DCIT, CHENNAI V. Shasun Pharmaceuticals Ltd., CHENNAI

ITA 799/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90501 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-05-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 02-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DAS GUPTA IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Transfer pricing; Retrospective amendment; Competent authority; Revenue expenditure; Capital expenditure
• Section: 80HHC; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A. NO.799/MDS/2014 ( / ASSESSMENT YEAR : 2003 -2004 ) THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI. ( %& /APPELLANT) VS M/S. SHASUN PHARMACEUTICALS LTD, (FORMERLY M/S. SHASUN CHEMICALS & DRUGS LTD) NO.3, DORAISWAMY ROAD, T. NAGAR, CHENNAI 600 017. [PAN: AAACS 5031L] ( '(%& /RESPONDENT) / APPELLANT BY : SHRI. S. DAS GUPTA, IRS, JCIT. / RESPONDENT BY : SHRI. S. SRIDHAR, ADVOCATE. /DATE OF HEARING : 26.05.2015 !' /DATE OF PRONOUNCEMENT : 19.06.2015 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNAI, D ATED 29.11.2013 FOR THE ASSESSMENT YEAR 2003-2004. I.T.A.NO.799/MDS/2014. :- 2 -: 2. THE FIRST GROUND IN THIS APPEAL IS THAT THE COMMISS IONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE ASSESSI NG OFFICER TO DELETE THE DISALLOWANCE OF SHARE ISSUE EXPENSES OF @4,55,1 89/- TO BE AMORTIZED U/S.35D OF THE INCOME TAX ACT. 3. AFTER HEARING BOTH THE SIDES, A SIMILAR ISSUE CAME UP FOR OUR CONSIDERATION IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 1999- 2000 IN JURISDICTIONAL HIGH COURT IN T.C. NO.1415 OF 2007 AND TCA NO.48 OF 2008, INTERALIA, IT WAS HELD THAT 15. BY APPLYING THE PRINCIPLE LAID DOWN IN THE AFORESAID DECISIONS, PARTICULARLY IN AGRO CARGO TRA NSPORT LTD CASE, ONE HS TO COME TO A CONCLUSION THAT THERE IS NO PARTICULARS WITH REGARD TO THE EXPENDITURE INCURRED BY THE ASSESSEE TO CLAIM DEDUCTION AND FURTHER THE EXPENDI TURE INCURRED BY THE ASSESSEE IS TO BE TREATED AS A CAPI TAL EXPENDITURE AND NOT AS A REVENUE EXPENDITURE. THE DECISION F THE ASSESSING OFFICER IS ALSO LIABLE TO BE CONFIRMED FOR ANOTHER REASON. IN THE APPEALS BEFOR E THE COMMISSIONER OF INCOME-TAX AND THE TRIBUNAL, BOTH T HE AUTHORITIES HAVE NOT GONE INTO THE MERITS OF THE CA SE OR PERUSED THE MATERIALS TO SHOW THE EXPENDITURE INCUR RED BY THE ASSESSEE. ON THE OTHER HAND, BOTH THE AUTHORIT IES BY SIMPLY STATING THAT THE CLAIM OF THE ASSESSEE FOR T HE PREVIOUS ASSESSMENT YEARS HAD BEEN ALLOWED, THE CLA IM OF THE ASSESSEE. IF THE APPELLATE AUTHORITY OR THE T RIBUNAL WOULD HAVE GONE INTO THE MERITS OF THE CASE AND PER USED THE MATERIAL, THEY WOULD HAVE COME TO A REASONABLE CONCLUSION. SINCE BOTH THE AUTHORIZES HAVE NOT DECI DED THE MATTER ON MERITS AND, IN THE LIGHT OF THE AFORESAID DECISIONS, THE FINDING OF THE ASSESSING OFFICER HAS TO BE CONFIRMED. 4. RESPECTFULLY, FOLLOWING THE ABOVE DECISION OF THE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE, THIS GROUND OF T HE REVENUE IS ALLOWED. I.T.A.NO.799/MDS/2014. :- 3 -: 5. THE NEXT GROUND IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE ADDITION OF DEPRECIATION OF @1,74,55,191/- ON THE BASIS OF FINAL OPENING WDV RELYING UPON THE DECISION OF ITAT IN TH E ASSESEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 IN ITA NO.553/ MDS/2006, DATED 06.07.2007. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE COMMISSIONER OF INCOME TAX (APPEALS) GA VE DIRECTION TO THE ASSESSING OFFICER TO RECOMPUTE THE DEPRECIATION ON THE BASIS OF WRITTEN DOWN VALUE AFTER GIVING EFFECT TO THE TRIBU NAL ORDER IN ASSESSEES OWN CASE IN ITA NO.553/MDS/2006 FOR THE ASSESSMENT YEAR 2002-03 VIDE ORDER DATED 06.07.2007. BEING SO, WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS). THIS GROUND OF THE REVENUE IS REJECTED. 7. THE NEXT GROUND IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ELI GIBLE FOR DEDUCTION U/S.80HHC ON THE ISSUE OF ADJUSTMENT OF NEGATIVE PR OFIT AND ALSO ON THE ISSUE OF CONSIDERATION OF EXPORT INCENTIVES WIT HOUT APPLICATION OF ELIGIBILITY CONDITIONS IN THE 3 RD AND 4 TH PROVISO TO SEC 80HHC (3) OF THE I.T. ACT AND ALLOW DEDUCTION ACCORDINGLY. I.T.A.NO.799/MDS/2014. :- 4 -: 8. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICE R IN DENYING DEDUCTION U/S.80HHC OF @3,42,13,823/- ON THE GROUN D THAT THE COMPUTATION OF PROFIT CLAIMED BY THE ASSESSEE U/S.8 0HHC IS A NEGATIVE FIGURE. THE ASSESSING OFFICER HAD ALSO OBSERVED TH AT 90% OF THE FOLLOWING AMOUNTS HAD TO BE EXCLUDED FOR THE PURPOS E OF EDUCATION U/S.80HHC. MISCELLANEOUS RECEIPTS : @ 24,34,000/- INSURANCE CLAIM : @2,38,52,650/- PROFITS ON SALE OF ASSETS : @ 9,91,000/- EXCHANGE GAIN : @ 23,68,000/- PROVISIONS WRITTEN BACK : @ 8,18,000/- THE ASSESSING OFFICER HAS ALSO OBSERVED THAT EXCISE DUTY AND SALES TAX OF @.3,83,22,737/- HAS BEEN INCLUDED FOR ARRIVING A TOTAL TURNOVER FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S.80HHC. AGGRIEVED, THE ASSESSEE WENT ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 9. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THIS ISSUE OF ADJUSTMENT OF THE NEGATIVE PROFIT WITH 90% OF THE EXPORT INCENTIVES, THE SUPREME COURT OF I NDIA IN THE CASE OF IPCA LABORATORY REPORTED IN 256 ITR 521 HELD THAT THE I.T.A.NO.799/MDS/2014. :- 5 -: DEDUCTION SHOULD BE COMPUTED AFTER ADJUSTMENT OF NEGA TIVE PROFIT WITH THE 90% OF THE EXPORT INCENTIVES IN PRO PORTION OF THE EXPORT TURNOVER TO THE TOTAL TURNOVER. SUBSEQUENTLY , FIFTH PROVISO WAS INSERTED BY TAXATION LAWS (AMENDMENT) A CT, 2005 W.R.E.F. 1.4.1992 TO SUB-SEC (3)OF 80HHC WHEREIN IT WAS PROVIDED THAT THE LOSS WAS NECESSARILY REQUIRED TO B E SET OFF AGAINST THE 90% OF THE EXPORT INCENTIVES IN PROPORTI ON OF THE EXPORT TURNOVER TO THE TOTAL TURNOVER. MEANWHILE, S EVERAL ASSESSEES' FILED WRIT PETITION BEFORE HON'BLE MADRA S HIGH COURT AND ALSO OTHER COURTS CHALLENGING THE INSERTION OF T HE THIRD AND FOURTH PROVISOS TO SEC 80HHC(3) OF THE I.T.ACT. REGAR DING THE VALIDITY OF THE INSERTION OF THE THIRD AND FOURTH P ROVISO TO SEC 80HHC, ON THE DIRECTION OF SUPREME COURT OF INDIA, THE GUJARAT HIGH COURT HEARD THE ISSUE AT LENGTH, CONSIDERED VA RIOUS DECISIONS OF THE APEX COURT INCLUDING THE CASES OF TOPMAN EXPORTS REPORTED IN 342 ITR 49 (SC), IPCA LABORATORY LTD V. DCIT REP ORTED IN 266 ITR 521 (SC) ON THE ISSUE OF TAXABILITY OF DEPB AND ALLOWABILIT Y OF DEDUCTION U/S.80HHC AND PASSED AN ORDER DATED 02.07 .2012 WHICH WAS REPORTED IN 348 ITR 391 IN THE CASE OF AVANI EXPORTS & OTHERS V. COMMISSIONER OF INCOME-TAX, RAJKOT AND OT HERS . THE OPERATIONAL PARAS 26 & 27 OF THE DECISION OF THE HON'BLE GUJARAT