Bio Med Private Ltd., Ghaziabad V. Addl. CIT, Ghaziabad

ITA 2069/DEL/2011

• Counselvise Citation: 206920114 RSA 2011
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 26-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C B SINGH
• Keywords: Business income; Business expenditure; Rule of consistency
• Section: 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.2069 & 2070 /DEL/2011 ASSESSMENT YEAR : 2005-06 & 2004-05 BIO MED PRIVATE LIMITED, ADDL. CIT, C/O AKHILESH KUMAR, ADVOCATE, RANGE-2, CHAMBER NO.206-207, GHAZIABAD. ANSAL SATYAM, RDC RAJ NAGAR, GHAZIABAD. V. AND I.T.A. NO.2162 /DEL/2011 ASSESSMENT YEAR : 2005-06 ADDL. CIT, BIO MED PRIVATE LIMIT RANGE-II, C/O AKHILESH KUMAR, GHAZIABAD. CHAMBER NO.206-207, ANSAL SATYAM, RDC , V. RAJ NAGAR, GHAZIABAD. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AABCB3477 AABCB3477 AABCB3477 AABCB3477- -- -C CC C APPELLANT BY : SHRI AKHILESH KUMAR, ADVOCATE. RESPONDENT BY : SHRI C.B. SINGH, SR. DR. ORDER PER TS KAPOOR, AM: THESE ARE THREE APPEALS, TWO FILED BY THE ASSESSEE AND ON E FILED BY THE DEPARTMENT AGAINST THE ORDER OF LD CIT(A), GHAZI ABAD DATED 9.2.2011 FOR ASSESSMENT YEAR 2004-05 & 2005-06. THESE A PPEALS ARE ITA NO2070/DEL/2011 2 HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMM ON ORDER. THE GROUNDS RAISED IN THE REVENUES APPEAL ARE AS UNDER:- 1. THAT THE LD CIT(A) HAS ERRED IN ALLOWING DEDUCTION U /S 80IB OF THE IT ACT AMOUNTING TO `.59,11,890/- IN SPITE OF THE FA CT THAT UNIT NO.III WAS ESTABLISHED BY SPLITTING AND RECONSTRUCTION OF THE EXISTING UNIT. 2. HENCE THE ORDER OF THE LD CIT(A) DESERVES TO BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 2. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 200 4-05 & 2005-06 ARE AS UNDER:- FOR ASSES FOR ASSES FOR ASSES FOR ASSESSMENT YEAR 2004 SMENT YEAR 2004 SMENT YEAR 2004 SMENT YEAR 2004- -- -05: 05: 05: 05: 1. BECAUSE THE LD CIT(A) IS BAD IN LAW AS WELL AS IS AGAINST THE FACTS 2. AND CIRCUMSTANCES OF THE CASE SO FAR AS THE SAME IS RELATE D TO ALLOCATION OF R&D EXPENSES. 3. BECAUSE LD CIT(A) ERRED IN DISALLOWING THE TOTAL CLAI M U/S 80IA/IB `.2,66,716/- BY HOLDING THAT THE EXPENSES ON R&D SHALL BE ALLOCATED 1/3 RD TO UNIT-III CLAIMING EXEMPTION U/S 80IA/IB OF THE ACT IN THE WHOLE DISREGARD OF THE FACT THAT THE ISSUE HAS ALREADY BEEN DECIDED FINALLY IN FAVOUR OF THE ASSESSEE BY HON'B LE ITAT & LD. CIT(A) IN THE EARLIER YEARS WHICH IS AGAINST THE J UDICIAL DISCIPLINE. 4. BECAUSE WITHOUT PREJUDICE TO THE ABOVE AND IN THE AL TERNATIVE, THE LD CIT(A) WRONGLY ENHANCED THE INCOME BY ALLOCA TING EXPENSES AS ABOVE, EVEN AFTER ACCEPTING THE ELIGIBILIT Y OF CLAIM ITA NO2070/DEL/2011 3 U/S 80IA/IB WHICH WAS DENIED BY ASSESSING OFFICER IN TOTA L DISREGARD TO THE PROVISIONS OF THE ACT, AGAINST THE MAT ERIAL ON THE RECORD AND PAST HISTORY OF MORE THAN A DECADE WHICH I S WRONG AS WELL AS AGAINST THE PRINCIPAL OF CONSISTENCY. IT IS THEREFORE PRAYED THAT THE ENHANCEMENT OF INCOM E/ADDITION SUSTAINED `.2,66,716/- BY THE LD CIT(A) BE QUASHED. FOR ASSESSMENT YEAR 2005 FOR ASSESSMENT YEAR 2005 FOR ASSESSMENT YEAR 2005 FOR ASSESSMENT YEAR 2005- -- -06: 06: 06: 06: 1. BECAUSE THE LD CIT(A) IS BAD IN LAW AS WELL AS IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE SO FAR AS THE SAME IS RELATE D TO ALLOCATION OF R&D EXPENSES. 2. BECAUSE LD CIT(A) ERRED IN DISALLOWING THE CLAIM U/S 8 0IA/IB `.5,10,905/- I.E. 30% ON `.1703017/- BY HOLDING THA T THE EXPENSES ON R&D SHALL BE ALLOCATED 1/3 RD TO UNIT III CLAIMING EXEMPTION U/S 80IA/B OF THE ACT IN THE WHOLE DISREGA RD OF THE FACT THAT THE ISSUE HAS ALREADY BEEN DECIDED FINALLY IN FAV OUR OF THE ASSESSEE BY HON'BLE ITAT & LD CIT(A) IN THE EARLIER YEA RS WHICH IS AGAINST THE JUDICIAL DISCIPLINE. 3. BECAUSE WITHOUT PREJUDICE TO THE ABOVE AND IN THE AL TERNATIVE, THE LD CIT(A) WRONGLY ENHANCED THE INCOME BY ALLOCA TING EXP AS ABOVE, EVEN AFTER ACCEPTING THE ELIGIBILITY OF CLAI M U/S 80IA/B WHICH WAS DENIED BY THE ASSESSING OFFICER IN TOTAL DISREG ARD TO THE PROVISIONS OF THE ACT AGAINST THE MATERIAL ON THE RECORD AND PAST HISTORY OF MORE THAN A DECADE WHICH IS WRONG AS WE LL AS AGAINST THE PRINCIPAL OF CONSISTENCY. IT IS THEREFORE PRAYED THAT THE ENHANCEMENT OF INCOM E/ADDITION SUSTAINED `.510905/- BY THE LD CIT(A) BE QUASHED. ITA NO2070/DEL/2011 4 3. THE BRIEF FACTS OF THE CASE ARE THAT THE COMPANY I S ENGAGED IN THE PRODUCTION OF PHARMACEUTICALS VACCINES FOR ANIMAL AND HUMAN USE. THE ANIMAL VACCINES ARE PRODUCED IN UNIT NO.1 & 2 WH EREAS HUMAN VACCINES ARE PRODUCED IN UNIT NO.3. UNIT NO.3 WAS ESTA BLISHED IN THE YEAR AND IT HAS BEEN CLAIMING DEDUCTION U/S 80IB SINCE 1996. 4. BESIDES UNIT NO.1, 2 & 3, THE COMPANY IS ALSO HAVING AN INDEPENDENT R&D UNIT WHEREIN CONTINUES RESEARCH & DEV ELOPMENT ACTIVITIES ARE CARRIED OUT IN RESPECT OF INNOVATION A ND FURTHER IMPROVEMENT OF PRODUCTS RELATING TO ALL THE THREE UN ITS AND THE CLAIM FOR EXPENSES ON R&D IS BEING CLAIMED BY THE ASSESSEE U/S 35 (2AB) OF THE INCOME TAX ACT, 1961. 5. FIRST OF ALL, WE ARE TAKING UP THE APPEAL FILED B Y THE REVENUE IN RESPECT OF ASSESSMENT YEAR 2005-06. 6. THE RETURN DECLARING INCOME OF `.10088947/- WAS F ILED AFTER CLAIMING DEDUCTION OF `.59,11,890/- U/S 80IB OF THE INCOME TAX ACT, 1961. THE RETURN WAS THEN REVISED TWICE ON 17.11.2005 AND 30.11.2005. THE CASE WAS SELECTED FOR SCRUTINY AND THE NOTICE U/S 143(2) WAS ISSUED ACCORDINGLY AND SERVED UPON THE ASSESSEE FOLLOWED BY QUESTIONNAIRE. DURING THE ASSESSMENT PROCEEDINGS, THE NECESSARY DOCUMENTS AS CALLED FOR BY THE ASSESSING OFFICER WERE FIL ED. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE REGARDING DEDUCTION U/S 80IB OF THE ACT IN RESP ECT OF UNIT NO.III ON THE FOLLOWING GROUNDS:- A) IN ASSESSMENT YEAR 2005-06 AS IN THE EARLIER YEARS ASSESSEE COULD NOT PROVE THAT UNIT NO.III WAS SET UP AFTER PUR CHASE OF PLANT & MACHINERY. ITA NO2070/DEL/2011 5 B) NO CONSTRUCTION OF SEPARATE BUILDING FOR PRODUCTION O F HUMAN VACCINES (MEANS FOR UNIT III). C) UNIT III WAS SET UP OUT OF EXISTING UNIT I & II, HENCE IT WAS BROUGHT INTO EXISTENCE BY RECONSTRUCTION. D) NO QUANTITATIVE DETAILS ARE MAINTAINED FOR RAW MATER IAL CONSUMPTION ETC. 7. AGGRIEVED BY THIS, THE ASSESSEE COMPANY APPROACHED TH E CIT(A) AND PLEADED IN THE FORM OF WRITTEN SUBMISSIONS AS UNDER: - A) THE DEDUCTION U/S 80IB IS BEING ALLOWED TO THE ASSESSEE SINCE ASSESSMENT YEAR 1996-097 CONTINUOUSLY UP TO ASSESSMENT YEAR 2003-04. IT WAS FIRST DISALLOWED IN THE YEAR 2004-05 O N THE SIMILAR POINT AS IN THE CURRENT YEAR AND IN THE CASE OF ASSESSMENT YEAR 1999-00 SUCH DEDUCTION WAS ALSO WITHDRAWN ON THE SAME BASIS U/S 148/143(3) OF THE ACT. B) HOWEVER, THE ISSUE OF INSTALLATION OF SEPARATE PLANT & MACHINERY AND INDEPENDENT FACTORY PREMISES HAVE ALREADY BEEN EX AMINED IN THE INITIAL STAGE AND AFTER SATISFYING ABOUT THE CO MPLIANCE, DEDUCTION WAS ALLOWED FOR UNIT NO.III. C) EVIDENCE FOR CONSTRUCTION OF SEPARATE BUILDING WAS ALSO FILED. 8. THE LD AR OF THE ASSESSEE ALSO PLEADED BEFORE THE CIT (A) THAT THE ISSUE OF ELIGIBILITY U/S 80IB IN RESPECT OF UNIT NO .III OF ASSESSEE HAS BEEN ALREADY SETTLED IN THE EARLIER YEARS. THIS CLAIM OF THE ASSESSEE IS BEING ALLOWED SINCE ASSESSMENT YEAR 1996-97 TILL ASSESSMENT YEAR 2003-04. IN ALL THESE YEARS, ALL ISSUE OF DEDUCTION HAV E BEEN SCRUTINIZED AND CLAIM WAS ACCEPTED THEREAFTER. NOW AF TER LAPSE OF SO ITA NO2070/DEL/2011 6 MANY YEARS, A NEW ALLEGATION THAT THERE WAS NO PLANT & MACHINERY OR NO NEW BUILDING FOR UNIT NO. III IS TOTALLY UNJUSTIFI ED. 9. LD AR PLEADS THAT THOUGH PRINCIPLES OF RES ADJUDICA TA ARE NOT APPLICABLE TO INCOME TAX PROCEEDINGS BUT THE SAID PRI NCIPLE IS SUBJECT TO MANY RIDERS LIKE CONSISTENCY AND JUDICIAL DISCIPLINE . RELIANCE IS PLACED ON THE CASE OF RADHA SWAMI SATSANG V. CIT (199 2) 193 ITR 321 (SC) WHEREIN IT WAS HELD THAT WHEN THE FACTS ARE SIMI LAR AS IN EARLIER YEARS, THE REVENUE AUTHORITIES SHOULD MAINTAIN CONSISTEN CY ON THE ISSUE. ONE MORE CASE OF CIT V. NEW NEO POLY PACK PVT. LTD. (2000) 245 ITR 492 (DEL.) WAS CITED WHERE IT WAS HELD THAT IT IS NOT OPEN TO REVENUE TO ACCEPT THE JUDGMENT IN THE CASE OF ASSESSEE A ND CHALLENGE ITS CORRECTNESS IN THE CASE OF OTHER ASSESSEE. 9. BESIDES ABOVE CASE LAWS , THE LD AR HAD SUBMITTED NUM BER OF DETAILED SUBMISSIONS RUNNING INTO 13 PARAGRAPHS IN SUPPOR T OF HIS CLAIM. FEW OF THE MOST IMPORTANT ARGUMENTS ARE REPROD UCED BELOW:- 1. COMPANY HAD PLANNED TO ENTER IN THE FIELD OF MANUFA CTURE OF HUMAN VACCINES IN THE FY 1992-93 BY INITIATING A COLLABORATION WITH THE INSTITUTE OF POLIOMYELITIS & V IRAL ENCEPHALITIDES, MOSCOW, RUSSIA. 2. NEW BUILDING & FACILITIES WERE THE REQUIREMENT FOR MANUFACTURE OF HUMAN VACCINES AS PER RULES OF DRUG CONTROL AUTHORITIES. 3. THE INDUSTRIAL PLOT C-96, ON WHICH M/S BIO MED. PVT. LTD. FACTORY IS LOCATED IS A VERY LARGE PLOT OF OVER 9500 SQ. YDS. ACQUIRED FROM THE UPIDC IN 1972. ITA NO2070/DEL/2011 7 4. BIO MED. PRIVATE LTD. BUILT ITS FIRST BUILDING IN 19 73 IN THE FRONT PART OF THE PLOT COVERING AN AREA OF ABOUT 55 0 SQ. YDS. ONLY, LEAVING MORE THAN 90% SPACE AS UNOCCUPIED. 5. BIO MED. PVT. LTD. BUILT ANOTHER SET OF BUILDING COM PRISING OF THE MAIN BUILDING (950 SQ.YDS. SPACE TWO STORY BUILD ING), GENERATOR HOUSE AND OFFICE FACILITY (170 SQ.YDS.). THI S ACTIVITY WAS STARTED IN THE END OF 1988 AND COMPLETE D IN 1991. THESE FACILITIES ARE LOCATED IN THE BACK OF THE FIRST BUILDING (BUILT IN 1974) AND IN THE MIDDLE OF INDUST RIAL PLOT. THIS UNIT IS BEING USED FOR MANUFACTURE OF VETERINARY VACCINES. THE DRUG MANUFACTURING LICENSE FOR THE ADDI TIONAL VACCINE WAS GRANTED DURING THE YEAR 1992-93 FOR VARI OUS VACCINES ON THE ORIGINAL LICENSE SINCE THE DRUG CONTRO LLER ISSUES ONLY ONE LICENSE ON ONE PREMISE WHETHER THEY ARE PART OF ONE UNIT OR SEPARATE UNITS. BIO MED PVT. LTD. HAS DESIGNATED THIS UNIT AS UNIT-III. 10. BASED UPON THE SUBMISSIONS, THE LD CIT(A) DECIDED TH E CLAIM OF DEDUCTION U/S 80IB IN FAVOUR OF THE ASSESSEE AND DELETE D THE ADDITION OF `.59,11,890/-. THE RELEVANT PORTION OF CIT(A)S O RDER IS REPRODUCED BELOW:- THE ASSESSING OFFICER HAS FAILED IN APPRECIATING THE FA CTS ON RECORD. FROM THE EVIDENCES ON THE RECORD, IT IS VERY CLEAR THAT THERE WAS PURCHASE OF NEW PLANT & MACHINERY AND NEW/SE PARATE BUILDING WAS CONSTRUCTED FOR THE SET UP OF UNIT NO.III . IN FACT THE SAID UNIT WAS SET UP IN ASSESSMENT YEAR 2006-07 AND CONSTRUCTION WAS STARTED AS EARLY AS IN ASSESSMENT YEAR 2 003-04. SIMILARLY SEPARATE PLANT/MACHINERY IS ALSO PURCHASED I N THAT PERIOD FOR UNIT III. YEARLY INVESTMENTS IN UNIT III I S ALSO PROVIDED ITA NO2070/DEL/2011 8 WITH COPY OF FINANCIAL STATEMENTS. EVIDENCES IN SUPPORT ARE VERIFIED IN THE EARLIER YEARS AND DEDUCTION U/S 80IB IS GRANTED FROM ASSESSMENT YEAR 1996-97 TO ASSESSMENT YEAR 2003-04. I HAVE ALSO VERIFIED ALL THE EVIDENCES PUT FORWARD AGAI N BY THE ASSESSEE. EVEN SALES TAX DEPARTMENT HAS GRANTED EXEMPTION TO UNIT III AS NEW UNIT AFTER SPOT INQUIRY AND EXAMINATI ON OF RECORDS. THE PRODUCT OF UNIT III BEING HUMAN VACCINE IS ALSO D IFFERENT FROM THE PRODUCT OF OLD UNITS WHICH IS ANIMAL VACCINE AND IT CANNOT BE IMAGINED THAT MACHINERY ETC. CAN BE USED FOR MANUFAC TURING HUMAN VACCINES MORE SO WHEN UNITS ARE ALSO UNDER THE SUPERVISION OF DRUG CONTROL AUTHORITIES WHO PHYSICALLY EXAMINE THE UNITS FROM TIME TO TIME AND ISSUE LICENSE TO DEAL IN VACCINES. ALL THE THREE UNITS THOUGH ARE EXISTING ON THE SAME PL OT BUT ARE SEPARATE AND BECAUSE OF THIS THE ASSESSING OFFICER MIGHT HAVE FELT THAT UNIT III HAS COME OUT ON ACCOUNT OF SPLITTI NG IN SUPPORT OF WHICH HE HAS RELIED A NUMBER OF CASES AS MENTIONED IN H IS ORDER FOR THE EARLIER YEAR ASSESSMENT YEAR 2004-05. BUT THE F ACTS OF THESE CASES ARE DIFFERENT FROM FACTS OF THIS CASE. IN FAC T THEY ARE SUPPORTING THE CASE OF ASSESSEE THAT UNIT SHOULD BE SEPARAT E BUT MAY EXIST IN THE SAME AREA NEAR TO THE OLD UNITS ETC. 11. AGGRIEVED BY THIS, THE DEPARTMENT IS IN APPEAL BE FORE US. 12. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIA L AVAILABLE ON RECORD. THE MAIN POINT OF CONTENTION BETWEEN THE PA RTIES IS THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. THE LD DR RELIED UPON THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT SINCE NO SEPARATE UN IT WAS CONSTRUCTED AND HENCE THE DISALLOWANCE WAS NECESSARY. T HE LD AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BEEN AVAILING TH E DEDUCTION U/S 80IB FROM 1996-97 TO ASSESSMENT YEAR 2003- 04. ITA NO2070/DEL/2011 9 KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY AS HELD I N THE CASE OF RADHA SWAMI SATSANG V. CIT (1992) 193 ITR 321 (SUPRA) AND RESPECTFULLY FOLLOWING THE HON'BLE DELHI HIGH COURT JUDGMENT IN CIT V. NEO POLY PACK PVT. LTD. 245 ITR 492 (SUPRA) WHERE IT HAS BEEN HELD THAT IT IS NOT OPEN TO REVENUE TO ACCEPT A JUDGMENT IN TH E CASE OF THE ASSESSEE AND CHALLENGE ITS CORRECTNESS IN THE CASE OF OTHE R ASSESSEE. HERE, IN THE PRESENT CASE, THE ASSESSEE HAS BEEN AVAILING THIS DEDUCTION U/S 80IB SINCE 1996-97 AND DOCUMENTS REGARD ING CONSTRUCTION OF NEW UNIT WERE FILED IN THE RESPECTIVE YEARS AND HENCE WE ARE OF THE OPINION THAT UNIT NO.3 WAS NOT MADE OU T BY SPLITTING THE EARLIER BUSINESS AND IT WAS A SEPARATE INDUSTRIAL UNDERTA KING AND ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED. 13. NOW WE TAKE UP THE APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 & 2005-06. 14. THE CRUX OF THE APPEALS FILED BY THE ASSESSEE FOR TH E ASSESSMENT YEAR 2004-05 & 2005-06 IS TO ADJUDICATE WHETHER R&D EXPENSES INCURRED BY THE ASSESSEE IS TO BE ALLOCATED TO DIFFEREN T UNITS OR THE SAME CAN BE ALLOWED AS LUMP SUM U/S 35 (2AB) OF THE INCOME TAX ACT, 1961. THE LD CIT(A) HAS HELD IN HIS ORDER THAT THE COMPANY WAS E LIGIBLE FOR DEDUCTION U/S 80-IB IN THE YEARS 2004-05 & 2005-06 BU T IN THE SAME ORDERS HE HAD OBSERVED THAT ASSESSEE HAD CLAIMED R&D EX PENSES SEPARATELY BY DEBITING IT TO THE PROFIT & LOSS ACCOUNT INSTEAD OF ALLOCATING SUCH EXPENSES TO DIFFERENT UNITS. CONSEQUEN TLY HE PASSED THE ORDERS DIRECTING ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTION U/S 80IB/80IA AFTER APPORTIONING 1/3 RD EXPENSES TO UNIT-III. ITA NO2070/DEL/2011 10 15. THE RELEVANT PORTION OF CIT(A)S ORDER ON THIS CO UNT IS REPRODUCED BELOW:- AS FAR AS ALLOCATION OF R&D EXPENSES IS CONCERNED, I AM IN FULL AGREEMENT WITH THE ASSESSING OFFICER THAT THESE EXPENSES SH OULD BE ALLOCATED. LD COUNSEL VEHEMENTLY ARGUED THAT THE SAME CANNOT BE ALLOCATED AS PER THE PROVISIONS OF SEC.28/29 WHERE EXPENSES UNDER VARIOUS PROVISIONS OF SEC. 35 ARE SEPARATEL Y ALLOWED AND SPECIALLY WHEN PROVISIONS OF SECTION 35(2AB ) MANDATE FOR SUCH ALLOWANCE SEPARATELY AND NO DEDUCTI ON OF SUCH EXPENDITURE UNDER ANY OTHER PROVISION OF THE ACT AS P ER THE SUB SECTION 2 OF THE SAID PROVISION OF THE ACT. PLEA OF LD COUNSEL IS NOT ACCEPTABLE AS EMBARGO UNDER SUB SECTION 2 IS ONLY TO AVOID DOUBLE DEDUCTION SO THAT AN ASSESSEE WHO CLAIMS DEDUCTION UNDER THE SAID PROVISION SHALL NO T BE ALLOWED TO CLAIM THE SAME AGAIN. SECTION 35 IS AN ENABLING SECTION FOR THE COMPUTATION OF BUSINESS INCOME; AND IT IS A SECTION WITHIN SECTION 28 TO 43 WH ICH ARE FOR DETERMINATION OF INCOME FROM BUSINESS. 16. IN VIEW OF THESE FINDINGS HE HELD THAT R&D EXPENSE S SHOULD BE ALLOCATED TO ALL THREE UNITS. SINCE THERE WERE THRE E UNITS, HENCE 1/3 RD EXPENSES RELATING TO R&D WERE ALLOCATED TO UNIT-III. 17. THE SAME VIEW WAS TAKEN BY LD CIT(A) IN RESPECT OF ASSESSMENT YEAR 2004-05 WHEREIN ALSO HE ALLOWED THE CLAIM OF ASSE SSEE U/S 80IBOF THE INCOME TAX ACT, 1961 BUT REDUCED THE CLAIM BY R EDUCING PROFIT OF UNIT-III BY ALLOCATING 1/3 RD OF R&D EXPENSES TO UNIT-III. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US FOR BOTH THE Y EARS. ITA NO2070/DEL/2011 11 18. THE LD AR OF THE ASSESSEE EXPLAINED BEFORE US THAT R&D CENTRE OF THE COMPANY IS A GOVT. APPROVED INDEPENDENT UNIT AND IS WORKING FOR THE OVERALL INNOVATION OF THE PRODUCTS OF THE C OMPANY AND NO PARTICULAR EXPENSES CAN BE SAID TO BE RELATING TO A P ARTICULAR UNIT AND THEREFORE THE EXPENSES RELATING TO R&D EXPENSES CANNOT BE ALLOCATED TO DIFFERENT UNITS. HE FURTHER PLEADED THAT FOR CLA IMING R&D EXPENSES, THERE IS SEPARATE PROVISION IN THE INCOME TAX ACT, 196 1 WHICH IS SECTION 35 (2AB). THE LD AR ALSO BROUGHT BEFORE OUR NOTICE AN ITAT ORDER IN I.T.A. NO.5649/DEL/2004 IN WHICH THE HON'B LE TRIBUNAL IN THE CASE OF SAME ASSESSEE AND ON THE SAME POINT HAD HELD IN F AVOUR OF THE ASSESSEE. 19. THE LD DR STRESSED UPON THE POINT THAT R&D WORK ME ANT THE SAME THING AS BUSINESS EXPENSES OF THE COMPANY AND THE NET PROFIT OF A PARTICULAR UNIT HAS TO BE CALCULATED AFTER ALLOCAT ING THE APPROPRIATE PORTION OF EXPENSES TO A PARTICULAR UNIT AND HENCE H E RELIED UPON THE CIT(A)S ORDER. 20. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIA L AVAILABLE ON RECORD. THE POINT OF CONTENTION BEFORE THE PARTIES I S THE ALLOCATION OF R&D EXPENSES TO THE THREE UNITS. FROM THE ITAT ORDER I N APPEAL NO.5649/DEL/2004, IT IS OBSERVED THAT THE ASSESSEE COMPAN Y WAS ORIGINALLY DENIED THE BENEFIT OF SECTION 80IA IN RESP ECT OF UNIT NO.2 DURING 1994-95 WHICH WAS CHALLENGED BEFORE THE CIT(A ) AND CIT(A) HAD GIVEN RELIEF TO THE COMPANY. THE REVENUE HAD NOT FI LED APPEAL AGAINST THE CIT(A)S ORDER. DURING THE YEAR 2001-02 ALSO, TH E CASE OF THE ASSESSEE TRAVELED UP TO THE STAGE OF THE TRIBUNAL ON TH E SAME ISSUE I.E. 1/3 RD ALLOCATION OF R&D EXPENSES OF EACH UNIT. THE CASE WA S DECIDED IN ITA NO2070/DEL/2011 12 FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE DE CISION OF THE ITAT IS REPRODUCED BELOW:- IN THE APPEAL BEFORE THE CIT(A), THE ASSESSEE CONTENDE D THAT THE RESEARCH PROJECT UNDERTAKEN BY IT RELATES TO THE DEVELOPMENT OF NEW VACCINES WHICH NONE OF THE THREE UNITS WAS MANUFACTURING AND FURNISHED DETAILS OF VACCINES MANUFA CTURED DURING THE YEAR. IT WAS FURTHER POINTED OUT THAT THE ASSESSING OFFICER HIMSELF AGREED IN THE ASSESSMENT ORDER THAT THE R&D EXPENSES DID NOT RELATE TO ANY PARTICULAR UNIT AND TH AT THE BENEFIT DERIVED BY ONE PARTICULAR UNIT FROM THE R&D EXPENDITURE CANNOT BE ASCERTAINED. IT WAS FURTHER POINTED OUT TH AT FOR THE ASSESSMENT YEAR 1994-95, THE CIT(A) HAS BY ORDER DATED 1.5.1998 HELD THAT THE EXPENDITURE ON RESEARCH AND D EVELOPMENT CANNOT BE APPORTIONED TO UNIT NO. II FOR THE PURPOSE OF SECTION 80IA. THE CIT(A) ACCEPTED THE ABOVE SUBMISSIONS AND AL SO HELD THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SUCH E XPENSES INCURRED ON R&D WHICH RELATES TO ANY PARTICULAR UNIT . HE, THEREFORE, ACCEPTED THE ASSESSEES PLEA FOLLOWING HIS PREDECESSORS ORDER FOR THE ASSESSMENT YEAR 1994-95. THE DEPARTMENT IS IN APPEAL AND WE HAVE CONSIDERED TH E RIVAL CONTENTIONS. THE LD COUNSEL FOR THE ASSESSEE MADE A STATEM ENT FROM THE BAR THAT THE ASSESSEE HAS NOT RECEIVED ANY INTI MATION OF AN APPEAL FILED BY THE DEPARTMENT AGAINST THE DEC ISION OF THE CIT(A) FOR THE ASSESSMENT YEAR 1994-95 ON THIS POINT. T HE LD SR. DR STATED THAT HE HAS NO INFORMATION OF ANY APPEAL BY THE DEPARTMENT ON THIS POINT FOR THE ASSESSMENT YEAR 1994- 905, BUT WANTED TO VERIFY THE POSITION AND REQUESTED THAT WE M AY HOLD OVER THE PASSING OF THE ORDERS TILL THE END OF THE MON TH. ITA NO2070/DEL/2011 13 ACCORDINGLY, WE HAVE WAITED TILL THE 31.5.2007 BUT SO FAR NO INFORMATION HAS COME FROM THE DEPARTMENT. SINCE THE DEPARTMENT HAS NOT CHALLENGED THE ORDER OF THE CIT(A ) ON THIS POINT FOR THE ASSESSMENT YEAR 1994-95, RESPECTFULLY FOL LOWING THE JUDGMENTS OF THE HON'BLE DELHI HIGH COURT IN CIT V, NEO POLY PACK (P) LTD. 245 ITR 492, CIT V. ARJ SECURITY PRINTERS 2 64 ITR 346, 276 AND CIT V. DALMIA PROMOTERS DEVELOPERS P. LTD. 281 IT R 346, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS POINT FOR THE YEAR UNDER APPEAL AND DISMISS THE GROUND TAKEN BY THE REVENUE. 21. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL AND KEEPING IN VIEW THE PRINCIPLES OF CONSISTENCY IN THE JUDICIAL PRO NOUNCEMENTS, WE ARE OF THE OPINION THAT THE CIT(A) WHILE ON THE ONE HAND HAD RIGHTFULLY GIVEN THE BENEFIT OF SECTION 80IB OF THE ACT BUT AT THE SAME TIME HE HAS WRONGLY REDUCED THE PROFITS OF UNIT NO.3 BY ALLOC ATING 1/3 RD OF R&D EXPENSES IN RESPECT OF BOTH YEARS 22. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 & 2005-06 ARE ALLOWED AND THE APPEAL F ILED BY THE REVENUE FOR ASSESSMENT YEAR 2005-06 IS DISMISSED. 23. ORDER PRONOUNCED IN THE OPEN COURT ON THE 27TH DAY OF APRIL, SD/- SD/- (R.P. TOLANI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.27.4.2012. HMS ITA NO2070/DEL/2011 14 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. (ITAT, NEW DELHI). ITA NO2070/DEL/2011 15