The Assistant Commissioner of Income Tax, Central Circle, Bellary V. M/s Shilpa Medicare Ltd., Raichur

MA 119/BANG/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3768 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-11-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 10-09-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S ANNAMALAI
• Section: 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B R BASKARAN , ACCOUNTANT MEMBER MP NO.119/BANG/2020 [IN ITA 1352/BANG/2015] ASSESSMENT YEAR : 2011 - 12 THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, B A LLAR I. VS. M/S SHILPA MEDICARE LTD., 10/80, 1 ST FLOOR, RAJENDRA GUNG, RAICHUR 584 102 PAN: AADCS 8788F APPELLANT RESPONDENT APPELLANT BY : SMT. R. P REMI , JCIT (DR), ITAT, BENGALURU. RESPONDENT BY : S. ANNAMALAI, A DVOCATE DATE OF HEARING : 23 . 1 0.2020 DATE OF PRONOUNCEMENT : 05 . 1 1 .2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS A MP FILED BY THE REVENUE PRAYING FOR RE CALLING THE ORDER OF TRIBUNAL DATED 6.2.2020 INSOFAR AS IT RELATES TO AY 2011-12 IN ITA NO. 1352/B/2015. 2. ONE OF THE ISSUES THAT AROSE FOR CONSIDERATION I N THE APPEAL BY THE ASSESSEE FOR AY 2011-12 WAS WITH REGARD TO THE ALLO WABILITY OF THE ASSESSEE FOR WEIGHTED DEDUCTION U/S 35(2AB) OF THE INCOME TAX ACT 1961 (THE ACT). SIMILAR ISSUE AROSE FOR CONSIDERATION IN THE ASSESSEES APPEAL FOR AY 2010-11 ALSO IN ITA NO.1351/BANG/2015. THE APPE ALS FOR AY 2010-11 AND 2011-12 WERE HEARD TOGETHER AND A COMMON ORDER WAS PASSED BY THE MP NO.119/B/2020 PAGE 2 OF 6 TRIBUNAL. ON THE ISSUE OF ALLOWING DEDUCTION U/S.3 5(2AB) OF THE ACT, THE TRIBUNAL CAME TO THE FOLLOWING CONCLUSION:- 7. GROUNDS 6 TO 10 RAISED BY ASSESSEE ARE WITH REG ARD TO REJECTION OF THE CLAIM OF ASSESSEE FOR GRANT OF WEI GHTED DEDUCTION U/S. 35(2AB) OF THE ACT. THE ADMITTED POSITION U/S . 35(2AB) OF THE ACT IS THAT APPROVAL OF PRESCRIBED AUTHORITY ON THE SCIENTIFIC RESEARCH ON IN HOUSE R&D FACILITY IS REQUIRED TO BE OBTAINED. IT IS ALSO THE ADMITTED POSITION THAT THE ASSESSEE OBTAIN ED THE APPROVAL FROM THE PRESCRIBED AUTHORITY W.E.F. 1.4.2011. THE ASSESSEE HAD MADE APPLICATION TO THE PRESCRIBED AUTHORITY FOR GR ANT OF APPROVAL ON 12.5.2011 AND THE DATE OF APPROVAL OF THE SCIENT IFIC RESEARCH BY THE PRESCRIBED AUTHORITY WAS 7.12.2011. IT WAS THE CASE OF AO THAT SINCE IN THE PREVIOUS YEAR RELEVANT TO AY 2010 -11, THE ASSESSEE HAD NOT EVEN MADE APPLICATION FOR GRANT OF APPROVAL TO THE PRESCRIBED AUTHORITY AND SINCE THE APPROVAL OF THE PRESCRIBED AUTHORITY IS ONLY W.E.F. 1.4.2011, THE DEDUCTION CA NNOT BE ALLOWED FOR AY 2010-11. THE ASSESSEE, HOWEVER, HAD PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CLARIS LIFESCIENCES LTD. [326 ITR 251 (GUJ)] WHEREIN THE H ONBLE HIGH COURT HELD THAT THE PROVISIONS OF SECTION 35(2AB) N OWHERE SUGGESTS OR IMPLIES THAT THE R&D FACILITY IS TO BE APPROVED FROM A PARTICULAR DATE OR THAT THE DATE OF APPROVAL ONLY W ILL BE THE CUT-OFF DATE FOR ALLOWABILITY OF WEIGHTED DEDUCTION. THE CIT(APPEALS) ON THIS ASPECT HELD AS FOLLOWS:- THE CONTENTS OF THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE ARE PERUSED AND CONSIDE RED. THE HON'BLE HIGH COURT OF GUJARAT HAS APPROVED IN- PRINCIPLE THAT CUT-OFF DATE FOR CLAIMING DEDUCTION UNDER SECTION 35(2AB) IS NOT THE DATE OF APPROVAL BY THE GOVERNMENT. IN THE INSTANT CASE, THE APPROVAL HAS B EEN RECEIVED DURING THE FY 2011-12, WHICH IS AFTER 2 YE ARS OF THE CURRENT AY. THE ASSESSEE IS INTO THE BUSINESS O F MANUFACTURING OF BULK DRUGS AND INTERMEDIARIES, WHI CH GO INTO PRODUCTION OF PHARMACEUTICAL PRODUCTS. IN THIS KIND OF INDUSTRY, RESEARCH AND DEVELOPMENT IS PART AND P ARCEL OF THE PRODUCTION AND WITHOUT WHICH SURVIVAL BECOME S DIFFICULT. THE APPELLANT'S ELIGIBILITY TO CLAIM THE DEDUCTION IS ALSO NOT IN DISPUTE, HOWEVER, WHAT IS UNACCEPTA BLE IS THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESP ECT OF THE CURRENT AY. WITHOUT RECEIVING APPROVAL DURING T HE MP NO.119/B/2020 PAGE 3 OF 6 YEAR. AS DISCUSSED ELSEWHERE, APPROVAL HAS BEEN REC EIVED BY THE ASSESSEE-COMPANY DURING THE PERIOD RELEVANT TO SUBSEQUENT AY 2012-13. OF COURSE, A DEDUCTION IS AL LOWED IN ASSESSMENT IN AY 2012-13. THE DECISION IN THE CA SE OF CLARIS LIFE SCIENCES, IS DISTINGUISHABLE FOR THE RE ASON THAT APPROVAL IN THAT CASE WAS RECEIVED DURING THE YEAR ITSELF. WHEREAS IN THE CASE ON HAND, AS SAID ABOVE, THE APP ROVAL IS RECEIVED NOT DURING THE CURRENT YEAR. IN THE CIRCUMSTANCES, I TAKE THE VIEW THAT THE APPELLANT I S NOT ELIGIBLE TO TAKE A DEDUCTION IN THE CURRENT AY. ACC ORDINGLY. I UPHOLD THE STAND OF THE AO IN DISALLOWING THE DEDUCTION. 8. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. THE LD. COUNSEL FOR THE ASSESSEE APART FROM RELY ING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CLARIS LIFE SCIENCE (SUPRA) FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SAND AN VIKAS (INDIA) PVT. LTD., 335 ITR 117 (DEL) LAYING DOWN ID ENTICAL PROPOSITION AND ALSO ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF BANCO PRODUCTS (I) LTD., 405 I TR 318 (GUJ). 10. WE HAVE PERUSED THE AFORESAID DECISIONS AND WE FIND THAT IN THE CASE OF CLARIS LIFESCIENCES (SUPRA), WEIGHTE D DEDUCTION WAS CLAIMED BY THE ASSESSEE IN AY 2001-02 AND THE A PPROVAL WAS RECEIVED IN THAT YEAR ITSELF. SIMILARLY IN THE CAS E OF SANDAN VIKAS (INDIA) PVT. LTD. (SUPRA), WEIGHTED DEDUCTION WAS CLAIMED IN AY 2005-06 AND THE APPLICATION WAS FILED BY THE ASSESS EE COMPANY ON 10.1.2005 I.E., DURING THE RELEVANT PREVIOUS YEA R. IN THE CASE OF BANCO PRODUCTS (I) LTD. (SUPRA), WEIGHTED DEDUCT ION WAS CLAIMED FOR AY 2008-09 AND APPLICATION TO THE PRESC RIBED AUTHORITY WAS MADE ON 22.12.2006, MUCH PRIOR TO THE PREVIOUS YEAR RELEVANT TO AY 2008-09. IT WAS IN THOSE CIRCU MSTANCES THAT THAT THE HIGH COURT TOOK THE VIEW THAT THE DATE OF RECOGNITION OR DATE OF APPROVAL IS IRRELEVANT, BUT THE EXISTENCE O F RECOGNITION OR APPROVAL IS SUFFICIENT TO GRANT DEDUCTION U/S. 35(2 AB). IN OUR VIEW, THE RATIO LAID DOWN IN THE AFORESAID DECISION CANNOT BE APPLIED TO THE CASE OF ASSESSEE. AS WE HAVE ALREAD Y MENTIONED THAT THE APPROVAL FOR GRANT OF RECOGNITION TO THE P RESCRIBED AUTHORITY WAS MADE BY THE ASSESSEE ONLY ON 12.5.201 1 AND NOT AT ANY TIME DURING THE RELEVANT PREVIOUS YEAR. IN THE GIVEN FACTS AND MP NO.119/B/2020 PAGE 4 OF 6 CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ORDER OF CIT(APPEALS) SHOULD BE UPHELD ON THIS BASIS. WE MAY ALSO MENTIO N A SIMILAR CLAIM HAS BEEN MADE BY THE ASSESSEE IN AY 2011-12 W HICH IS ALSO BEING DECIDED IN THIS COMMON ORDER AND IN THAT YEAR THE ASSESSEE WOULD BE ENTITLED TO THE BENEFIT OF DEDUCT ION U/S. 35(2AB) AS THE APPROVAL WAS RECEIVED ON 12.5.2011 D URING THE PREVIOUS YEAR RELEVANT TO AY 2011-12. WE WILL DIS CUSS THIS ISSUE WHILE DECIDING THE RELEVANT GROUND OF APPEAL FOR AY 2011- 12. AS FAR AS AY 2010-11 IS CONCERNED, WE ARE OF T HE VIEW THAT THERE IS NO MERIT IN GROUNDS NO.6 TO 10 AND CONSEQU ENTLY THEY ARE DISMISSED. 3. THE ABOVE PARAS OF THE TRIBUNALS ORDER DECIDES THE ISSUE FOR AY 2010-11. AS FAR AS THE ISSUE FOR AY 2011-12 IS CONC ERNED, THE TRIBUNAL ALLOWED THE DEDUCTION FOR THAT AY OBSERVING AS FOL LOWS:- 33. GROUND NOS.2 TO 6 ARE WITH REGARD TO GRANT OF WEIGHTED DEDUCTION TO THE ASSESSEE U/S. 35(2AB) OF THE ACT. WE HAVE ALREADY SEEN WHILE DECIDING IDENTICAL GROUND OF ASS ESSEE FOR AY 2010-11 THAT THE CLAIM OF ASSESSEE WAS REJECTED ONL Y BECAUSE OF THE APPROVAL OF THE PRESCRIBED AUTHORITY U/S. 35(2A B) OF THE ACT WAS EFFECTIVE ONLY FROM 1.4.2011. IN AY 2011-12 AL SO, THE REVENUE TOOK THE SAME STAND THAT THE APPROVAL WAS O BTAINED ONLY ON 7.12.2011 AND IT WAS VALID ONLY FROM 1.4.2011 TO 31.3.2012 RELEVANT TO AY 2012-13. 34. WE HAVE ALREADY HELD WHILE DECIDING IDENTICAL G ROUND FOR AY 2010-11 THAT THE DEDUCTION HAS TO BE ALLOWE D FOR AY 2011-12 BECAUSE THE APPLICATION FOR GRANT OF APPROV AL TO THE PRESCRIBED AUTHORITY WAS MADE BY THE ASSESSEE ON 12 .5.2011 I.E., DURING THE RELEVANT PREVIOUS YEAR. IN THE CIRCUMST ANCES, THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CLARIS LIFESCIENCES LTD. (SUPRA) AS WELL AS THE DECISION O F THE HONBLE DELHI HIGH COURT IN THE CASE OF SANDAN VIKAS (I) LT D. (SUPRA) WILL BE APPLICABLE. FOLLOWING THE AFORESAID DECISIONS, WE HOLD THAT THE ASSESSEE SHOULD BE ALLOWED WEIGHTED DEDUCTION U /S. 35(2AB) OF THE ACT FOR AY 2011-12. THUS, THE RELEVANT GROU NDS OF APPEAL ARE ALLOWED. MP NO.119/B/2020 PAGE 5 OF 6 4. IN THIS MP THE REVENUE HAS POINTED OUT THAT THE CONCLUSIONS OF THE TRIBUNAL FOR AY 2010-11 WAS THAT IF THE APPLICATION FOR GRANT OF APPROVAL IS MADE TO THE PRESCRIBED AUTHORITY DURING THE PREVIOU S YEAR, THEN THE DEDUCTION HAS TO BE ALLOWED EVEN THOUGH THE APPROVA L IS OBTAINED AT A LATER DATE. IF THIS ANALOGY IS APPLIED TO AY 2011-12, THE APPLICATION FOR APPROVAL WAS MADE ON 12.05.2011 WHICH IS AFTER THE END OF PR EVIOUS YEAR RELEVANT ASSESSMENT YEAR 2011-12. THE REVENUE HAS THEREFORE PRAYED THAT DEDUCTION U/S.35(2AB) OF THE ACT FOR AY 2011-12 ALS O OUGHT NOT TO HAVE BEEN GRANTED BY THE TRIBUNAL. 5. THE LD. DR REITERATED THE STAND OF THE REVENUE A S REFLECTED IN THE GROUNDS OF APPEAL. THE LD. COUNSEL FOR THE ASSESSEE , ON THE OTHER HAND, BROUGHT TO OUR NOTICE THAT THE APPROVAL U/S 35(2AB) OF THE ACT WAS OBTAINED ON 19.01.2011 AND THEREFORE THE CONCLUSIONS OF THE TRIBUNAL ALLOWING DEDUCTION FOR AY 2011-12 ARE CORRECT. IN THIS REGAR D OUR ATTENTION WAS DRAWN TO PAGE NO.36 OF PB, WHICH IS A RECOGNITION G RANTED BY THE APPROPRIATE AUTHORITY DATED 19.01.2011. THE LD. COU NSEL ACCORDINGLY POINTED OUT THAT THIS SHOULD BE THE PROPER DATE FOR CONSIDERING THE ASSESSES ALLOWABILITY FOR THE DEDUCTION U/S 35(2A B). HE POINTED OUT THAT THE DATE 12.05.2011 REFERRED TO IN THE ORDER OF TRI BUNAL IS THE DATE OF APPLICATION MADE BY THE ASSESSEE FOR ISSUE OF APPRO VAL IN FORM 3CM AND THIS IS NOT THE RELEVANT DATE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND ARE OF THE VIEW THAT DATE OF APPROVAL IS VERY CRUCIAL AND IN V IEW OF THE FACTS BROUGHT TO OUR NOTICE IN THE MP AND IN VIEW OF THE FACTS BROUG HT TO OUR NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE REGARDING THE CORRECT DATE OF APPROVAL OF THE PRESCRIBED AUTHORITY WHICH IS STATED TO BE 19.01.20 11, THE QUESTION WITH REGARD TO THE ALLOWABILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S 35(2AB) FOR AY 2011-12 NEEDS TO BE RE-ADJUDICATED AS THERE IS A MISTAKE APPARENT ON THE FACE OF THE RECORD IN TERMS OF NOTICING THE COR RECT DATE OF APPROVAL OF THE MP NO.119/B/2020 PAGE 6 OF 6 PRESCRIBED AUTHORITY U/S 35(2AB). THE DECISION OF T HE TRIBUNAL FOR AY 2010- 11 REJECTING THE APPEAL OF THE ASSESSEE FOR ALLOWIN G DEDUCTION U/S. 35(2AB) OF THE ACT WILL NOT BE AFFECTED IN ANY MANNER. HO WEVER, THE FINDINGS IN AY 2010-11 REGARDING DATE OF APPLICATION FOR GRANT OF APPROVAL AND DATE OF APPROVAL WILL BE ADJUDICATED AFRESH WHILE ADJUDICAT ING THE ISSUE OF DEDUCTION U/S. 35(2AB) OF THE ACT FOR AY 2011-12 WI THOUT BEING INFLUENCED IN ANY MANNER WHATSOEVER BY THE FINDINGS IN AY 2010 -11. WITH THESE OBSERVATIONS, WE RECALL THE ORDER OF THE TRIBUNAL I N ITA NO. 1352/B/15 DATED 06.02.2020 FOR THE LIMITED PURPOSE OF RE-ADJU DICATING THE GROUNDS 2 TO 6 RAISED BY THE ASSESSEE IN THAT APPEAL WHICH IS WI TH REGARD TO THE GRANT OF DEDUCTION U/S 35(2AB) OF THE ACT. ACCORDINGLY, THE REGISTRY IS DIRECTED TO FIX THE APPEAL FOR HEARING IN DUE COURSE. 7. IN THE RESULT, THE MISCELLANEOUS APPLICATION IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF NOVEMBER, 2020. SD/- SD/- ( B R BASKARAN ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 5 TH NOVEMBER, 2020. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.