I.T.A.NO.799/MDS/2014. :- 6 -: HIGH COURT IN THE CASE OF M/S. AVANI EXPORTS AND OTHERS VS. CIT REPORTED IN 348 ITR 391 IS REPRODUCED HEREWITH: ' ON CONSIDERATION OF THE ENTIRE MATERIALS ON RECO RD, WE, THEREFORE FIND SUBSTANCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE PETITIONERS THAT THE IMPUGNED AMENDMENT IS VIOLATIVE FOR ITS RETROSPECTIVE OPERATION IN ORDER TO OVERCOME THE DECISION OF THE TRIBUNAL, AND AT THE SAME TIME, FOR DEPRIVING THE BENEFIT EARLIER GRANTED TO A CLASS OF THE ASSESSEES WHOSE ASSESSMENTS WERE STILL PENDING ALTHOUGH SUCH BENEFIT WILL BE AVAILABLE TO THE ASSESSEES WHOSE ASSESSMENTS HAVE ALREADY BEEN CONCLUDED. IN OTHER WORDS, IN THIS TYPE OF SUBSTANTIVE AMENDMENT, RETROSPECTIVE OPERATION CAN BE GIVEN ONLY IF IT IS FOR THE BENEFIT OF THE ASSESSEE BUT NOT IN A CASE WHERE IT AFFECTS EVEN A FEWER SECTION OF THE ASSESSEES. WE, ACCORDINGLY, QUASH THE IMPUGNED AMENDMENT ONLY TO THIS EXTENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN EFFECT FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF EARLIER ASSESSMENT YEARS OF THE ASSESSEES WHOSE EXPORT TURNOVER IS ABOVE 10 CRORE. IN OTHER WORDS, THE RETROSPECTIVE AMENDMENT SHOULD NOT BE DETRIMENTAL TO ANY OF THE ASSESSEES 9.1 THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERV ED THAT THE APEX COURT IN THE CASE OF IPCA LABORATORY LTD (SUPR A) ALSO HELD THAT THE LOSS RESULTING IN THE COMPUTATION OF 80HHC OF THE I.T. ACT SHALL BE ADJUSTED AGAINST THE PROFIT OF THE EXPORT INCENTIVES IN PROPORTION OF THE EXPORT TURNOVER TO THE TOTAL TURN OVER. THE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS (SUPRA) ALSO ALLOWED THE CLAIM OF DEDUCTION OF 80HHC ON THE ISSUE OF DEP B SALES. RESPECTFULLY FOLLOWING THE DECISION OF THE GUJARAT HIGH COURT IN THE I.T.A.NO.799/MDS/2014. :- 7 -: CASE OF AVANI EXPORTS (SUPRA), AND APEX COURT DECIS IONS IN THE CASES OF IPCA LABORATORY LTD (SUPRA), TOPMAN EXPORT S (SUPRA), THE COMMISSIONER OF INCOME TAX (APPEALS) OF THE CONSIDE RED VIEW THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 80HHC ON THE ISSUE OF ADJUSTMENT OF NEGATIVE PROFIT AND ALSO ON THE ISSUE OF CONSIDERATION OF THE EXPORT INCENTIVES AND ALLOWED THE GROUND. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US 10. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPE ALS) RELIED ON THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF M/S. AVANI EXPORTS & OTHERS 348 ITR 391, AND THE DECISION OF THE GUJARAT HIGH COURT HAS NOT BECOME FINAL AND THE DEPARTMENT HAS P REFERRED AN SLP WHICH IS PENDING BEFORE THE SUPREME COURT. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE DECISION OF THE TRIBUNAL RELIED UPON BY THE COMMISSIONER OF INCOME TAX (APPE ALS) IN ITA NO.1633/MDS/2006, DATED 19.11.2007 IN THE ASSESSEE S OWN CASE HAS NOT BECOME FINAL AND THE DEPARTMENT HAD PREFERRED A N APPEAL BEFORE THE HIGH COURT OF MADRAS. 11. ON THE OTHER HAND, THE LD. AUTHORISED REPRESENTATI VE FOR ASSESSEE SUBMITTED THAT IS ISSUE IS SQUARELY COVERE D BY THE JUDGMENT I.T.A.NO.799/MDS/2014. :- 8 -: OF GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS & OTHERS 348 ITR 391 . 12. WE HAVE BOTH THE PARTIES AND PERUSED THE MATERIAL O N RECORD. AS DISCUSSED IN PARA NO.9 OF THIS ORDER, THE GUJARAT H IGH COURT IN THE CASE OF AVANI EXPORTS & OTHERS (CITED SUPRA) QUASHED THE AMENDMENT MADE BY THE TAXATION LAW AND (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 1998 BY WAY OF ADDING SECOND, THIRD, FOURTH AND FIFTH PROVISO TO SECTION 80HHC (3), ONLY TO THE EXT ENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN EFFECT FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF EARLIER ASSESSMENT YEARS OF THE ASSESSEES WHO EXPORT TURNOVER IS ABOVE @10 CRORES. SINCE, IN THE PRESENT CASE, THE ASSESSMENT YEAR INVOLVED IS 2003- 04, BEING SO, THE ISSUE OF AMENDMENT HAS NO CONSEQUENCE TO THE ASSESS EES CASE. ACCORDINGLY, WE UPHOLD THE FINDING OF THE COMMISSIO NER OF INCOME TAX (APPEALS) ON THIS ISSUE. THIS GROUND IS REJECTED. 13. THE NEXT GROUND FOR OUR CONSIDERATION IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT EXCE PT COMMISSION RECEIPT OTHER AMOUNTS ARISE OUT OF MANUFACTURE AND EXPORT ACTIVITY TO BE CONSIDERED FOR THE PURPOSE OF COMPUTATION OF BOO K PROFIT U/S.115JA AND 115JB IN RELATION TO DEDUCTION U/S.80HHC. I.T.A.NO.799/MDS/2014. :- 9 -: 14. THIS GROUND OF THE REVENUE IS MISPLACED AS THIS GRO UND WAS NOT ADJUDICATED BY THE COMMISSIONER OF INCOME TAX (APPE ALS) AND THE ASSESSEE HAS NOT PRESSED THE SAME. IN OTHER WORDS, THIS GROUND OF THE ASSESSEE IS ALSO DISMISSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS NOT PRESSED. HENCE, THIS GROUND IS DIS MISSED AS INFRUCTUOUS . 15. THE NEXT GROUND IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ELI GIBLE FOR @70,65,156/- AND NOT FOR WEIGHTED PORTION OF THE CLAIM OF @35,32 ,578/- U/S.35(2AB) RELYING UPON THE DECISION BY THE TRIBUNAL IN ITA NO .949/MDS/2005 FOR THE ASSESSMENT YEAR 1999-2000. 16. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICE R DENIED THE CLAIM OF DEDUCTION U/S.35(2AB) OF @11,70,43,544/- O N THE GROUND THAT THE OFFICIAL COPY OF THE COMMUNICATION IN FORM NO.3 CL ISSUED BY THE MINISTRY OF SCIENCE AND TECHNOLOGY WAS NOT RECEIVED . THEREFORE, THE ASSESSING OFFICER PASSED ORDER U/S.154 DATED 07.11. 2006 ALLOWING DEDUCTION U/S.35(2AB) OF @10,64,45,810/- ON THE BAS IS OF THE APPROVAL GIVEN BY DSIR AND BALANCE AMOUNT OF @1,05,97,734/- WAS DISALLOWED. AGGRIEVED, THE ASSESSEE WENT ON APPEAL BEFORE THE C OMMISSIONER OF INCOME TAX (APPEALS). I.T.A.NO.799/MDS/2014. :- 10 -: 17. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE INC URRENCE OF EXPENDITURE OF @70,65,156/- BUT ONLY DISALLOWED ON ACCOUNT OF THE APPROVAL NOT GRANTED BY THE COMPETENT AUTHORITY AT WEIGHTED PERECENTED. THE ASSESSING OFFICER HAS ALSO NOT DIS PUTED THE NATURE OF THE EXPENDITURE. THE SEC 35(1) PROVIDES FOR DEDUCT ION OF EXPENDITURE OTHER THAN THE CAPITAL EXPENDITURE LAID OUT OR EXPE NDED ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS. THE NATURE OF TH E EXPENSES CLAIMED ARE LIKE CIVIL WORK INCLUDING REFURNISHING OF FLOOR , PAINTING WORK, CARPENTRY WORK, GENERAL HOUSEKEEPING, GARDENING, FA LSE CEILING, CLEANING DOOR, REPAIRING, SALARY PAID TO PERSONAL I N R & D UNIT WHOSE SERVES ASSOCIATED ENTERPRISE IN ADMINISTRATIVE IN N ATURE, SECURITY GUARD EXPENSES, INTEREST EXPENSE ETC. THE EXPENSES ARE E SSENTIALLY INCURRED FOR REPAIR AND MAINTENANCE OF EXISTING R&D FACILITY AND FOR GENERAL UPKEEPING OF THE R &D UNIT WHICH WAS SUBJECT TO INS PECTION BY VARIOUS AUTHORITIES LIKE US FDA ETC. AND NOT FOR CONSTRUCTI ON OF NEW BUILDING OR EXTENSION OF THE EXISTING BUILDING. EVEN OTHERWISE , THESE EXPENSES ARE ALLOWABLE U/S.37 OF THE I.T. ACT, 1961. LOOKING AT THE NATURE OF THE EXPENSES CLAIMED BY THE ASSESSEE, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE VIEW OF THE ASSESSEE HAD IN CURRED AN EXPENDITURE OF @70,65,156/- AS REVENUE EXPENDITURE AND RESPECTFULLY I.T.A.NO.799/MDS/2014. :- 11 -: FOLLOWING DECISION OF THE TRIBUNAL IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR IN ITA NO.949/2005 DATED 04.04.2007 , COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE APPEAL OF THE A SSESSEE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE COMMISSIONER OF INCOME TAX (APPEALS) HA S FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.949/2005, DATED 04.04.2007 , WHEREIN HELD THAT 3. HAVING HEARD THE RIVAL CONTENTIONS AND GOING THROUGH THE CASE RECORDS, IT IS OBSERVED THAT THE A SSESSING OFFICER AS WELL AS THE COMMISSIONER OF INCOME TAX (APPEALS) HAS REPEATED THE SAME MISTAKE. IT IS SEE N THAT THE ASSESSEE IS ENTITLED TO CLAIM FOR DEDUCTION ON SCIENTIFIC RESEARCH UNDER SEC.35(2AB) OF THE ACT BUT THE LOWER AUTHORITIES HAVE RESTRICTED THE REVENUE EXPENDITURE TO THE EXTENT OF 128.38 LAKHS AND CAPITAL EXPENDITURE OF 28.82 LAKHS RESTRICTED TO 26.50 LAKHS. THE LD. COUNSEL FOR THE ASSESSEE FILED A COPY OF SCIENTIFIC EXPENDITURE AS CERTIFIED BY THE MINISTRY OF SCIENCE & TECHNOLOGY, DEPARTMENT OF SCIENTIFIIC & INDUSTRIAL RESEARCH , NEW DELHI WHERE BY THE COMPLETE DETAILS REGARDING TOTAL ELIGIBLE R & D EXPENDITURE UNDER SEC.35(2AB) OF THE ACT IS GIVEN. THE RELEVANT PART FROM THE CERTIFICATE IS REPRODUCED AS IT IS: ( IN LACS) SL. NO A.Y. 1998-99 A.Y. 1999-2000 A.Y. 2000-2001 I. CAPITAL EXPENDITURE (LAND AND BUILDING) --- --- --- II ELIGIBLE CAPITAL EXPENDITURE (OTHER THAN LAND AND BUILDING) 29.82 28.82 78.41 III ELIGIBLE RECURRING EXPENDITURE 101.53 126.06 156.46 I.T.A.NO.799/MDS/2014. :- 12 -: IV TOTAL ELIGIBLE R & D 131.35 154.88 234.87 V AMOUNT RECEIVED IN CASH & KIND --- --- 35.33 VI TOTAL ELIGIBLE R & D EXPENDITURE U/S.35(2AB) 131.35 154.88 201.54 THE ELIGIBLE RECURRING EXPENDITURE IS 126.06 LAKHS WHEREAS ELIGIBLE CAPITAL EXPENDITURE IS 28.82 LAKHS THEREBY TOTALLY ELIGIBLE RESEARCH AND DEVELOPMENT EXPENDITURE IS 154.88 LAKHS. IT SEEMS THAT THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER OF IN COME TAX (APPEALS) HAS COMMITTED A MISTAKE IN PRINCIPLE. HO WEVER, BOTH THE PARTIES AGREED THAT IT IS AN ALLOWABLE EXPENDITURE . IN VIEW OF THIS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER SHOULD A MEND THE ORDER TO THAT EFFECT AND ALLOW THE CLAIM OF THE ASSESSEE AMO UNTING TO ,2.90 LAKHS AND RECALCULATE THE INCOME. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 19. RESPECTFULLY, FOLLOWING THE ABOVE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE, THIS GROUND OF THE REVENUE IS DISMISSED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.799/MDS/2014 IS PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 19 TH DAY OF JUNE, 2015, AT CHENNAI. SD/- SD/- ( . ! ) V. DURGA RAO ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ /CHENNAI. %& /DATED:19.06.2015. KV &' () *) /COPY TO: 1. + APPELLANT 2. / RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. )-. / /DR 6. .0 1 /GF. I.T.A.NO.799/MDS/2014. :- 13 -: