTY PROC EEDINGS ARE SIMILAR AND IDENTICAL. IT HAS ALSO BEEN SUBMITTED T HAT FACTS IN ALL ASSESSMENT YEARS ARE SIMILAR. FOR SAKE OF CONVENIE NCE, LD. COUNSEL SUBMITTED THAT ITA NO.7302/DEL/2017 FOR A.Y . 2011-12 ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 3 MAY BE TAKEN AS LEAD APPEAL. LD. DR DID NOT OBJECT TO THE REQUEST BY LD.COUNSEL. GROUNDS RAISED BY ASSESSEE IN ITA NO.7302/DEL/2017 ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [C IT(A)] HAS GROSSLY ERRED IN DIRECTING THE LEARNED ASSESSING OF FICER [AO] TO TAX THE ENTIRE GROSS RECEIPTS OF RS. 84,49,28,000 AS TH E INCOME OF THE APPELLANT BY DISALLOWING ENTIRE REVENUE EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT BY HOLDING IT TO BE CAPITAL T HEREBY MAKING AN ENHANCEMENT TO THE INCOME WITHOUT GIVING ANY SPECIF IC NOTICE TO THE APPELLANT AS STATUTORY REQUIRED U/S 251(2) OF THE I NCOME-TAX ACT, 1961 (ACT) AND FOR THIS REASON ALONE THE ENHANCEMEN T SO MADE IS ILLEGAL, BAD IN LAW AND SO, MAY BE DIRECTED TO BE D ELETED. 2. THE LD CIT(A) ERRED ON FACTS AND IN LAW IN DISAL LOWING THE ENTIRE EXPENDITURE OF RS. 102,52,32000/- DEBITED TO THE PR OFIT & LOSS ACCOUNT BY ALLEGEDLY HOLDING IT TO BE CAPITAL IN NA TURE, BY COMPLETELY IGNORING THE SUBMISSION, FACTS AND EVIDE NCES SUBMITTED BY THE APPELLANT IN THE COURSE OF PROCEEDINGS UNDER THE ACT AND THEREBY, THE DISALLOWANCE / ADDITION / ENHANCEMENT SO MADE IS BAD IN LAW AND HENCE, BE KINDLY ORDERED TO BE DELET ED. 2.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [C IT(A)] HAS GROSSLY ERRED IN DIRECTING THE LEARNED ASSESSING OF FICER [AO] TO DISALLOW THE ENTIRE REVENUE EXPENDITURE AMOUNTING T O RS. 102,52,32,000 INCURRED DURING THE YEAR BY HOLDING T HEM AS CAPITAL IN NATURE AND CONSEQUENTLY DIRECTING THE LD. AO TO TAX ENTIRE GROSS RECEIPTS OF RS. 84,49,28,000 AS TAXABLE WITHOUT APP RECIATING THAT THOSE WERE NEITHER THE SUBJECT MATTER OF ASSESSMENT NOR THE APPELLANT HAD RAISED ANY GROUND TO THAT EFFECT, AS SUCH, IT WAS BEYOND THE JURISDICTION OF THE LD. CIT(A) TO ISSUE SUCH DIRECTION. 2.2. THE LD.CIT(A) HAD ACTED WITHOUT JURISDICTION WHEN BY AN ORDER SHEET ENTRY DATED 08.03.2016, THE CIT(A) DIRE CTED THE APPELLANT TO SHOW CAUSE WHY SHOULD THE EXPENDITURE BE NOT CAPITALIZED AS RESEARCH WORK IS MEANT TO CREATE AN ENDURING ASSET. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 4 2.3. THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT IN AN ORDINARY COURSE OF ITS BUSINESS ACTIVITY INCURS SUCH EXPENSES ON YEAR TO YEAR BASIS AND HAD BEEN REMUNERATED BY ITS CUSTOMER FOR SUCH BUSINESS ACTIVITY UNDER THE CONTRACT. 2.4. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT IN THE ABSENCE OF AN ASSESSMENT HAVING BEEN MADE IN RESPECT OF THE AL LOWABILITY OF SUCH EXPENSES BY THE LD. AO OR BEING CONSIDERED BY LD. AO IN THE ORDER OF ASSESSMENT, THE SAME WAS NOT THE SUBJECT M ATTER OF APPEAL AND WAS THUS OUTSIDE THE SCOPE OF THE PROVIS IONS OF SECTION 246A OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, LD.CIT(A) HAS GROSSLY ERRED IN MAKING THE AFORESAID DISALLOWANCE OF REVENUE EXPENDITURE OF RS.102,52,32,000 (INCLUDI NG DEPRECIATION AND INTEREST) AND FAILED TO APPRECIATE THAT THE APP ELLANT HAD PRODUCED COMPLETE INFORMATION WITH REGARD TO NATURE OF EXPENDITURE INCURRED FOR EARNING INCOME FROM VARIOU S PHARMACEUTICALS COMPANIES. 3.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THE AFORESAID EXPEN DITURE TO BE CAPITAL IN NATURE WITHOUT APPRECIATING THAT NO ENDU RING BENEFIT ACCRUES TO THE APPELLANT AND ALSO THAT NO ASSET OF ENDURING NATURE WAS CREATED DURING THE YEAR UNDER CONSIDERATION. 3.2. THE LEARNED CIT(A) HAS ERRED IN MAKING THE AB OVE DISALLOWANCE ON SURMISES, CONJECTURES AND IN COMPLE TE DISREGARD TO FACTS OF THE CASE, EVIDENCE AND MATERIAL PLACED ON RECORD, THUS, THE ORDER PASSED BY THE LD. CIT(A) SUFFERS FROM PER VERSITY AND IS UNTENABLE IN LAW. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT ON ACCOUNT OF APPELLANT DOING RESEARCH FOR THE THIRD PARTY NAMELY, ELI LILLY & CO AND OWNERSHIP OF SUCH RESEARCH WORK BEING VESTED WITH ELI LILLY & CO., THE APPELLANT WAS NOT ENTITLED TO DEDUCTION U/S 80IB(8A ) OF THE ACT WITHOUT APPRECIATING THAT APPELLANT STOOD APPROVED BY THE PRESCRIBED AUTHORITY UNDER THE PROVISION OF SECTION 80IB(8A) OF THE ACT AND SO WAS ELIGIBLE AND ENTITLED TO DEDUCTION U /S 80IB(8A) OF THE ACT. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 5 4.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT IN ORDER TO CL AIM DEDUCTION U/S 80IB(8A) OF THE ACT, OWNERSHIP OVER THE RESEARCH I S NECESSARY AS NO SUCH CONDITION IS EITHER PROVIDED FOR NOR COULD BE IMPLIEDLY READ INTO THE PROVISIONS OF SECTION 80IB(8A) OF THE ACT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE DISALLOW ANCE OF RS.15,92,89,609 BEING HELD AS EXPENDITURE OF CAPITA L NATURE INCURRED TOWARDS SUB-CONTRACTING THE PART OF RESEAR CH CONTRACT TO GROUP COMPANY NAMELY, JUBILANT CHEMSYS LIMITED IN T HE ASSESSMENT ORDER. 5.1. THE LD. CIT(A) IN ALTERNATE ALSO ERRED IN UPH OLDING THE ORDER OF THE LD. AO ON THE ISSUE OF DISALLOWANCE OF RS.15,92,89,609 BEING INCURRED TOWARDS SUBCONTRACTI NG THE PART OF RESEARCH CONTRACT TO GROUP COMPANY NAMELY, JUBILANT CHEMSYS LIMITED U/S 8OIB(I3) READ WITH SECTION 80IA(10) OF THE ACT. 6. ON THE FACTS OF THE CASE AND IN LAW, THE LD. CIT (A) HAS GROSSLY ERRED IN DIRECTING THE AO TO CHARGE INTERES T WHILE ISSUING THE NOTICE OF DEMAND UNDER SECTION 156 OF THE ACT I N PURSUANCE TO THE ORDER PASSED UNDER SECTION 250 OF THE ACT. 7. ON THE FACTS OF THE CASE AND IN LAW, THE LD. CIT (A) HAS GROSSLY ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUD ICE TO EACH OTHER. THAT THE APPELLANT RESERVES ITS RIGHT TO ADD, ALTER , AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT T HE TIME OF HEARING OF THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE AS UNDER :(ITA NO. 7302/D/17 AY 2011-12) LD.AO OBSERVED THAT ASSESSEE IS ENGAGED IN BUSINES S OF SCIENTIFIC RESEARCH AND INFORMATICS SERVICES, FOR DRUG DISCOVE RY UNITS, BASED UPON INSILCO SOLUTIONS. IT WAS OBSERVED THAT ASSESS EE PROVIDED DISCOVERY INFORMATICS PRODUCTS AND SERVICES AND COL LABORATIVE DRUG SERVICES THAT INCLUDE PRE-CLINICAL, IN-VIVO AND FORMULATION ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 6 SERVICES. IT ALSO PROVIDES DISCOVERY RESEARCH SERVI CES, WHICH IS DRIVEN BY CONCEPT OF STRUCTURE DIRECTED DRUG DESIGN . IT WAS OBSERVED BY LD.AO THAT ASSESSEE HAD CLAIMED GROSS R ECEIPTS OF RS.84,49,28,000/-, WHICH INCLUDED OTHER INCOME OF RS.19,58,000/-, AGAINST WHICH EXPENDITURE AMOUNTING TO RS.102,52,32,000/-, SHOWING LOSS OF RS.18,03,04,000 /- WAS SHOWN. LOSS WAS WORKED OUT AFTER ADJUSTING DEPRECIA TION AND BONUS PAID FOR A.Y. 2010-11. LD. AO ALSO OBSERVED THAT ASSESSEE HAD APPROVAL FROM DEPARTMENT OF SCIENTIFIC & INDUST RIAL RESEARCH, AND WAS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80 IB (8A) OF THE ACT. LD.AO THUS CALLED UPON ASSESSEE TO FURNISH RELEVANT DETAILS IN RESPECT OF CLAIMS MADE BY ASSESSEE IN ITS ACCOUNTS AND COMPUTATION OF INCOME. 2.1 . LD.AO OBSERVED THAT DURING YEAR UNDER CONSIDERA TION JUBILANT BIOSYS LTD., HAD CONTRACT WITH M/S. ELI L ILLY AND CO, USA. ASSESSEE HAD ENTERED INTO A SEPARATE CONTRACT WITH JUBILANT CHEMSYS (SISTER CONCERN OF ASSESSEE), FOR RENDERING SERVICES TO M/S. ELI LILLY AND CO. LD.AO OBSERVED THAT CONTRAC T ENTERED INTO BY JUBILANT BIOSYS LTD., WITH ITS SISTER CONCERN, J UBILANT CHEMSYS, WAS FOR RENDERING SERVICES TO M/S. ELI LIL LY AND CO., AND PAYMENT OF RESEARCH FEE AMOUNTING TO RS.15,92,8 9,609/-HAS BEEN MADE BY JUBILANT BIOSYS LTD TO JUBILANT CHEMSY S. 2.2. IT WAS ALSO OBSERVED BY LD.AO THAT JUBILANT CHEMS YS ALSO RENDERED RESEARCH SERVICES TO M/S. ELI LILLY AND CO ., FOR WHICH FEES AMOUNTING TO RS.21,28,77,244/- WAS RECEIVED. 2.3. LD. AO CONCLUDED THAT SUB-CONTRACT ENTERED INTO BY JUBILANT BIOSYS LTD. WITH ITS SISTER CONCERN, JUBI LANT CHEMSYS, ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 7 FOR CONTRACT GIVEN BY M/S. ELI LILLY AND CO., ARE BEING DIVERTED TO A CONCERN, WHICH IS SHOWING PROFITS AND CLAIMING DEDUCTION UNDER SECTION 80(IB)(8A), RATHER THAN SHOWING INCO ME IN HANDS OF JUBILANT BIOSYS LTD., WHEN IT IS RUNNING IN LOS SES. LD.AO THEREFORE TAKING INTO CONSIDERATION PROVISIONS OF S ECTION 80IB(13) READ WITH SECTION 80IA(10) HELD THAT BUSINESS BETWE EN BOTH CONCERNS WAS SO ARRANGED THAT TRANSACTION HAD AN E FFECT OF PRODUCING MORE PROFIT IN HANDS OF JUBILANT CHEMSYS THAN ORDINARY PROFITS. HE THEREFORE MADE ADDITION OF RS. 15,92,89,609/, IN HANDS OF JUBILANT BIOSIS LTD. (BEING PAYMENT MAD E BY ASSESSEE TO JUBILANT CHEMSYS). 3. AGGRIEVED BY ORDER OF LD.AO, ASSESSEE PREFERRED AP PEAL BEFORE LD.CIT (A). 3.1. DURING COURSE OF APPELLATE PROCEEDINGS LD.CIT (A) ISSUED SHOW CAUSE NOTICE DATED 08/03/16 ON FOLLOWING ISSUE S: (A) WHY WORK OF COMPANY BE TREATED AS RESEARCH WHEN IT IS PERFORMING SPECIFIED JOB WORK FOR ITS PARTNERS? (B) WHY DEDUCTION UNDER SECTION 80 IB (8), BE ALLOWED I N CASE ITS INCOME IS POSITIVE? (C) WHY SHOULD EXPENDITURE BE NOT CAPITALISED AS RESEAR CH WORK IS MEANT TO CREATE ENDURING ASSET? 3.2. ASSESSEE MADE VARIOUS SUBMISSIONS VIDE REPLY DATE D 15/11/16. ON CONSIDERING THE SAME LD.CIT (A) ENHANC ED ADDITION OF RS.1,02,52,32,000/-, WHICH INCLUDES ADD ITION MADE BY LD.AO AMOUNTING TO RS.15,92,89,609/-. 4. AGGRIEVED BY ORDER OF LD. CIT (A), ASSESSEE I S IN APPEAL BEFORE US NOW. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 8 5. GROUND NOS. 1-2.4 RAISED BY ASSESSEE IS IN RESPECT OF VALIDITY OF ENHANCEMENT OF INCOME MADE BY LD.CIT (A) UNDER SECTION 251 (1) (A) OF THE ACT. 5.1. LD.COUNSEL SUBMITTED AS UNDER: IT WAS SUBMITTED THAT NO ENHANCEMENT NOTICE HAS BEE N ISSUED AND SERVED ON ASSESSEE BY LD.CIT(A) WHILE INVOKING HIS POWER U/S 251(1)(1) OF THE ACT. HE SUBMITTED THAT POWER CONFERRED WITH CIT(A) OF ENHANCEMENT OF ASSESSMENT HAS BEEN GRANTI NG REASONABLE OPPORTUNITY OF SHOWING CAUSE TO ASSESSEE . LD. COUNSEL SUBMITTED THAT LD.CIT PROCEEDED TO ISSUE DI RECTIONS WHICH ARE DETRIMENTAL TO INTEREST OF ASSESSEE. IT HAS BEEN SUBMITTED THAT HE COULD HAVE ENHANCED ONLY AFTER IS SUING NOTICE UNDER SUB-SECTION (2) OF SECTION 251. SINCE NO SUC H NOTICE WAS ISSUED, ORDER PASSED BY LD. CIT SUFFERS FROM ILLEGA LITY. LD. COUNSEL SUBMITTED THAT NOTICE ISSUED BY LD. CIT (A) FOR ENHANCEMENT OF INCOME, NEITHER EXPENSES AS TO WHY P ROPOSED DISALLOWANCES ARE WARRANTED NOR ANY REASON OR JUSTI FICATION IS SPECIFIED WHY EXPENSES INCURRED BY ASSESSEE SHOULD BE TREATED AS CAPITAL IN NATURE. FURTHER, LAW REQUIRES SHOW CAUSE NOTICE TO BE ISSUED UNDER A SPECIFIC PROVISION OF LAW AND NOT AS A CORRESPONDENCE. THIS SHOWS THAT REQUIREMENT OF ISSU ING A SHOW- CAUSE NOTICE AS PER THE PROVISIONS OF SECTION 251(2 ) OF THE ACT IS NOT MET IN LIGHT OF APEX COURTS RULING IN CASE OF METAL FORGINGS & ANR VS UNION OF INDIA & ORS [APPEAL (CIVIL) 2029-31 OF 1995] HE THUS SUBMITTED THAT LD. CIT (A) FAILED TO DISCHA RGE STATUTORY OBLIGATIONS CASTED UPON HIM BY PROVISIONS OF SECTIO N 251(2) OF THE ACT, HENCE ADDITION MADE ON THE GROUND THAT REVENUE EXPENSES WERE TO BE TREATED AS CAPITAL IN NATURE IS LIABLE T O BE DELETED. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 9 IN ADDITION TO THE ABOVE, LD.COUNSEL SUBMITS THAT A S SPECIFICALLY STATED IN THE GROUNDS OF APPEAL, THE EXPENDITURE AM OUNTING TO INR 102,52,32,000/- WAS NEVER IN QUESTION AND DID N OT FORM SUBJECT MATTER OF APPEAL NOR ASSESSEE HAD RAISED AN Y GROUND ON SAME. HENCE, ENHANCEMENT OF INCOME BY LD. CIT(A) IS ILLEGAL AND INVALID AND BEYOND HIS POWERS. THE LD. CIT(A) CANNO T MAKE ENHANCEMENT ON THE ISSUE WHICH DOES NOT ARISE OUT O F THE ORDER OF ASSESSMENT. HE PLACED RELIANCE ON DECISION BY CO ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF RAMESH KUMAR PABBI V. ACIT (REFER PAGE 28-34 OF THE CASE LAW COMPENDIUM) HAS H ELD AS UNDER: AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT ADDITION MADE BY ENHANCEMENT OF COMMISSION EXPENSES IS WHOLLY UNJUSTIFIED. IN THIS CASE THE ASSESSING OFFICER DID NOT MADE DISALLOWANCE OUT OF COMMISSION EXPENSES. THE LD. CI T (APPEALS) HAS TAKEN UP THE ISSUE OF COMMISSION EXPENSES SUO-M OTO IN THE APPELLATE PROCEEDINGS, THEREFORE, THE ISSUE OF COMM ISSION DID NOT ARISES OUT OF THE ASSESSMENT PROCEEDINGS. IT IS WEL L SETTLED LAW THAT LD. CIT (A) WAS NOT EMPOWERED TO ENHANCE AN INCOME WHICH IS NOT MATTER OF ASSESSMENT. THE ISSUE IS COVERED BY AFORE SAID JUDGMENTS RELIED UPON BY LD.COUNSEL FOR THE ASSESSEE. IT IS, THEREFORE, CLEAR THAT LD. CIT(A) CANNOT TOUCH UPON AN ISSUE WHICH DO ES NOT ARISE FROM THE ORDER OF THE ASSESSMENT AND WAS OUTSIDE TH E SCOPE OF THE ORDER OF THE ASSESSMENT. THUS, THE ORDER OF THE CIT (A) CANNOT BE SUSTAINED IN LAW. THIS ALONE IS SUFFICIENT TO DELET E THE ENTIRE ADDITION. 5.2. ON THE CONTRARY, LD.SR.DR SUBMITTED THAT UNDER SE CTION 251, LD.CIT(A) IS NOT REQUIRED TO TAKE APPROVALS FO R ISSUING NOTICE ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 10 OF ENHANCEMENT OF ASSESSMENT. THE ONLY REQUIREMENT THAT NEEDS TO BE FULFILLED BY LD.CIT(A) IS THAT ASSESSEE SHALL BE OFFERED REASONABLE OPPORTUNITY TO SHOW CAUSE AGAINST SUCH ENHANCEMENT. HE FURTHER SUBMITTED THAT EXPLANATION TO SUB CLAUSE (2) OF SECTION 251 OF THE ACT, FURTHER ENVIS AGES THAT LD.CIT (A) TO CONSIDER AND DECIDE ANY MATTER ARISING OUT O F PROCEEDINGS, IN WHICH ORDER APPEALED AGAINST WAS PASSED, NOTWITH STANDING THAT, SUCH MATTER WAS NOT RAISED BEFORE LD.CIT (A) BY ASSESSEE. LD.SR.DR THUS PLACED RELIANCE UPON EXPLANATION, IN SUPPORT OF, ENHANCEMENT NOTICE ISSUED BY LD.CIT (A) ON ISSUES, WHICH WERE NOT SUBJECT MATTER OF APPEAL BEFORE LD.CIT (A). 5.3. HE PLACED RELIANCE UPON SPECIFIC OBSERVATION BY HONBLE SUPREME COURT IN CASE OF JUTE CORPORATION OF INDIA LTD VS. CIT, REPORTED IN (1991) 187 ITR 68 WHEREIN HONBLE COURT OBSERVED THAT , THE ACT DOES NOT CONTAIN ANY EXPRESS PROVISION DEBA RRING ASSESSEE FROM RAISING AN ADDITIONAL GROUND IN APPEA L AND THERE IS NO PROVISION IN THE ACT PLACING RESTRICTIONS ON POW ER OF APPELLATE AUTHORITY IN ENTERTAINING AN ADDITIONAL GROUND IN A PPEAL. IN THE ABSENCE OF ANY STATUTORY PROVISION, THE GENERAL PRI NCIPLE RELATING TO AMPLITUDE OF APPELLATE AUTHORITY IS, POWER BEING CO -TERMINUS WITH THAT OF ASSESSING OFFICER SHOULD NORMALLY BE APPLIC ABLE. 5.4 . LD.SR DR SUBMITTED THAT RATIO THAT EMERGES OUT OF DECISIONS RELIED UPON BY LD.COUNSEL PASSED BY HONBLE SUPREME COURT AND VARIOUS HIGH COURTS IS THAT, LD.CIT (A) IS NOT VESTED WITH POWERS OF ENHANCEMENT IN RESPECT OF NEW SOURCE OF INCO ME, AND ASSESSMENT HAS TO BE CONFINED TO THOSE ITEMS OF INC OME, WHICH WERE SUBJECT MATTER OF ORIGINAL ASSESSMENT. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 11 5.5. HE SUBMITTED THAT ALL DECISIONS ARE DISTINGUISHABL E FACTUALLY, VIS-A-VIS PRESENT FACTS OF CASE. ENHANCEMENT NOTIC E IN PRESENT CASE HAS BEEN ISSUED BY LD.CIT(A) IN RELATION TO E XPENDITURE CLAIMED BY ASSESSEE FOR EARNING INCOME, WHICH WAS SUBJECT MATTER OF ASSESSMENT. HE SUBMITTED THAT THERE IS NO NEW SOURCE OF INCOME, WHICH HAS BEEN RAISED IN NOTICE ISSUED TO ASSESSEE FOR ENHANCEMENT BY LD.CIT (A), AND SAME DESERVES TO BE UPHELD. 6. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 7. AT THIS JUNCTURE, WE REFER TO FOLLOWING COMMENTARY BY KANGA AND PALKHIVALA ON THE LAW AND PRACTICE OF INCOME TAX VOL-I EIGHTH EDITION AT PAGE 1513 : ENHANCEMENT OF ASSESSMENT MEANS INCREASING THE AMO UNT OF TOTAL INCOME OR TAX. IF THE CIT (A) DOES NOT ENHANC E THE TOTAL INCOME, BUT BY MEANS OF REDUCTION UNDER ONE HEAD AND AN INC REASE UNDER ANOTHER HEAD ALLOWS THE ASSESSMENT TO REMAIN THE SA ME OR REDUCES IT, HE CANNOT BE SAID TO HAVE ENHANCED THE ASSESSMENT MERELY BECAUSE INCOME UNDER ONE HEAD HAS BEEN INCRE ASED. 1 WHERE THE ASSESSEES INCOME HAS BEEN ASSESSED UNDER MORE HEADS THAN ONE, EVEN IF THE ASSESSEES APPEAL IS CO NFINED TO THE INCOME ASSESSED UNDER ONLY ONE OF THE HEADS, THE CI T (A) MAY ENHANCE THE ASSESSMENT, BY INCREASING THE AMOUNT A SSESSED UNDER ANOTHER HEAD OF INCOME, IN RESPECT OF WHICH T HE ASSESSEE HAS NOT APPEALED. 2 THE REASON IS THAT INCOME TAX IS ONLY ONE TAX AND THE ASSESSEE, WHEN HE GOES IN APPEAL EXPOSES T HE ASSESSMENT AS A WHOLE TO THE SCRUTINY OF THE CIT (A ). 3 HOWEVER, THE CIT (A) HAS NO POWER TO ENHANCE THE ASSESSMENT BY ASSESSING NEW SOURCES OF INCOME OUTSIDE THE SUBJECT MATTER OF THE ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 12 ASSESSMENT APPEALED AGAINST. 4 THE FOLLOWING PROPOSITIONS EMERGE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN CIT V S. SHAPOORJI PALLONJI 5 AND CIT VS. HARDUTROY CHAMARIA 6 : (I) THE CIT (A) HAS NO JURISDICTION TO TRAVEL BEYOND TH E SUBJECT MATTER OF THE ASSESSMENT OR BEYOND THE RECORD, IE T HE RETURN OF INCOME AND THE ASSESSMENT ORDER; AND HIS POWER OF ENHANCEMENT RELATES ONLY TO THAT INCOME WHICH H AS BEEN SUBJECTED TO THE PROCESS OF ASSESSMENT. (II) THE PROCESS OF ASSESSMENT INCLUDES NOT ONLY TAXING AN INCOME BUT ALSO HOLDING THAT A PARTICULAR INCOME IS NOT TAXABLE. (III) THEREFORE, THE CIT (A) CAN TAX THE INCOME WHICH THE AO HAD, EXPRESSLY OR BY CLEAR IMPLICATION, CONSIDERED AND HELD TO BE NOT TAXABLE-IRRESPECTIVE OF THE QUESTION WHET HER THE INCOME FALLS UNDER A HEAD WITH REGARD TO WHICH AN A PPEAL HAS OR HAS NOT BEEN PREFERRED. HOWEVER, THE CIT (A) CANNOT TAX AN ITEMS OF INCOME, THE TAXABILITY OF WHICH HAD NOT BEEN CONSIDERED AT ALL BY THE AO. 7 FOOTNOTE DETAILS IN RESPECT OF EXTRACT REPRODUCED H EREINABOVE ARE AS UNDER: 1. CIT VS NAMBERUMAL REPORTED IN 1 ITR 32; GOWRI VS CIT 31 ITR 250; 2. PEAREYLAL 10 ITR 239; 3. NARRONDAS VS. CIT 31 ITR 909 APPROVED IN CIT VS. MACMILLAN (SC) 33 ITR 182 4. JAGARNATH VS. CIT 2 ITC 4, CIT VS. NAWAZ 6 ITR 370; GAJALAKSHMI VS. CIT 22 ITR 502, 510; NARRONDAS VS. CIT 31 ITR 909; STERLING VS. ITO 99 ITR 236 ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 13 5. 44 ITR 891 6. 66 ITR 443 7. SNEH LATA VS. CIT 61 ITR 139, 143 (1), CIT VS. J AGDISH 51 ITR 266 (2), PRABHUDAS VS. CIT 62 ITR 621(3), CI T VS. CHAGANLAL 148 ITR 7 (4), LOKENATH VS. CIT 161 ITR 8 2 (5), CIT VS. NIRBHERAM 127 ITR 491 (6), 8. WE ALSO REFER TO DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF SHAPOORJI PALLONJI MYSTERY VS CIT (WHICH HAS BEEN A FFIRMED BY HONBLE SUPREME COURT IN 44 ITR 891, REFERRED TO HEREIN ABOVE). HONBLE BOMBAY HIGH COURT CLARIFIED THAT SOURCE OF INCOME WOULD NOT MEAN SOURCE IN SENSE OF HEAD OF INCOME AS USED IN THE INCOME TAX ACT, BUT WOULD MEAN A SPECIFIC SOURC E FROM WHICH A PARTICULAR INCOME/EXPENDITURE SPRANG OR AROSE. HONBLE COURT HELD AS UNDER: THEREFORE, IT IS CLEAR THAT WHAT WE MEANT BY 'SOUR CE' WAS NOT SOURCE IN THE SENSE OF HEAD OF INCOME AS USED IN TH E INCOME-TAX ACT. BY 'SOURCE' WHAT WE MEANT WAS THE SPECIFIC SOU RCE FROM WHICH A PARTICULAR INCOME SPRANG OR AROSE. THE SUPREME COURT HAD TO CONSIDER THIS JUDGMENT VER Y RECENTLY AND, WITH RESPECT, IT HAS APPROVED OF OUR JUDGMENT IN NARRONDAS MANORDAS'S CASE (SUPRA) AND IT HAS ITSELF DEDUCED T HE PRINCIPLE WHICH EMERGES FROM THIS JUDGMENT. IN COMMISSIONER O F INCOME- TAX V. MCMILLAN & CO. [1958] 33 ITR 182 AT PAGE 193 , THEIR LORDSHIPS SAY THAT THE LANGUAGE OF SECTION 31 WAS ' WIDE ENOUGH TO ENABLE THE APPELLATE ASSISTANT COMMISSIONER TO 'COR RECT THE INCOME-TAX OFFICER NOT ONLY WITH REGARD TO A MATTER WHICH HAS BEEN RAISED BY THE ASSESSEE BUT ALSO WITH REGARD TO A MA TTER WHICH HAS BEEN CONSIDERED BY THE INCOME-TAX OFFICER AND DETER MINED IN THE ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 14 COURSE OF THE ASSESSMENT.' THEN FURTHER ON THEIR L ORDSHIPS QUOTE THE FOLLOWING PASSAGE FROM OUR JUDGMENT: IT IS CLEAR THAT THE APPELLATE ASSISTANT COMMISSIO NER HAS BEEN CONSTITUTED A REVISING AUTHORITY AGAINST THE DECISI ONS OF THE INCOME-TAX OFFICER; A REVISING AUTHORITY NOT IN THE NARROW SENSE OF REVISING WHAT IS THE SUBJECT-MATTER OF THE APPEA L, NOT IN THE SENSE OF REVISING THOSE MATTERS ABOUT WHICH THE ASS ESSEE MAKES A GRIEVANCE, BUT A REVISING AUTHORITY IN THE SENSE THAT ONCE THE APPEAL IS BEFORE HIM HE CAN REVISE NOT ONL Y THE ULTIMATE COMPUTATION ARRIVED AT BY THE INCOME-TAX O FFICER BUT HE CAN REVISE EVERY PROCESS WHICH LED TO THE ULTIMATE COMPUTATION OR ASSESSMENT. IN OTHER WORDS, WHAT HE CAN REVISE I S NOT MERELY THE ULTIMATE AMOUNT WHICH IS LIABLE TO TAX, BUT HE IS ENTITLED TO REVISE THE VARIOUS DECISIONS GIVEN BY T HE INCOME-TAX OFFICER IN THE COURSE OF THE ASSESSMENT AND ALSO TH E VARIOUS INCOMES OR DEDUCTIONS WHICH CAME IN FOR CONSIDERATI ON OF THE INCOME-TAX OFFICER. SO THE POWER OF THE APPELLATE ASSISTANT COMMISSIONE R IS CONFINED TO CONSIDERING THE MATTER WHICH HAS BEEN CONSIDERED BY THE INCOME-TAX OFFICER AND DETERMINED IN THE COURSE OF THE ASSESSMENT; AND 'MATTER' IS USED, NOT IN THE SENSE OF A HEAD OF INCOME, BUT IN THE SENSE OF A SPECIFIC SOURCE OF IN COME. SO THE QUESTION THAT HAS TO BE ASKED WHEN DECIDING WHETHER THE APPELLATE ASSISTANT COMMISSIONER HAS THE POWER OR N OT IS : 'IS THIS THE MATTER WHICH WAS CONSIDERED AND DECIDED BY THE INCOME-TAX OFFICER ?' IF IT WAS, IRRESPECTIVE OF THE NATURE OF THE AP PEAL PREFERRED BY THE ASSESSEE, THE APPELLATE ASSISTANT COMMISSIONER WOULD HAVE THE POWER TO CONSIDER THAT MATTER. NOW, IT IS CLEAR ON THE RECORD THAT THE INCOME-TAX OFFICER NEVER CONSID ERED THIS MATTER IN THE ASSESSMENT YEAR 1947-48. STRANGELY ENOUGH, A S THE RECORD SHOWS, HE DID CONSIDER IT IN THE ASSESSMENT YEAR 19 46-47 WHEN IT WAS UNNECESSARY FOR HIM TO CONSIDER IT BECAUSE THE RECEIPT DID NOT FALL IN THAT ASSESSMENT YEAR; AND THE OPINION THEN EXPRESSED BY HIM WAS THAT THIS PAYMENT COULD NOT BE TREATED AS A BUSINESS RECEIPT. NOW, IF HIS SUCCESSOR HAD EXPRESSED THE SA ME OPINION FOR ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 15 THE ASSESSMENT YEAR 1947-48, THEN UNDOUBTEDLY THE A PPELLATE ASSISTANT COMMISSIONER COULD HAVE REFUSED TO ACCEPT THAT OPINION AND BROUGHT THIS AMOUNT TO TAX. IN OUR OPINION, THE REFORE, IT IS CLEAR THAT, UNDER THE CIRCUMSTANCES OF THIS CASE, THE APP ELLATE ASSISTANT COMMISSIONER WAS NOT COMPETENT TO ENHANCE THE ASSES SMENT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1947-48 BY A S UM OF RS. 40,000. HONBLE COURT HEREINABOVE HELD ENHANCEMENT NOTICE TO BE INVALID, FOR REASON THAT, RECEIPT THAT WAS CONSIDERED FOR PURPOSES OF TAXATION IN NOTICE OF ENHANCEMENT ISSUE D BY LD. CIT (A), IN AFORESTATED CASE, DID NOT FALL IN ASSESSMEN T YEAR, THAT WAS UNDER CONSIDERATION AND THEREFORE AMOUNT DID NOT FO RM PART OF ASSESSMENT RECORD BEFORE ASSESSING OFFICER. 