Ind Bro Research & Breeding Farms Pvt.Ltd., Hyderabad V. ACIT, Circle-2(1), Hyderabad

ITA 810/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1476 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMANA RAO
• Assessee Lawyers: K NEERAJA
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 810/HYD/2012 ASSESSMENT YEAR: 2005-06 M/S IND BRO RESEARCH & BREEDING FARMS PVT. LTD., APPELLANT CIRCLE 1, WARANGAL VS. ASST. COMMISSIONER OF INCOME-TAX, RESPONDENT CIRCLE 2(1), HYDERABAD APPELLANT BY : SMT. K. NEERAJA RESPONDENT BY : SHRI RAMANA RAO DATE OF HEARING : 31/12/2012 DATE OF PRONOUNCEMENT : 24/01/ 2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-III, HYDERABAD, DATED 16 TH MARCH, 2012 FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED ITS RETURN OF INCOME FOR THE AY 2005-06 ON 01/11/2005 DECLARING NET INCOME OF RS. 8,44,142/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S 147 OF TH E ACT ON 31/12/2010 BY THE AO BY DISALLOWING DEDUCTION U/ S 2 ITA NO. 810/HYD/2012 IND BRO RESEARCH & BREEDING FARMS P. LTD. 35(2AB) OF RS. 15,98,048/- AND ADDITIONAL DEDUCTION U/S 35(2AB) OF RS. 6,13,588/- CLAIMED BY THE ASSESSEE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNISH A COPY OF THE LETTER ISSUED BY GOVERNMENT OF INDIA, MINISTRY OF SCIENCE & TECHN OLOGY, DEPT. OF SCIENCE INDUSTRIAL RESEARCH, NEW DELHI, FO R CLAIMING DEDUCTION U/S 35(2AB). IN REPLY, THE ASSES SEE FILED A REPLY STATING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED AND FILED A COPY OF THE LETTER ISSUED BY T HE GOVERNMENT OF INDIA, MINISTRY OF SCIENCE & TECHNOLO GY, DEPT OF SCIENTIFIC INDUSTRIAL RESEARCH, NEW DELHI D ATED 10/09/2004 FOR RECOGNITION OF THE COMPANYS R&D UNI T UPTO MARCH, 2006. AFTER VERIFICATION OF THE SAME, T HE AO FOUND THAT AS PER THE PROVISIONS OF SECTION 35(2AB) , PRESCRIBED AUTHORITY FOR APPROVING THE SAID IN-HOU SE R&D UNIT IS SECRETARY LEVEL TO THE GOVERNMENT OF INDIA . THEREFORE, THE AO ASKED TO FURNISH INFORMATION AS T O WHETHER ANY DELEGATED POWERS TO THE DESIGNATED SCIE NTIST G FOR THE PURPOSE OF ISSUING APPROVAL FOR IN-HOUS E R&D UNIT. 4. SINCE THE ASSESSEE FAILED TO FURNISH THE COPY OR CLARIFICATION IN SUPPORT OF THE DEDUCTION CLAIM U/S 35(2AB), THE AO OPINED THAT THE ASSESSEE DID NOT FULFILL TH E CONDITIONS AS REQUIRED OF GETTING APPROVAL FROM THE 3 ITA NO. 810/HYD/2012 IND BRO RESEARCH & BREEDING FARMS P. LTD. PRESCRIBED AUTHORITY. ACCORDINGLY, THE AO DISALLOWE D THE DEDUCTION CLAIMED BY THE ASSESSEE AND ADDED THE SAM E TO THE INCOME OF THE ASSESSEE. THE CIT(A) ALSO HELD TH AT THE ASSESSEE FAILED TO FULFILL THE CONDITIONS TO CLAIM DEDUCTION U/S 35(2AB) AND ALSO U/S 35(1)(I) OF THE ACT AND, H ENCE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IS DISM ISSED. 5. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(A)-III, HYDERABAD I S ERRONEOUS BOTH IN LAW AND ON FACTS OF THE CASE. 2. THE LEARNED CIT(A) MISDIRECTED HERSELF IN APPRECIATING BOTH LEGAL AND FACTUAL POSITIONS IN RESPECT OF THE CLAIM OF THE APPELLANT FOR DEDUCTION OF RS. 15,98,048/- U/S 35(1)(I) OF THE ACT. 3. THE LEARNED CIT(A) FAILED TO NOTE THAT THE APPELLANT CHARGED THE EXPENDITURE ON RESEARCH AND DEVELOPMENT OF RS. 15,98,048/- DIRECTLY TO THE PROF IT AND LOSS ACCOUNT WHICH IS NOTHING BUT A CLAIM U/S 35(1)(I). 4. THE LEARNED CIT(A) OUGHT NOT TO HAVE REJECTED TH E APPELLANTS CLAIM FOR THE ABOVE DEDUCTION ON THE BA SIS OF POINTS WHICH ARE NOT RELEVANT TO THE POINT AT IS SUE. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING, THE APPELLANT PRAY S THAT THE CLAIM OF DEDUCTION OF THE AMOUNT OF RS. 15,98,048/- U/S 35(1)(I) MAY KINDLY BE ALLOWED. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SMT. K. NEERAJA FILED ADDITIONAL GROUNDS OF APPEAL, WHIC H ARE AS FOLLOWS: 1. THE AO HAS DISALLOWED THE ACTUAL RESEARCH AND DEVELOPMENT EXPENDITURE INCURRED OF RS. 4 ITA NO. 810/HYD/2012 IND BRO RESEARCH & BREEDING FARMS P. LTD. 15,98,048/- AND ADDITIONAL DEDUCTION OF RS. 6,13,588/- U/S 35(2AB) OF THE IT ACT, BUT FAILED T O ALLOW THE ACTUAL EXPENDITURE OF RS. 15,98,048/- INCURRED AS A DEDUCTION U/S 35(1)(I) OF THE IT ACT . 2.THE AO SHOULD NOT HAVE DISALLOWED THE CLAIM OF TH E ASSESSEE U/S 35(2AB) OF THE IT ACT, LOSING SIGHT OF THE INTENTION OF THE LEGISLATURE. 7. THE LEARNED COUNSEL INVITED OUR ATTENTION TO PAG ES 2 & 3 OF THE PAPER BOOK, WHICH ARE STATEMENT OF COMPU TATION OF TOTAL INCOME WHERE AGAINST INCOME UNDER DOMESTIC BUSINESS OF THE ASSESSEE IN RESPECT OF R&D EXPENDIT URE THE SUM OF RS. 6,13,588/- APPEARS AT PAGE 2. FURTHER, AT PAGE 3 IN THE P&L A/C UNDER THE HEAD EXPENDITURE RESEARCH AND DEVELOPMENT EXPENSES AT RS. 15,98,048/ - HAS BEEN CLAIMED BY THE ASSESSEE. 8. ON THE OTHER HAND, THE LEARNED DR MR. RAMANA RAO RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE REVENUE AUTHORITIES DISALL OWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE FAILED TO FURNISH THE COPY OR CLARIFICATION IN SUPP ORT OF THE DEDUCTION CLAIM U/S 35(2AB) AND ALSO U/S 35(1)(I). BEFORE US, THE LEARNED COUNSEL FILED STATEMENT OF COMPUTAT ION OF TOTAL INCOME WHEREIN UNDER INCOME FROM DOMESTIC BUSINESS THE ASSESSEE HAS SHOWN THE EXPENDITURE INC URRED 5 ITA NO. 810/HYD/2012 IND BRO RESEARCH & BREEDING FARMS P. LTD. IN RESPECT OF R& D EXPENDITURE OF RS. 6,13,588/- AN D IN THE PROFIT & LOSS ACCOUNT UNDER THE HEAD EXPENDITUR E THE ASSESSEE HAS SHOWN RESEARCH AND DEVELOPMENT EXPENDITURE OF RS. 15,98,048/-. IN THESE CIRCUMSTAN CES, WE RESTORE THE ISSUE BACK TO THE FILE OF THE AO TO VERIFY THE CLAIM MADE BY THE ASSESSEE AND THEREAFTER DECIDE TH E ISSUE AS TO WHETHER THE SAME IS ALLOWABLE U/S 35(2AB)/35(1)(I) OF THE ACT. THE ASSESSEE IS DIRECT ED TO FURNISH THE DOCUMENTS AS REQUIRED BY THE AO IN SUPP ORT OF ITS CLAIM. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2013. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAV AN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 24 TH JANUARY, 2013 KV 6 ITA NO. 810/HYD/2012 IND BRO RESEARCH & BREEDING FARMS P. LTD. COPY TO:- 1) M/S IND BRO RESEARCH & BREEDING FARMS PVT. LTD. PLOT NO. 157, H.NO.2-4-113, 19 TH CROSS ROAD, SNEHAPURI COLONY, NAGOLE VILLAGE, HYDERABAD 500 035. 2) ACIT, CIRCLE 2(1), HYDERABAD 3) THE CIT (A)-III, HYDERABAD 4) THE CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.