DCIT, New Delhi V. M/s Ozone Pharmaceuticals Pvt. Ltd., New Delhi

ITA 3863/DEL/2009

• Counselvise Citation: 386320114 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: DR RAKSH GUPTA
• Keywords: Gift; Depreciation; Opportunity of being heard; Additional evidence; Corroborative evidences; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI EFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO.3863/DEL/09 ASSTT. YR: 2006-07 DCIT, CIR. 13(1), VS. M/S OZONE PHARMACEUTICALS PVT. LTD., NEW DELHI. 1, LSC, BLOCK A-3, JANAK PURI, NEW DELHI.-110058. PAN/GIR NO. AAACO0056H ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI R. S. NEGI SR. DR RESPONDENT BY: DR. RAKSH GUPTA ADV. O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DAT ED 30-6-2009 RELATING TO A.Y. 2006-07. FOLLOWING GROUNDS ARE RAI SED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING TH E ADDITION OF RS. 1,19,81,395/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF PART OF SALES PROMOTION AND INCENT IVE EXPENSE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING TH E ADDITION OF RS. 42,35,278/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF PART OF RESEARCH AND DEVELOPMENT EXPENSES BY ADMITTING ADDITIONAL EVIDENCE WITHOUT CALLING FO R A REPORT FROM THE AO AS REQUIRED UNDER RULE 46A OF THE IT RU LES, 1962. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING TH E ADDITION 2 OF RS. 10,120/- MADE BY THE AO ON ACCOUNT OF DISALL OWANCE OF EXCESS DEPRECIATION CLAIMED IN RESPECT OF UPS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING TH E ADDITION OF RS. 14,52,484/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF PART OF TRAVELING EXPENSES. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD. CIT(A) ERRED IN DELETING TH E ADDITION OF RS. 5,60,009/- MADE BY THE AO ON ACCOUNT OF DISA LLOWANCE OF DEDUCTION CLAIMED U/S 80-IC OF THE IT ACT, 1961 . 2. BRIEF FACTS ARE: THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND SALE OF ALLOPATHIC AS WELL AS AYURVEDIC MEDICINES AT BADDI (HIMACHAL PRADESH) AND GAUHATI (ASSAM). ASSESSEES BUSINESS PROFITS ARE EL IGIBLE FOR DEDUCTION U/S 80-IB OF THE I.T. ACT. IN THE YEAR UNDER CONSIDERAT ION ASSESSEE DECLARED INCOME ON THE BASIS OF BOOK PROFITS AS COMPUTED U/S 115JB. ACCORDING TO ASSESSEE, THOUGH ALL THE RELEVANT DETAILS WERE FILE D, HOWEVER, AO IN AN ARBITRARY MANNER MADE AD HOC DISALLOWANCE ACROSS TH E BOARD IN RESPECT OF ABOVE EXPENSES. ASSESSEES ALTERNATE PLEA THAT THE DISALLOWANCES RESULTED IN INCREASE OF THE ELIGIBLE PROFITS U/S 80-IB, THEREF ORE, THE ABOVE DISALLOWANCE DID NOT BRING INTO ANY SURPLUS TAXABLE INCOME, WAS DENIED. 2.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEF ORE CIT(A), WHERE THE RESPECTIVE DISALLOWANCES WERE DELETED BY FOLLOWING OBSERVATIONS: (I) SALES PROMOTION/ INCENTIVE EXPENSES (RS. 1,19,81,39 5/-): I HAVE GONE THROUGH THE OBSERVATIONS OF THE AO AS CONTAINED IN THE ASSESSMENT ORDER AND ALSO THE SUBM ISSIONS OF THE APPELLANT FILED DURING THE COURSE OF ASSESSM ENT PROCEEDINGS AS WELL AS AT THE TIME OF APPELLATE PRO CEEDINGS AND THE VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. IT IS SEEN THAT THE APPELLANT HAS INCURR ED THESE EXPENSES UNDER THE HEAD 'SALES PROMOTION AND INCENT IVES 3 EXPENSES'. THESE EXPENSES HAVE BEEN INCURRED FOR BU SINESS PROMOTION, COMMISSION TO C & F AGENTS, ANNUAL AWARDS TO THE SALES STAFFS, CONVEYANCE AND TRAVELLING, PUBLIC ITY, SALES CONFERENCE, TRAINING, AND BONUS OFFER, FREE ISSUES, BAG FOR FIELD STAFFS, BREAKAGE AND EXPIRY. ALL THESE EXPENS ES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOS ES. AS REGARDS THE AO'S OBSERVATIONS THAT FOR SOME SMALL A MOUNTS OF THE EXPENSES; THE APPELLANT COULD NOT PRODUCE BI LLS AT THE TIME OF THE ASSESSMENT PROCEEDINGS AND A LARGE NUMB ER OF CASH VOUCHERS OF SMALL AMOUNTS WERE PRODUCED, THE APPELLANT HAS SUBMITTED THAT IT HAS GOT ALL INDIA P RESENCE AND MORE THAN 500 SALES REPRESENTATIVES ARE WORKING FOR IT. THEY VISIT EVERY PART OF INDIA FOR HOLDING CONFERENCES A ND MEETINGS WITH DEALERS. FOR THIS PURPOSE, THEY HAVE TO INCUR TELEPHONE EXPENSES, TAXI EXPENSES AND OTHER LOCAL T RAVELLING EXPENSES .. FOR WHICH NO BILLS ARE ISSUED AND SUCH TYPES OF EXPENSES ARE REIMBURSED TO THE FIELD STAFFS AGAINST SELF MADE VOUCHERS IN CASH. THERE ARE VARIOUS OTHER EXPENSES INCURRED BY C & F AGENTS FOR WHICH BILLS ARE NOT POSSIBLE AND SUCH EXPENSES ARE REIMBURSED BY WAY OF CASH AGAINST SELF MADE VOUCHERS. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT SPECIFICALLY POINTED OUT AS TO WHICH EXPENS ES ARE BOGUS AND RIOT INCURRED FOR BUSINESS PURPOSES. HE H AS SIMPLY STATED THAT FOR SOME SMALL AMOUNTS OF EXPENSES, BIL LS WERE NOT PRODUCED AND LARGE NUMBER OF CASH VOUCHERS WERE PRODUCED. ON THE BASIS OF THESE OBSERVATIONS, THE A O HAS DOUBTED THE GENUINENESS OF THE EXPENSES INCURRED UN DER THIS HEAD; MERELY, ON THE BASIS OF DOUBT OR SUSPICIOUS, HOWSOEVER IT MAY BE STRONG, NO EXPENSES CAN BE DISA LLOWED UNLESS IT IS PROVED OTHERWISE. IT IS SEEN THAT THE AO HAS NOT BROUGHT ANYTHING ON RECORD WHICH CAN SHOW THAT THES E EXPENSES WERE NOT INCURRED FOR BUSINESS PURPOSES. S IMPLY, BECAUSE THE EXPENSES WERE INCURRED IN CASH, IT CANN OT BE HELD THAT THESE WERE NOT INCURRED WHOLLY AND EXCLUS IVELY FOR BUSINESS PURPOSES. INCURRING EXPENSES IN CASH MAY B E THE NECESSITY OF THE BUSINESS WHILE TRAVELING AWAY FROM THE HEADQUARTERS BY THE FIELD STAFF FOR THAT THE APPEL LANT CANNOT BE PUT INTO DISADVANTAGEOUS POSITION. FURTHER, THE APPELLANT IS ENTITLED FOR 100% DEDUCTION U/S 80-IC OF THE I.T . ACT ON THE PROFIT EARNED FROM GAWAHATI UNIT AND @ 30% U/S 4 80IB/C FOR BADDI UNIT, THEREFORE, THE APPELLANT WAS NOT GETTING ANY ADVANTAGE OR BENEFIT BY INFLATING SUCH EXPENSES. IN VIEW OF THE ABOVE, I AGREE WITH .THE C ONTENTION OF THE APPELLANT THAT ALL EXPENSES INCURRED UNDER THE HEAD 'SALES PROII1OTIONAND INCENTIVE EXPENSES' WERE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AND NO PART OF IT WAS FOR THE PERSONAL BENEFIT. THEREFORE, THE ADDITIONS MADE BY THE AO OF RS. 1,19,81,395/- IS DELETED. II. RESEARCH & DEVELOPMENT EXPENSES ( RS. 42,35,278 /-): I HAVE GONE THROUGH THE OBSERVATIONS OF THE AO AS CONTAINED IN THE ASSESSMENT ORDER AND ALSO THE SUBMISSIONS OF THE APPELLANT FILED DURING THE COURSE OF ASSESSMENT PRO CEEDINGS AS WELL AS AT THE TIME OF APPELLATE PROCEEDINGS. IT IS SEEN THAT THE APPELLANT HAS INCURRED RS. 84,70,557/ - TOWARDS RESEARCH AND DEVELOPMENT. OUT OF THAT AN AMOUNT. OF RS. 42,3 5,278/- WAS DISALLOWED STATING THAT 'SUCH EXPENSES WERE NOT INCURRED IN LAST YEAR. THE APPELLANT HAS STATED THAT IT IS E NGAGED IN THE BUSINESS OF PHARMACEUTICALS PRODUCTS AND IT NEEDS R ESEARCH AND DEVELOPMENT WORK-OF VARIOUS MEDICINES TO IMPROV E THE QUALITY OF THE PRODUCT AND TO DEVELOP NEW FORMULATI ONS FOR THAT IT HAS ESTABLISHED A LABORATORY AT 639-640,M.L E. BAHADURGARH, HARYANA AFTER TAKING THE SAID- BUILDIN G ON RENT- FROM M/S SEAGULL DRUGS PVT. LTD. THIS BUILDING WAS TAKEN ON RENT FOR A PERIOD OF TWO YEARS ALONG WITH EQUIPMENT S AND FURNITURE AND FIXTURES- INSTALLED THEREIN. THE COPY OF THE RENT .- AGREEMENT FILED BEFORE ME AND PLACED ON RECORD.' THE APPELLANT HAS ALSO FILED COPIES OF THE ACCOUNTS OF THE CHEMICAL PURCHASED, GENERATOR EXPENSES AND COPIES OF THE PUR CHASE BILLS OF CHEMICALS USED IN THE LABORATORY AND ALSO INVOICE RAISED BY UNIVERSITY OF NOTERDAME TO WHOM 95,000 DO LLARS I.E. RS. 42,47,450/- HAVE BEEN PAID AS TUITION FEE FOR TEACHING AND EDUCATING STAFFS OF M/S OZONE PHARMACEUTICALS AT. BAHADURGAH, HARYANA , BADDI, GAUHATI UNIT IN THE AREA OF DIAGNOSTIC TECHNIQUE FOR DRUG DEVELOPMENT, BEFORE A O AS WELL AS BEFORE ME. ALL THESE DOCUMENTS SHOW THAT T HE APPELLANT COMPANY HAS INCURRED EXPENSES UNDER THE H EAD 'RESEARCH AND DEVELOPMENT'. IT IS ALSO SEEN THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS NOT DENIED OR P ROVE THAT NO RESEARCH AND DEVELOPMENT ACTIVITIES WERE CARRIED OUT BY THE APPELLANT. THE AO WAS NOT JUSTIFIED IN DISALLOW ING 50LYO.OF RESEARCH AND DEVELOPMENT EXPENSES SIMPLY B ECAUSE NO SUCH EXPENSES WERE. CLAIMED IN THE .. EARLIER YE ARS. WHEN APPELLANT- HAS PROVED THAT IT HAS TAKEN A LABORATOR Y BUILDING ON RENT ALONG WITH FURNITURE AND LABORATORY EQUIPME NTS, 5 PURCHASED CHEMICALS, TAKEN SERVICES OF EXPERTS TO IMPROVE THE DIAGNOSTIC TECHNIQUE AND HIR ED PROFESSIONALS FOR CARRYING OUT RESEARCH AND DEVELOP MENT ACTIVITIES, SUCH EXPENSES CANNOT BE DISALLOWED. THE REFORE, THE ADDITION OF RS. 42,34,278/- MADE BY THE AO IS DELETED. III. EXCESS DEPRECIATION ON UPS (RS. 10,120/-): UPS WERE HELD TO BE ELIGIBLE FOR DEPRECIATION @ 60% . IV. TRAVELLING EXPENSES (RS. 14,52,484/-): I HAVE CONSIDERED THE OBSERVATION OF THE ASSESSING OFFICER AND THE SUBMISSION MADE BY THE APPELLANT DURING THE COURSE OF APPELLANT PROCEEDINGS. IT IS SEEN THAT THERE IS AN INCREASE IN THE TURNOVER FROM RS. 45 CRORES TO RS. 58 CRORES DU RING THE YEAR. THE BUSINESS OPERATION OF THE APPELLANT IS SP READ ALL OVER INDIA. IT IS ALSO SEEN THAT THE AO HAS NOT BRO UGHT ANYTHING ON RECORD WHICH COULD PROVE THAT THE EXPEN DITURE INCURRED UNDER THIS HEAD WAS NOT GENUINE AND NOT IN CURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. HE HA S SIMPLY DISALLOWED BECAUSE THE TRAVELING EXPENSES HAS GONE UP FROM 1.71% OF THE TOTAL TURNOVER TO 1.96% OF THE TOTAL T URNOVER DURING THE YEAR; THERE IS NO FIXED PARAMETERS FOR A LLOWING EXPENSES UNDER ANY HEAD. THE EXPENSES MAY VARY FROM YEAR TO YEAR; IT MAY BE LESS OR MORE. ALL THESE FACTS DE PEND ON THE NECESSITY OF THE BUSINESS. THE AO CANNOT SIT ON THE APPELLANTS CHAIR AND DECIDE HOW IT SHOULD CONDUCT ITS BUSINESS. THE DISALLOWANCE MADE BY THE AO IS PURELY ON SUSPICIOUS AND WITHOUT BRINGING ANYTHING ON RECORD. IT HAS BEEN HELD IN THE CASE OF DHAKESHWARI COTTON MILLS L TD. 26 ITR 775 (SC) WHEREIN IT IS THAT AO IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL AT ALL. THEREFORE, MUST BE MORE THAN BARE SUSPICION TO SUPPORT AN ASSESSMENT. V. DISALLOWANCE OF DEDUCTION U/S 80-IC (RS. 5,60,00 9/-): IN VIEW OF THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT' AND VARIOUS JUDGMENTS CITED BY THE APPELLANT, I HOL D THAT APPELLANT IS ENTITLED FOR DEDUCTION U/S 80IB/C OF THE IT ACT, 1961, ON MERITS AND SAME CANNOT BE DENIED ON THE TE CHNICAL GROUND THAT THE REPORT WAS NOT FILED ALONG WITH THE RETURN OF INCOME. I, THEREFORE, DIRECT THE AO TO ALLOW THE DE DUCTION U/S 80-IB/C OF THE ACT FOR BADDI UNIT FOR RS. 5,60,009/- . AS REGARD THE GAUHATI UNIT, THE APPELLANT HAD FILED AU DIT REPORT CLAIMING DEDUCTION OF RS. 3,90,09,915/ - BEFORE AO AND THE 6 SAME HAS BEEN ALLOWED BY HIM AND THE CLAIM MADE BY THE APPELLANT THAT IT HAD MADE CLAIM OF HIGHER DEDUCTIO N OFRS.3,91,77,0511- BY FILING THE REVISED AUDIT REPO RT BEFORE AO AS WELL AS BEFORE ME, IT IS SEEN FROM THE CASE R ECORD AND SUBMISSIONS FILED BEFORE ME THAT NO SUCH REPORT HA S BEEN FILED BY THE APPELLANT NEITHER BEFORE AO NOR BEFORE ME. THE ONLY REPORT IN FORM NO. 1 OCCB FILED BEFORE AO IS OF THE CLAIM OF RS. 3,90,09,915/-, WHICH HAS BEEN ALLOWED BY THE AO. THEREFORE, THE CLAIM OF THE APPE LLANT OF HIGHER DEDUCTION U/S 80-IB/C N FOR GAUHATI UNIT IS NOT SUPPORTED BY ANY AUDIT REPORT OR DOCUMENTS. AS SUCH , THE CLAIM OF THE APPELLANT FOR GAUHATI UNIT FOR FURTHER DEDUCTION IS REJECTED. 3. AGGRIEVED, REVENUE IS BEFORE US. 4. LD. DR RELIED ON THE ORDER OF AO. IN RESPECT OF GROUND NO. 2 I.E. RESEARCH & DEVELOPMENT EXPENSES, IT IS PLEADED THAT THE CIT(A) ENTERTAINED ADDITIONAL EVIDENCE WITHOUT GIVING AO A N OPPORTUNITY ON THIS ADDITIONAL EVIDENCE. THIS BEING SO, THE ISSUE MAY B E SET ASIDE AND RESTORED BACK TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFTE R AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE AO, AS HELD BY HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MANISH BUILD WELL PVT. LTD. (ITA NO. 928/2011 DECIDED ON 15-11-2011). 5. LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, VEHEMENTLY ARGUES THAT AOS ALLEGATION THAT ASSESSEE DID NOT FILE AN Y SUPPORTING EVIDENCE IN RESPECT OF CLAIM OF THESE EXPENSES, IS FACTUALLY IN CORRECT. THE EXPENDITURE ON SALES PROMOTION CANNOT BE 90% GENUINE AND 10% NO N-GENUINE. AO HAS ARBITRARILY ADOPTED AN AD HOC APPROACH DISREGARDING THE FACT THAT ASSESSEES BOOKS OF ACCOUNTS ARE AUDITED AND COVERE D BY REGULATORY NORMS OF FOOD & DRUG ADMINISTRATION. WITHOUT POINTING OUT ANY SPECIFIC DEFICIENCY IN ANY EXPENDITURE AND MERELY ON GENERAL ASSUMPTIONS, THE EXPENDITURE HAS BEEN DISALLOWED ON AD HOC BASIS. 7 5.1. APROPOS SALES PROMOTION EXPENSES, IT IS PLEADE D THAT AO HAS WRONGLY OBSERVED THAT ASSESSEE COULD NOT PRODUCE BI LLS FOR VARIOUS SMALL CASH VOUCHERS IN RESPECT OF FREE GIFTS, CONFERENCE EXPENSES, INCIDENTAL EXPENSES ETC. IN A.Y. 2004-05. THEREFORE, 10% OF EN TIRE EXPENDITURE WAS DISALLOWED. WHILE MAKING DISALLOWANCE AO HAS NOT QU OTED INSTANCES OF ASSTT. YEAR IN QUESTION. IT IS POINTED OUT THAT THI S DISALLOWANCE IN A.Y. 2004-05 WAS DELETED BY CIT(A) AND THE ITAT HAS DISM ISSED THE DEPARTMENTAL APPEAL. 5.2. APROPOS GROUND NO. 2 I.E. R & D EXPENSES, LD. COUNSEL CONTENDS THAT NO NEW EVIDENCE WAS FURNISHED BEFORE CIT(A). T HE AMOUNT IN QUESTION ON RESEARCH & DEVELOPMENT COMPRISED OF TH E LEASE RENT PAID TO THE LESSOR OF THE BUILDING M/S SEAGULL DRUGS PVT. L TD. AND FEE PAID TO UNIVERSITY OF NOTERDAME FOR ITS ENGAGEMENT IN THE R ESEARCH & DEVELOPMENT PLAN OF THE ASSESSEE, THUS THE ENTIRE E XPENDITURE WAS FOR THE PURPOSE OF RESEARCH & DEVELOPMENT. IT IS SURPRISING THAT AO ALLOWED 50% EXPENDITURE ON THE RESEARCH & DEVELOPMENT. THUS, HA LF OF THE LESE RENT & FEE TO UNIVERSITY OF NOTERDAME WAS HELD TO BE VERIF IABLE AND HALF NOT VERIFIABLE. THE FACT THAT ASSESSEE INCURRED THIS RE SEARCH & DEVELOPMENT EXPENSES IS ACCEPTED BY AO. ONLY THE LEASE DEED IN RESPECT OF PREMISES WAS PRODUCED BEFORE THE CIT(A), WHICH COULD NOT BE CALLED A NEW EVIDENCE, INASMUCH AS THE LEASE RENTAL, NAME OF THE LESSOR AND OTHER DETAILS WERE ALREADY INCORPORATED IN THE BOOKS OF ACCOUNTS WHICH IS NOT DENIED BY AO. THE DISALLOWANCE IS GROSSLY ARBITRARY AND HAS BEEN RIGHTLY DELETED BY CIT(A). 5.3. IN RESPECT OF UPS DEPRECIATION, IT IS PLEADED THAT BY NOW IT IS SETTLED 8 THAT UPS IS ELIGIBLE DEPRECIATION @ 60%. 5.4. APROPOS GROUND NO. 4 IT IS PLEADED THAT ALL TH E DETAILS ABOUT TRAVELING EXPENSES WERE FILED BEFORE AO AND CIT(A) HAS RIGHTLY HELD THAT AO CANNOT DISALLOW THE EXPENDITURE ONLY BECAUSE PER CENTAGE OF TRAVELING EXPENSES HAS GONE UP. THIS MAY BE DUE TO SEVERAL F ACTORS I.E. INCREASE IN THE COST OF TRAVELING, FREQUENCY OF TRAVELING ETC. AO HAS MERELY COMPARED GENERAL PERCENTAGE OF TRAVELING EXPENDITURE AND WIT HOUT POINTING ANY SPECIFIC INSTANCE, AD HOC DISALLOWANCE HAS BEEN MAD E. THE SAME BEING ARBITRARY AND UNJUST, HAS BEEN RIGHTLY DELETED BY C IT(A). 5.5. APROPOS GROUND NO. 5, I.E. DEDUCTION U/S 80-IC , LD. COUNSEL CONTENDS THAT FOR BADDI UNIT, ASSESSEE FILED THE RE VISED AUDIT REPORT IN FORM NO. 10CCB DURING THE COURSE OF APPEAL PROCEEDINGS. RELIANCE IS PLACED ON ITAT DELHI BENCH E ORDER DATED 21-4-2011 IN THE C ASE OF MRS. MANJU KAPOOR DALMIA VS. ITO (2011) 140 TTJ (DEL)(UO), WHE RE IT HAS BEEN HELD THAT FILING OF AUDIT CERTIFICATE IS DIRECTORY IN NATURE AND CAN BE FILED DURING THE COURSE OF APPEAL PROCEEDINGS. THEREFORE, CIT(A) WAS JUSTIFIED IN ALLOWING THE ASSESSEES CLAIM U/S 80-IC. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H THE ENTIRE MATERIAL AVAILABLE ON RECORD. APROPOS GROUND NO. 1, IN RESPECT OF SALES PROMOTION AND INCENTIVE EXPENSES, WE SEE NO INFIRMI TY IN THE ORDER OF CIT(A). AO WITHOUT POINTING OUT ANY SPECIFIC DISALL OWABLE INSTANCE IN RESPECT OF SALES PROMOTION AND INCENTIVE EXPENSES W AS UNJUSTIFIED IN DISALLOWING 10% ON AD HOC BASIS RELYING ON 2004-05 ORDER. THE ADDITION WAS DELETED BY CIT(A) IN A.Y. 2004-05, WHICH ORDER WAS UPHELD BY 9 ITAT. IN VIEW THEREOF, WE UPHOLD THE ORDER OF CIT(A ) AND REJECT REVENUES GROUND NO. 1. 6.1. APROPOS GROUND NO. 2 IN RESPECT OF RESEARCH & DEVELOPMENT EXPENSES, IN OUR VIEW, NO ADDITIONAL EVIDENCE HAS B EEN ADMITTED BY CIT(A). THE ASSESSEE HAD INCORPORATED ALL THE DETAI LS ABOUT RENT AND MERELY RELIANCE ON LEASE DEED BY CIT(A) CANNOT BE Q UESTIONED. THE FACT THAT 50% EXPENDITURE HAS BEEN ACCEPTED BY AO, ITSEL F INDICATES THAT RENT DETAILS WERE AVAILABLE BEFORE HIM FOR DISALLOWANCE OF BALANCE 50%, NO REASONS ABOUT GENUINENESS OR UNREASONABLENESS ARE G IVEN BY AO.. TAKING INTO ACCOUNT ALL THESE FACTS, WE SEE NO INFIRMITY I N THE ORDER OF CIT(A) DELETING THE ADDITION IN QUESTION, EVEN IF THE LESE AGREEMENT IS IGNROED. GROUND IS DISMISSED. 6.2. APROPOS GROUND NO. 3, REGARDING DEPRECIATION O N UPS, THE ORDER OR CIT(A) BEING IN CONFORMITY WITH ITAT ORDERS IN OTHE R CASES, HOLDING HIGHER RATE OF DEPRECIATION OF 60% ON COMPUTER PERI PHERALS SUCH AS UPS, PRINTERS, SCANNERS, MODEM ETC., WE SEE NO REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THE ISSUE IN QUESTION. GROUND FAILS. 6.3. APROPOS GROUND NO. 4 REGARDING TRAVELING EXPEN SES ALSO WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) IN DELETING THE AD DITION, THERE BEING NO MATERIAL BROUGHT BY THE AO FOR MAKING THE AD HOC DI SALLOWANCE. THE ORDER OF CIT(A) IS UPHELD. GROUND IS DISMISSED. 6.4. APROPOS GROUND NO. 5 REGARDING DEDUCTION U/S 8 0-IC, THE CIT(A) IN ALLOWING DEDUCTION U/S 80-IB/C FOR BADDI UNIT AT RS . 5,60,009/-, ASSESSEE 10 HAS RELIED ON HONBLE MADRAS HIGH COURT JUDGMENT. B ESIDES, ASSESSEE HAS FILED REVISED AUDIT REPORT IN FORM NO. 10CCB. ITAT IN THE CASE OF MRS. MANJU KAPOOR DALMIA (SUPRA), HAS HELD THAT FILING O F AUDIT CERTIFICATE IS DIRECTORY IN NATURE AND CAN BE FILED DURING THE COU RSE OF APPEAL PROCEEDINGS. WE SEE NO INFIRMITY IN THE ORDER OF CI T(A) ON THE ISSUE IN QUESTION AND UPHOLD THE SAME. GROUND IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16-03-2012. SD/- SD/- (K.D. RANJAN ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16-03-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 11