8.1 . SIMILAR IS THE VIEW PROPOUNDED BY HONBLE SUPREME COURT IN CASE OF CIT VS. RAI BAHADUR HARDUTORY MOTILAL CHAMARIA REPORTED IN 66 ITR 443, FULL BENCH DECISION OF HONBLE DELHI HI GH COURT IN CASE OF CIT VS. SARDARI LAL & CO REPORTED IN (2001) 251 IT R 864, DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS. UNION TIRES, REPORTED IN (1999) 240 ITR 556. 9. NOW COMING TO FACTS OF PRESENT CASE, IT IS OBSERVE D THAT, IN RETURN OF INCOME, ASSESSEE DECLARED INCOME AS PER P ROFIT AND LOSS ACCOUNT. EXPENDITURE THAT HAS BEEN ADDED BY LD.CIT (A) UNDER ENHANCEMENT PROCEEDINGS RELATE TO BUSINESS INCOME D ECLARED BY ASSESSEE. ADMITTEDLY, WHILE ARGUING MERITS OF CASE, LD.COUNSEL VEHEMENTLY SUBMITTED THAT EXPENDITURE DISALLOWED B Y LD.CIT (A) ARE IN RELATION TO, AND INEXTRICABLY LINKED WITH IN COME, THAT HAS BEEN OFFERED TO TAX AND CONSIDERED IN ASSESSMENT PR OCEEDINGS BY LD.AO. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 16 10. WE ARE, THEREFORE, OF CONSIDERED OPINION THAT EXPE NDITURE CONSIDERED IN NOTICE OF ENHANCEMENT BY LD.CIT (A) H AD BEEN SUBJECTED TO THE PROCESS OF ASSESSMENT. MERELY BECA USE ASSESSMENT ORDER IS SILENT ABOUT THIS ITEM AND THER E IS NO DISCUSSION THEREUPON, WOULD NOT MEAN THAT ASSESSING OFFICER HAD NOT CONSIDERED IT. WE DRAW OUR SUPPORT FROM ASSESSM ENT ORDER, WHEREIN ASSESSEE WAS REQUIRED TO FURNISH DETAILS OF EXPENSES AND RECEIPT WHICH WERE EXAMINED BY LD.AO ON TEST CHECK BASIS. ASSESSEE HAS VIDE LETTER DATED 24/01/14 PLACED AT P AGE 217-2 TO 1 OF PAPER BOOK, WHEREIN DETAILS OF EXPENSES HAS BE EN SUBMITTED BEFORE LD.AO. 10.1. WE ALSO FIND THAT FOLLOWING DECISIONS RELIED UPO N BY LD. COUNSEL, ARE DISTINGUISHABLE ON FACTS AND ARE NOT A PPLICABLE TO PRESENT FACTS OF THE CASE: DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VE RSUS EXCEL INDUSTRIES LTD REPORTED IN (2013) 38 TAXMANN.COM 10 0; DECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF DR SHASHI KANT GARG, REPORTED IN (2006) 152 TAXMANN 30 8 10.2. IT HAS BEEN URGED IN WRITTEN SUBMISSION BY LD. COU SNEL THAT NONOTICE HAS BEEN ISSUED U/S 251(2) OF THE ACT . HOWEVER, LD.SR.DR PLACED ON RECORD BEFORE US TODAY, COPY OF ORDER SHEET ENTRY RECORDED DURING APPELLATE PROCEEDINGS DATED 0 8.03.2006, WHERE REPRESENTATIVE OF ASSESSEE ADMITS TO ACCEPTAN CE OF NOTICE U/S 251(1). RELEVANT PORTION OF ORDER SHEET ENTRY IS REPRODUCED HEREIN BELOW: ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 17 ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 18 10.3. IN VIEW OF AFORE STATED DISCUSSIONS AND ANALYSI S OF BACKGROUND RELATING TO ISSUANCE OF NOTICE OF ENHANC EMENT UNDER SECTION 251(1) OF THE ACT, AND APPLYING RATIO LAID DOWN BY HONBLE SUPREME COURT AND VARIOUS HIGH COURT TO FACTS OF PRESENT CASE, WE ARE OF CONSIDERED OPINION THAT, ENHANCEMENT NOTICE HAS BEEN ISSUED ON AN ISSUE WHICH WAS SUBJECT MATTER DURING ASSESSMENT PROCEEDINGS, DETAILS OF WHICH ARE ALREADY PLACED ON RECORD BY ASSESSEE ITSELF. WE THUS HOLD THAT LD.CIT (A) HAS R IGHTLY EXERCISED POWERS UNDER SECTION 251 (1) OF THE ACT. 10.4. ACCORDINGLY GROUND NO. 1-2.4 RAISED BY ASSESS EE STANDS DISMISSED. 11. GROUND NO. 3-3.2 IS IN RESPECT OF DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.102,52,32,000/- HOLDING IT TO BE CAPITAL IN NATURE. 12. LD.COUNSEL SUBMITTED THAT LD.CIT(A) DISALLOWED EN TIRE EXPENDITURE BY HOLDING THAT RESEARCH ACTIVITY CARR IED ON BY ASSESSEE HAS RESULTED IN ENDURING BENEFITS TO ASSES SEE. HE SUBMITTED THAT WHILE DOING SO, LD.CIT(A) EXAMINED VARIOUS DEFINITIONS OF THE TERM RESEARCH TO ARRIVE AT TH E CONCLUSION THAT THE ACTIVITY PERTAINS TO ENHANCEMENT OF CUMULATIVE KNOWLEDGE OF HUMAN CIVILISATION AND, THEREFORE, COST OF RESEARCH DONE BY ASSESSEE RESULTED IN LONG AND ENDURING BENEFIT, WHI CH CANNOT BE HELD AS REVENUE EXPENDITURE. LD.COUNSEL SUBMITTED T HAT LD. CIT (A) FAILED TO APPRECIATE THAT ASSESSEE IS IN THE BU SINESS OF RESEARCH AND INFORMATICS SERVICES FOR DRUG DISCOVER Y UNITS BASED UPON INSILCO SOLUTIONS. IT HAS BEEN SUBMITTED THAT ASSESSEE PROVIDES DISCOVERY INFORMATICS PRODUCTS AND SERVICE S AND COLLABORATIVE DRUG SERVICES THAT INCLUDE PRE-CLINIC AL, IN-VIVO AND ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 19 FORMULATION SERVICES. HE SUBMITTED BY PLACING RELIANCE UPON AGREEMENT PLACED AT PAGE 109 OF PAPER BOOK THAT, SE RVICES RENDERED ARE AS PER AGREEMENT, AND UPON TERMINATION OF AGREEMENT ALL RESEARCH MATERIALS, NOTES ETC SHALL B E PROPERTY OF ELLY LILLY AND CO . LD.COUNSEL FURTHER SUBMITTED THAT ON ONE HAND ASSESSING OFFICER IS ACCEPTING INCOME OFFERED BY AS SESSEE RECEIVED FROM RESEARCH SERVICES RENDERED, AND ON OTHER HAND EXPENDITURE INCURRED FOR EARNING INCOME HAS BEEN TOTALLY DISALL OWED. PLACING RELIANCE UPON AUDITED ACCOUNTS PLACED IN PAPER BOOK , LD.COUNSEL SUBMITTED THAT BREAKUP OF EXPENDITURE INCURRED BY A SSESSEE ARE AS UNDER: PARTICULARS AMOUNT (RS) REMARKS COST OF SERVICES AND OTHER EXPENSES (EXCLUDING SUBCONTRACTOR SERVICES) 64,98,47,000 SUCH EXPENSES WERE INCURRED TOWARDS: 1. LAB CHEMICALS AND SPARES CONSUMED; 2. REPAIRS AND MAINTENANCE OF PLANT AND MACHINERY; 3. SALARY, WAGES, BONUS, GRATUITY AND ALLOWANCES, 4. STAFF WELFARE EXPENSES, 5. ADVERTISEMENT EXPENSES, 6. PRINTING AND STATIONARY EXPENSES, 7. COMMUNICATION EXPENSES 8. FREIGHT AND FORWARDING EXPENSES, 9. OFFICE MAINTENANCE EXPENSES, 10. CONTRIBUTION TO PROVIDENT FUND AND OTHER FUNDS ETC. 11. RATES AND TAXES 12. RENT 13. INSURANCE 14. VEHICLE AND RUNNING MAINTENANCE 15. STAFF RECRUITMENT AND TRAINING 16. SOFTWARE LICENSE FEE 17. FINANCE CHARGES 18. MISC. EXPENSES 19. BAD DEBTS ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 20 SUBCONTRACTOR SERVICES 15,92,90,000 SUCH EXPENSES WERE INCURRED TOWARDS SUB- CONTRACTING OF A PART OF RESEARCH ACTIVITIES DEPRECIATION& AMORTISATION 8,27,41,000 SUCH EXPENSES WERE INCURRED TOWARDS NORMAL WEAR AND TEAR OF FIXED ASSETS INTEREST 13,33,54,000 SUCH EXPENSES WERE INCURRED TOWARDS UNSECURED LOANS BORROWED BY THE APPELLANT TOTAL: 1,02,52,32,000 13. HE PLACED RELIANCE UPON DECISION OF HONBLE SUPREME COURT IN CASE OF BOMBAY STEAM NAVIGATION CO (1953) (P.) LTD., VS. CI T REPORTED IN (1965) 56 ITR 52. 14 . ON THE CONTRARY, LD. SR.DR PLACED RELIANCE UPON T HE ORDERS OF AUTHORITIES BELOW. 15 . WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDE S IN THE LIGHT OF RECORDS PLACED BEFORE US. 16. IT IS OBSERVED THAT, EXPENDITURE INCURRED BY ASSES SEE IS IN ITS NORMAL COURSE OF BUSINESS. FURTHER, IT IS ALSO NOT DISPUTED THAT ASSESSEE HAS BEEN REMUNERATED AS PER CONTRACT, UNDE R WHICH ASSESSEE IS REQUIRED TO INCUR EXPENDITURE. LD. AO/C IT(A) DID NOT DISPUTE THAT EXPENDITURE HAS NOT BEEN INCURRED FOR PURPOSES OF RESEARCH ACTIVITY CARRIED ON BY ASSESSEE IN ITS NOR MAL COURSE OF BUSINESS. WE DRAW OUR SUPPORT FROM DECISION OF HONBLE SUPREME COURT IN CASE OF EMPIRE JUTE COMPANY LTD VS. CIT REPORTED IN (1980) 124 ITR 1 , WHEREIN HONBLE COURT LAID DOWN THAT TEST OF ENDURING BENEFIT CANNOT BE APPLIED BLINDLY AND MECH ANICALLY WITHOUT HAVING REGARD TO FACTS AND CIRCUMSTANCES OF A GIVEN CASE. WE ALSO REFERRED TO CLAUSE 5.1 OF AGREEMENT AT PAGE 109 OF PAPER ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 21 BOOK, WHEREIN ASSESSEE HAS TO ENSURE THAT IT IS ABL E TO CARRY OUT ITS OBLIGATIONS UNDER CONTRACT, WHEREIN THE OWNERSH IP OF INVENTIONS OF RESEARCH SERVICES UNDER AGREEMENT WAS TO BE RETAINED BY ELI LILLY AND NOT BY ASSESSEE. 17 . WE ARE THEREFORE ARE OF CONSIDERED OPINION THAT ASSESSEE HAS TO BE GRANTED BENEFIT OF EXPENDITURE INCURRED BY IT , INCURRED IN DUE COURSE OF BUSINESS ACTIVITY. 18. ACCORDINGLY GROUND NO. 3-3.2 RAISED BY ASSESSE E STANDS ALLOWED. 19. GROUND NO. 4-4.1 IS IN RESPECT OF DEDUCTION UNDER SECTION 80 IB (8A) OF THE ACT BEING DENIED TO ASSESSEE. 20. LD.COUNSEL SUBMITTED THAT ASSESSEE HAS BEEN GRANTE D APPROVAL BY DEPARTMENT OF SCIENTIFIC AND RESEARCH, MINISTRY OF SCIENCE AND TECHNOLOGY UNDER SECTION 80 IB (8A) OF THE ACT SINCE A.Y. 2003-04. HE PLACED RELIANCE UPON CERTIFICATES ISSUED BY AUTHORITY WHICH IS PLACED AT PAGE 73-75 OF PAPER BO OK. PLACING RELIANCE UPON AUDITORS CERTIFICATE IN FORM 10 CCB PLACED AT PAGE 222 TO 230, LD.COUNSEL SUBMITTED THAT ASSESSEE HAS AN IN-HOUSE RESEARCH FACILITY AND IS ELIGIBLE FOR CLAIM UNDER S ECTION 35 OF THE ACT. IT IS SUBMITTED THAT, ASSESSEE BEING CERTIFIED TO BE ENGAGED IN BUSINESS OF RESEARCH AND DEVELOPMENT BY A COMPETENT AUTHORITY UNDER THE ACT, IT IS ELIGIBLE TO CLAIM DEDUCTION UN DER SECTION 80 IB (8A) AT 100%. 21. ON THE CONTRARY, LD.SR.DR PLACED RELIANCE UPON ORDE RS PASSED BY AUTHORITIES BELOW. 22. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 22 23 . FROM RELEVANT DOCUMENTS PLACED IN PAPER BOOK RELI ED UPON BY LD.COUNSEL, IT IS AN ADMITTED FACT THAT ASSESSEE HAS RECEIVED APPROVAL FROM PRESCRIBED AUTHORITY, WHICH HAS BEEN RENEWED FROM TIME TO TIME. THIS CLEARLY SHOWS THAT ASSESSEE FULFILS ALL REQUIRED CRITERIA TO CLAIM DEDUCTION UNDER SECTION 80 IB (8A) OF THE ACT READ WITH RULE 18 DA OF INCOME TAX RULES, 1 963. FURTHER WE DO NOT FIND ANY REQUIREMENT FOR ASSESSEE TO OWN RESEARCH CONDUCTED/CARRIED OUT, IN ITS ORDINARY COURSE OF BU SINESS ACTIVITY FOR CLAIMING DEDUCTION. SIMILAR VIEW HAS BEEN TAKEN BY FOLLOWING DECISIONS AS RELIED UPON BY LD.COUNSEL: I. DY.CIT VS. FORTIS CLINICAL RESEARCH LTD. (2012) 27 TAXMANN.COM 4 (DEL ITAT) II. QUINTILES RESEARCH (INDIA) (P) LTD. VS. DCIT (2 016) 74 TAXMANN.COM 228 (GUJ. HC) III. PRO.CIT VS. B.A.RESEARCH INDIA LTD. (2016) 70 TAXMANN.COM 268 (GUJ. HC) IV. SIRO CLINPHARM (P) LTD. VS. DCIT (2014) 49 TAXM ANN.COM 62 (MUMBAI ITAT) 24. WE THEREFORE, DIRECT LD. AO TO GRANT DEDUCTION UNDE R SECTION 80 IB (8A) OF THE ACT AS PER LAW TO ASSESSEE. ACCORDINGLY GROUND NOS. 4 - 4.1 RAISED BY ASSESSEE STANDS ALLOWED. 25.GROUND NO. 5-5.1 IS IN RESPECT OF DISALLOWANCE OF PAYMENTS MADE TOWARDS SUB-CONTRACTING PART OF RESEARCH WORK TO THE SISTER CONCERN BY INVOKING PROVISIONS OF SECTION 80 IB (13 ) READ WITH ATI A (10) OF THE ACT. 26. AT THE OUTSET LD.COUNSEL SUBMITTED THAT IDENTICAL ISSUES ON SIMILAR FACTS AND CIRCUMSTANCES BASED ON SAME AGREE MENT HAS ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 23 BEEN DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CAS E FOR A.Y. 2008-09 AND 2009-10 VIDE ORDER DATED 27/07/18 IN IT A NO. 3464 -3465/DEL/2014 AND 3466-3467/DEL/2014, AND DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2010-11 A ND 2011-12 VIDE ORDER DATED 12/09/18, A COPY OF WHICH IS PLACE D BEFORE US AT PAGES 1-20 OF PAPER BOOK. 27. LD.CIT DR THOUGH OPPOSED SUBMISSIONS ADVANCED BY LD. COUNSEL, COULD NOT CONTROVERT THE FACT THAT ISSUE DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR IMMEDIATELY PRE CEDING A.Y. WERE ON IDENTICAL FACTS AND CIRCUMSTANCES. 28 . WE HAVE PERUSED SUBMISSIONS AND RIVAL CONTENTION S OF BOTH SIDES BASED UPON RECORDS PLACED BEFORE US. WE HAVE ALSO PERUSED ORDER PASSED BY THIS TRIBUNAL IN ASSESSEES OWN CAS E FOR A.Y. 2008-09, 2009-10 AND 2010-11 (SUPRA). 29 . IT HAS ALSO BEEN OBSERVED THAT AGREEMENT BASED UP ON WHICH, SERVICES HAS BEEN RENDERED BY JUBILANT BIOSYS LTD. , TO JUBILANT CHEMSYS ARE ALSO SAME. ON PERUSAL OF ASSESSMENT ORD ERS AND RECORDS FOR IMMEDIATELY PRECEDING A.Y. PLACED IN TH E PAPER BOOK BEFORE US IT IS OBSERVED THAT LD.A.O., MADE SIMILAR ADDITION IN HANDS OF ASSESSEES ON SIMILAR FACTS AND CIRCUMSTA NCES. WE THEREFORE DO NOT FIND ANY REASON TO DEVIATE FROM VI EW TAKEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008 -09, 2009-10 AND 2010-11 (SUPRA). ON CAREFUL PERUSAL OF ORDER PASSED BY THIS TRIBUNAL, IT IS OBSERVED THAT THE ISSUE HAS BEEN DE CIDED BY OBSERVING AS UNDER: 7.1 . IT HAS ALSO BEEN OBSERVED THAT AGREEMENT BASED UP ON WHICH SERVICES HAS BEEN RENDERED BY JUBILANT BIOSYS LTD., TO JUBILANT CHEMSYS LTD., ARE ALSO SAME. ON PERUSAL OF ASSES SMENT ORDERS ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 24 AND RECORDS FOR IMMEDIATELY PRECEDING ASSESSMENT YE ARS PLACED IN PAPER BOOK BEFORE US, IT IS OBSERVED THAT ASSESSIN G OFFICER HAS MADE IDENTICAL ADDITION IN HANDS OF BOTH ASSESSEE S, ON SIMILAR FACTS AND CIRCUMSTANCES. WE, THEREFORE, DO NOT FI ND ANY REASON TO DEVIATE FROM THE VIEW TAKEN BY THIS TRIBUNAL VIDE O RDER DATED 27.07.2018 IN ASSESSEES OWN CASE FOR ASSESSMENT Y EARS 2008- 09 AND 2009-10 (SUPRA). ON CAREFUL PERUSAL OF THE O RDER PASSED BY THIS TRIBUNAL, IT IS OBSERVED THAT THE ISSUE HAS BE EN DECIDED BY OBSERVING AS UNDER : 6. A CAREFUL CIRCUMSPECTION OF THE ABOVE PROVISIO N DECIPHERS THAT THE ASSESSING OFFICER CAN DISCARD THE PROFIT DECLAR ED BY AN ELIGIBLE ASSESSEE FOR THE PURPOSES OF DEDUCTION UNDER THIS S ECTION AND ADOPT THE AMOUNT OF PROFIT AS HE CONSIDERS REASONAB LE, IF HE FINDS THAT THE COURSE OF BUSINESS BETWEEN TWO CLOSELY CON NECTED ASSESSEES HAS BEEN SO ARRANGED WHICH 'PRODUCES TO T HE ASSESSEE MORE THAN ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINESS. THUS, IT IS EVIDENT THAT A MERE CLOSE CONNECTION BETWEEN THE TWO ASSESSEES IS NOT CONCLUS IVE FOR INVOKING THE PROVISIONS OF SECTION 80IB(13) READ WI TH SECTION 80IA(10). RATHER, IT IS SIMPLY A STARTING POINT FOR UNFOLDING IF THE ASSESSEE HAS SHOWN MORE THAN NORMAL PROFITS IN ITS HANDS SO AS TO CLAIM HIGHER AMOUNT OF DEDUCTION. THE ASSESSING OFF ICER IS ENABLED TO ABANDON THE PROFIT DECLARED BY THE ASSESSEE AND SUBSTITUTE IT WITH A REASONABLE PROFIT ONLY ON DEMONSTRATING THAT THE ARRANGEMENT BETWEEN THE TWO ASSESSEES IS SUCH THAT THE ASSESSEE CLAIMING DEDUCTION HAS BEEN SHOWN TO HAVE EARNED M ORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE I N SUCH ELIGIBLE BUSINESS. IT IS, THEREFORE, ESSENTIAL THAT THE ASSE SSING OFFICER MUST ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 25 FIRST POSITIVELY ILL USTRATE THAT THE PROFIT DECLARED BY THE ASSESSEE FROM THE TRANSACTION WITH ITS CONNECTED CONCERN IS MORE THAN THE ONE ORDINARILY EARNED FROM SUCH TRANSACTIONS. THE E XPRESSION MORE THAN THE ORDINARY PROFITS' IS A RELATIVE TERM WHICH NEEDS TO BE DEPICTED WITH REFERENCE TO THE ORDINARY PROFITS. IF ORDINARY PROFIT FROM A TRANSACTION IS RS.100/-, BUT, AN ASSESSEE HA S SHOWN TO HAVE EARNED PROFIT OF RS.L10/- FROM SUCH TRANSACTIO N BECAUSE OF ITS CONNECTION WITH, THE OTHER ENTERPRISE, THEN, IT IS THE EXCESS OF RS. 10/-, WHICH CAN BE DISALLOWED. ERGO, IN ANY EVENT, THE ASSESSING OFFICER NEEDS TO BRING ON RECORD SOME MATERIAL TO I NDICATE ORDINARY PROFIT, WHICH IS THEN COMPARED WITH THE PROFIT DECL ARED BY THE ASSESSEE RESULTING FROM ITS TRANSACTIONS WITH THE C ONNECTED ASSESSEE SO AS TO TRIGGER THIS PROVISION. 7. WHEN WE ADVERT TO THE FACTS OF THE INSTANT CASE, IT TURNS OUT THAT THE ASSESSING OFFICER SIMPLY INVOKED THE PROVISIONS OF SECTION 80IA(10) AND DISALLOWED DEDUCTION FOR THE ENTIRE RE CEIPT OF RS.2.32 CRORE, WITHOUT SHOWING IN ANY MANNER THE ORDINARY P ROFIT WHICH MIGHT HAVE RESULTED IF THERE HAD BEEN NO CONNECTION BETWEEN THE ASSESSEE AND JB. PAGE 67 OF THE PAPER BOOK IS A COP Y OF INVOICE RAISED BY THE ASSESSEE ON JB. THIS INVOICE IS DATED 31.05.2007. THE DESCRIPTION GIVEN IN THE INVOICE IS (P035) FT E CHARGES FOR SERVICE PROVIDED BY 32 FTES. THE UNIT RATE HAS BE EN GIVEN AS USD 1 LAC AT PAGE 133 OF THE PAPER BOOK IS ANOTHER INVOICE WHICH THE ASSESSEE RAISED ON ELI LILLY & CO., USA. DESCRI PTION GIVEN IN THE INVOICE IS (P035) FTE CHARGES FOR SERVICE PROV IDED BY 32 FTES FOR USD 4166.6563 PER UNIT AND TOTAL OF 1,33,333 US D. IN ADDITION, THERE IS ANOTHER AMOUNT IN THE LATER INVO ICE WITH THE DESCRIPTION 'COST OF CHEMICALS AT USD 77446. THUS, IT IS MANIFEST ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 26 THAT THE TOTAL INVOICE VALUE WHICH THE ASSESSEE R AISED ON ELI LILLY & CO., USA, IS FOR USD 2,10,779. UNLIKE 'COST OF CH EMICALS RECEIVED BY THE ASSESSEE FROM ELI LILLY & CO., WHICH IS IN T HE NATURE OF REIMBURSEMENT, THERE IS NO CORRESPONDING AMOUNT IN THE INVOICE RAISED BY THE ASSESSEE ON JB TOWARDS REIMBURSEMENT OF COST OF CHEMICALS. THE ID. CIT(A) HAS RECORDED ON PAGE 13 O F THE IMPUGNED ORDER THAT THE ASSESSEE ALSO RECEIVED 'REIMBURSEMEN T FOR COST OF CHEMICALS AMOUNTING TO RS.93,99,256/- FROM JB IN R ELATION TO THE INVOICE RAISED ON IT. THIS FINDING HAS NOT BEEN CO NTROVERTED BY THE ID. DR. THUS, IN ALL, THE ASSESSEE RECEIVED RS. 3.27 CRORE FROM JB WHICH COMPRISES OF RS.2.32 CRORE TOWARDS MEDICIN AL CHEMISTRY RESEARCH SERVICES AND RS.93.99 LAC TOWARDS 'REIMBUR SEMENT OF COST OF CHEMICALS. IN PERCENTAGE TERMS, REIMBURSE MENT FOR CHEMICALS CONSTITUTED ROUGHLY 28% OF THE INVOICE WH ICH THE ASSESSEE RAISED ON JB AND SUCH PERCENTAGE IS 36% IN THE INVOICE RAISED BY THE ASSESSEE ON ELI LILLY & CO., USA. IF REIMBURSEMENT ON ACCOUNT OF CHEMICALS IS REMOVED FROM BOTH THE SETS OF INVOICES, WHAT REMAINS IS THAT THE ASSESSEE CHARGED I LAC USD FROM IB AND FOR SIMILAR WORK, IT CHARGED ' 1,33,333 USD FROM EL I LILLY & CO., USA. THUS, IT IS PROVED THAT THE RATE CHARGED BY TH E ASSESSEE FROM JB FOR SIMILAR WORK IS LOWER THAN THE RATE CHARGED BY IT FROM ELI LILLY & CO., USA. IN OTHER WORDS, THE ASSESSEE HAS EARNED LOWER INCOME FROM JB THAN IT EARNED ORDINARILY FROM UNREL ATED PARTIES. 8. WHEN WE AGAIN COME BACK TO SECTION 80IA(10), WHI CH HAS BEEN INVOKED BY THE ASSESSING OFFICER, THE TABLES GET TU RNED IN THE SENSE THAT THE INCOME EARNED BY THE ASSESSEE FROM I TS CONNECTED COMPANY, NAMELY, JB IS LESS THAN THE ORDINARY PROFI TS, BEING, THE AMOUNT CHARGED BY THE ASSESSEE FROM ELI LILLY & CO. , USA. UNDER ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 27 THESE CIRCUMSTANCES, IT BECOMES EVIDENT THAT THE PR OVISIONS OF SECTION 80IA(10) ARE NOT TRIGGERED. IF WE IGNORE TH IS ASPECT, THERE IS NOTHING IN THE ASSESSMENT ORDER TO SUBSTANTIATE THE CLAIM OF THE REVENUE THAT THE ASSESSEE CHARGED EXORBITANTLY FROM JB SO AS TO DIVERT INCOME FROM LOSS MAKING JB TO THE ASSESSEE S O AS TO ENABLE IT TO CLAIM HIGHER DEDUCTION. IN OUR CONSIDERED OPI NION, THAT THE LD.CIT(A) TOOK AN UNIMPEACHABLE VIEW ON THE ISSUE B Y DELETING THE ADDITION OF RS.2.32 CRORE MADE BY THE ASSESSING OFF ICER. 9. IN SO FAR AS THE APPEAL OF THE JUBILANT BIOSYS LTD ., IS CONCERNED, THE GRIEVANCE OF THE REVENUE IS TO THE E FFECT THAT THE LD. CIT(A) ERRED IN ALLOWING EXPENDITURE OF RS.2.32 CRO RE FOR WHICH PAYMENT WAS MADE TO JC. THE ASSESSING OFFICER, VIDE HIS ORDER DATED 29.12.2010 REFERRED TO THE FACTS NOTED IN THE CASE OF JC. HERE ALSO, HE REPRODUCED SECTION 80IB(13) READ WITH SECTION 80IA(10) AND, EVENTUALLY, LAID DOWN THAT THE COURSE OF BUSINESS WAS ARRANGED BETWEEN JB AND JC IN SUCH A WAY SO AS TO PRODUCE MORE THAN ORDINARY PROFIT IN THE HANDS OF JC. HE, T HEREFORE, DISALLOWED PAYMENT MADE BY THE ASSESSEE TO JC AMOUN TING TO RS.2.32 CRORE. THE ID. CIT(A) DELETED THE ADDITION. 10. IN VIEW OF OUR FINDINGS GIVEN IN THE CASE OF JC BY WHICH WE HAVE UPHELD THE IMPUGNED ORDER IN DELETING THE ADDI TION OF RS.2.32 CRORE, THE CONSEQUENTIAL EFFECT IN THE INSTANT APPE AL IS THAT SUCH AN EXPENDITURE HAS TO BE ALLOWED AS DEDUCTION IN THE H ANDS OF JB. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER. 11. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. 30. ON THE BASIS OF ABOVE DISCUSSION AND SIMILARITY OF FACTS IN YEAR UNDER CONSIDERATION WITH IMMEDIATELY PRECEDING A.Y. IN ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 28 ASSESSEES OWN CASE, WE DIRECT LD. AO TO GRANT DED UCTION CLAIMED BY ASSESSEE AS PER LAW. ACCORDINGLY GROUND NOS. 5-5.1 RAISED BY ASSESSEE ST ANDS ALLOWED ITA NOS: 1822 & 1823/DEL/18 (A.Y. 2013-14 AND 2014- 15) ITA 1824 & 1825/DEL/18 (A.Y.2012-13 & 2013-14) 31. IT HAS BEEN SUBMITTED BY LD.COUNSEL THAT IN ALL TH E OTHER A.YS UNDER CONSIDERATION BEFORE US IN THE CASE OF J UBILANT BIOSYS AND JUBILANT CHEMSYS, SIMILAR NOTICE HAS BEEN ISSUE D FOR ENHANCEMENT BY LD.CIT (A) AND IDENTICAL DISALLOWANC ES HAS BEEN MADE RELATING TO EXPENDITURE INCURRED BY ASSESSEE F OR EARNING THE INCOME OFFERED TO TAX AS WELL AS DISALLOWANCE OF DE DUCTION UNDER SECTION 80 IB (8A) AND 80 IB (13) OF THE ACT. HE SU BMITTED THAT THE FACTUAL BACKGROUND ALSO REMAINS SAME IN RESPECT OF THESE APPEALS VIS-A-VIS THE FACTS CONSIDERED HEREINABOVE IN FOREGOING PARAGRAPHS. LD.COUNSEL, THUS PLACED RELIANCE UPON T HE SUBMISSIONS ADVANCED BY HIM IN THE FOREGOING PARAGR APHS HEREINABOVE. 32 . LD.SR.DR ON THE CONTRARY, PLACED RELIANCE UPON OR DERS PASSED BY AUTHORITIES BELOW IN SUPPORT OF HIS CONTENTIONS AND REITERATED ARGUMENT REPRODUCED HEREINABOVE IN RESPECT OF EACH GROUND. 33. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDE S IN LIGHT OF RECORDS PLACED BEFORE US. WE ALSO OBSERVE THAT, FACTS IN RESPECT OF ALL OTHER A.YS UNDER CONSIDERATION ARE S IMILAR TO THE ONE THAT HAS BEEN CONSIDERED IN DETAIL HEREINABOVE. THE ISSUES RAISED BY ASSESSEE ARE ALSO SIMILAR AND IDENTICAL. ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 29 34. WE THEREFORE FOLLOWING SAME OBSERVATIONS AND VIEWS TAKEN HEREINABOVE DISMISS GROUND RAISED BY ASSESSEE IN RE SPECT OF CHALLENGE AGAINST THE ISSUANCE OF NOTICE UNDER SECT ION 251 (1) BY LD.CIT(A), AND ALLOW OTHER GROUNDS RELATING TO EXPENDITURE/DEDUCTIONS CLAIMED BY ASSESSEE. IN THE RESULT APPEALS FILED BY ASSESSEE IN ALL THE YEARS UNDER CONSIDERATION BEFORE US STANDS PARTLY ALLOWED. ITA NOS. 2759 & 2760/DEL/18 (A.Y.-2013-14 & 2014-15 ) ITA 2757 & 2758/DEL/18 (A.Y.-2012-13 & 2013-14) 35. THESE ARE PENALTY APPEALS FILED BY ASSESSEE ARE IN RESPECT OF LEVY OF PENALTY UNDER SECTION 271 (1) OF THE ACT ON DISALLOWANCE OF EXPENDITURE MADE BY LD. CIT (A) IN ALL YEARS UNDER CONSIDERATION. 36. AS WE HAVE DELETED THE ADDITION MADE, PENALTY LEVI ED DOES NOT SURVIVE. ACCORDINGLY GROUNDS RAISED BY ASSESSEE IN PENALTY A PPEALS STAND ALLOWED. IN THE RESULT PENALTY APPEALS FILED BY ASSESSEE STA NDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/11/2018 SD/- SD/- ( N.K. SAINI) (BEENA A PILLAI) VICE PRESIDENT JUDICIAL MEMBER DT. 28.11. 2018 *GMV/*KAVITA ARORA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ITA NO.7302/DEL/17, 1822&1823/DEL/18, 2759 & 2760/D EL/18 JUBILANT BIOSYS LTD. ITA NO. 1824 & 1825/DEL/18, 2757 & 2758/DEL/18 JUBI LANT CHEMSYS LTD. 30 - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES