Torrent Pharmaceutical Ltd., Ahmedabad V. ACIT, Circle-4(1)(2), Ahmedabad

MA 67/AHD/2022

AI Insights

The case involves Torrent Pharmaceuticals Ltd., which filed Miscellaneous Applications seeking rectification of a common order that had previously allocated R&D expenses to its Baddi Unit for the purpose of claiming deductions under Section 80IC of the Income Tax Act. The Tribunal had initially not directed the deletion of these disallowances. However, upon review and consideration of the judgment by the Hon'ble Gujarat High Court, which clarified that R&D expenses should not be allocated to industrial units eligible for deductions under Section 80IC, the Tribunal rectified its order. The Tribunal's decision affects the assessment years 2009-10 to 2012-13, correcting the allocation of R&D expenses and directing the Assessing Officer to recompute the deductions accordingly.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125632 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-01-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 28-08-2022
• Other Referred Cases: assessee's own case reported in 88 taxmann.com 530
• Laws Referred To: Section 80IC of the Act, Section 35(2AB) of the Act, Section 35(iv) of the Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Capital expenditure
• Section: 139; 80IC; 80IC; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER M. A . N os . 6 5 t o 68 / Ah d/ 20 22 ( I n I TA N o s . 12 8 5 & 12 8 6/ A hd/ 2 01 7 & I T A No s. 13 9 6 & 1 3 9 7 /A h d /2 0 1 8) ( A s s e ss me nt Y ea r s : 2 0 09 - 1 0 to 2 01 2- 1 3) T o rr e n t P h a rm ac e ut i c a ls L t d . Tor r e nt H o u s e Of f . A s h r a m R oa d Ah me da bad 3 80 0 0 9 बनाम/ V s. AC I T , Cir c l e- 4( 1 )( 2) , Ah me da b ad थायी लेखा सं./जीआइआर सं./P A N / G I R N o . : A A A C T 5 4 5 6 A (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Vartik Chokshi, A.R. यथ क ओर से/Respondent by : Shri V. K. Mangla, Sr. D.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 13/01/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 17/03/2023 O R D E R PER Ms. MADHUMITA ROY - JM: The instant Miscellaneous Applications have been filed by the assessee seeking rectification of the common order dated 22.02.2022 passed by us in ITA Nos. 1285 & 1286/Ahd/2017 (assessee) and ITA Nos. 1327 & 1328/Ahd/2017 (Revenue) for A.Y. 2009 and 2010-11 & ITA No. 1396 & 1397/Ahd/2018 (assessee) and ITA No. bearing 1414 & 1415/Ahd/2018 for A.Y. 2011-12 and 2012-13. - 2 - MA Nos. 65 to 68/Ahd/2022 Torrent Pharmaceuticals Ltd. Vs. ACIT Asst.Years – 2009-10 to 2012-13 M.A. No. 65/Ahd/2022 (A.Y. 2009-10) 2. The finding given by us in Ground No.3 and corresponding additional Ground No.1 relating to A.Y. 2009-10 on the issue of ‘allocation of R&D expenditure to the Baddi Unit being an eligible unit for deduction under Section 80IC of the Act is the subject matter for rectification. In Paragraph Nos. 25.3 at Page No.27 of the order dated 22.02.2022, we made the following observation: “25.3. In that view of the matter, we do not hesitate to hold that R&D expenditure is need not to be allocated to Baddi Unit as the case made out by the assessee are to be viewed this particular fact of not extending any research work by the said unit, and no benefit thereof was being rendered by it. In view of the matter, we delete the impugned addition of Rs.36,16,40,065/- disallowed by the ld.AO. Hence the ground of appeal of the assessee is allowed.” 3. The additional ground taken by the assessee in the said appeal for A.Y. 2009- 10 reads as follows: “3. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the appellant company's relevant ground of appeal that from out of the total development cost incurred by the appellant company for the products to be sold in domestic as well as international market, only the portion of development cost pertaining to the products to be sold in domestic market should be allocated to Baddi Unit for the purposes of Section 80-IC as the said unit is solely engaged in the manufacturing products to be sold in the domestic market, in spite of the fact that the appellant company wrongly considered total development cost for allocating to Baddi unit while filing the return of income.” 4. The relevant fact in regard to the issue is this that the appellant company incorrectly considered development cost allocated to Baddi Unit while filing of return. By way of the additional ground filed by the assessee consideration of the judgment passed by the Hon’ble Jurisdictional High Court in assessee’s own case was sought for whereby and whereunder it was held that no R&D expenditure included development cost and capital expenditure claimed under Section 35(2AB) or 35(iv) of the Act should be allocated to industrial units eligible for deduction under Section - 3 - MA Nos. 65 to 68/Ahd/2022 Torrent Pharmaceuticals Ltd. Vs. ACIT Asst.Years – 2009-10 to 2012-13 80IC of the Act. This ground of appeal was admitted by us upon perusal of the entire facts of the matter and the order passed by the Jurisdictional High Court in assessee’s own case reported in 88 taxmann.com 530 filed before us. The relevant portion whereof is as follows: “8.1 It is not in dispute that research centre is an independent centre and that its main object is to conduct research for the business of the assessee. The research centre, therefore, in our opinion, is not directly linked with the eligible undertaking. Thus, for the purpose of computing deduction u/s.80HH and 80I, profit from eligible undertaking is to be computed on the basis of gross income by reducing expenditure which has been incurred for the eligible undertaking out of the gross income derived from the industrial undertaking. In view of the aforesaid, question no.(A) is answered in favour of the assessee and against the Revenue.” 5. While passing order, no direction to delete the disallowance made by the assessee suo motto by apportionment of R&D cost to the tune of Rs.33,92,52,691/- as per return filed by the assessee was given. We find that such mistake is, therefore, to be rectified. The operative Paragraph No. 25.3 should be read as follows: “In that view of the matter, we do not hesitate to hold that R&D expenditure is need not to be allocated to Baddi Unit as the case made out by the assessee are to be viewed this particular fact of not extending any research work by the said unit, and no benefit thereof was being rendered by it. In view of the matter, we delete the impugned addition of Rs.36,16,40,065/- disallowed by the ld.AO. The allocated R&D expenses to Baddi Unit made by the assessee suo motto while filing return of income to the tune of Rs.33,92,52,691/- is also required to be deleted in view of the order passed by the Hon’ble Gujarat High Court as discussed hereinabove. Thus, we direct the Ld. AO to delete the R&D expenses allocated to the said Baddi Unit of Rs.33,92,52,691/- made by the assessee. He is accordingly directed to work out deduction under Section 80IC of the Act disregarding any allocation of R&D expenses to Baddi Unit. Both the grounds of appeal and the additional ground raised by the appellant is, thus, disallowed.” - 4 - MA Nos. 65 to 68/Ahd/2022 Torrent Pharmaceuticals Ltd. Vs. ACIT Asst.Years – 2009-10 to 2012-13 6. Order dated 22.02.2022 passed in ITA No.1285/Ahd/2017 is, therefore, modified to the above extent and be affected and read accordingly. M.A. No. 66/Ahd/2022 (A.Y. 2010-11) 7. The assessee seeking to rectify the order on the similar ground that has already been dealt with by us in M.A. No. 65/Ahd/2022 for A.Y. 2009-10, whereby and whereunder inadvertently the necessary direction for deletion of R&D expenses allocated by the assessee while filing the return of income has not been given to the Ld. AO. 8. We have also gone through the Ground Nos. 7 & 8 raided in ITA No. 1286/Ahd/2017 which reads as follows: “7. On the facts and in the circumstances of the case, the learned CIT(A) erred in rejecting the Additional Ground raised by the assessee company that research and development expenses should not be allocated to Baddi unit on the basis of turnover. 8. Without prejudice to the above, on the facts and in the circumstances of the case, the learned CIT(A) erred in considering the appellant company's alternative ground of appeal that from out of the total development cost incurred by the appellant company for the products to be sold in domestic as well as international market, only the portion of development cost pertaining to the products to be sold in domestic market should be allocated to Baddi Unit for the purposes of Section 80-IC, as the said unit is solely engaged in the manufacturing products to be sold in the domestic market, in spite of the fact that the appellant company wrongly considered total development cost for allocating to Baddi unit while filing the return of income.” 9. We find that at paragraph 105 of Page No. 77 we have granted identical relief to the assessee has already been granted by us for A.Y. 2009-10 at Paragraph No. 25.3, however, considering the identical facts and circumstances of the case, the relief granted by us in the instant rectified order in respect of M.A. No. - 5 - MA Nos. 65 to 68/Ahd/2022 Torrent Pharmaceuticals Ltd. Vs. ACIT Asst.Years – 2009-10 to 2012-13 65/Ahd/2022 for A.Y. 2009-10, the order is modified and Paragraph No. 105 should be read as under: “The issue raised by the assessee in the particular ground of appeal is identical to that of the ground preferred by the assessee as Ground No.3 for A.Y. 2010-11 and the additional ground made in ITA No.1285/Ahd/2017 for A.Y. 2009-10. Considering the identical facts and circumstances of the case, the order rectified by us as above in Paragraph No.25.3 for A.Y. 2009-10 shall also be applied for the year under consideration i.e. for A.Y. 2010-11. The deduction under Section 80IC of the Act shall be worked out by the Ld. AO without any allocation to the R&D expenses to Baddi Unit. This ground of appeal is, therefore, allowed.” 10. Order dated 22.02.2022 passed in ITA No.1286/Ahd/2017 is, thus, modified to the extent above and be affected and read accordingly. M.A. No. 67/Ahd/2022 (A.Y. 2011-12) 11. Since, the assessee is seeking rectification of the identical mistake found in the order for A.Y. 2011-12 & 2012-13 in M.A. Nos. 67 & 68/Ahd/2022 considering the identical facts of the case, we modify Paragraph No.140 at Page No.91 of ITA No.1396/Ahd/2018 for A.Y. 2011-12 to the following effect: “140. At the outset we note that the issue raised by the assessee in its ground of appeal for the AY 2011-12 is identical to the issue raised by the assessee vide ground no. 3 in ITA No. 1285/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1285/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2011-12. In fact, the appeal of the assessee for the assessment 2009-10 has been decided by us vide modified - 6 - MA Nos. 65 to 68/Ahd/2022 Torrent Pharmaceuticals Ltd. Vs. ACIT Asst.Years – 2009-10 to 2012-13 Paragraph No. 25.3 as above of this order in its favour. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2011-12. Hence, the ground of appeal filed by the assessee is allowed.” 12. Accordingly, the Tribunal order dated 22.02.2022 passed in ITA No.1396/Ahd/2018 is, thus, modified to the extent above and be affected and read accordingly. M.A. No. 68/Ahd/2022 (A.Y. 2012-13) 13. Since, the assessee is seeking rectification of the identical mistake found in the order for A.Y. 2012-13 in M.A. No.68/Ahd/2022 considering the identical facts of the case, we modify Paragraph No. 193 at Page No.110 of ITA No.1397/Ahd/2018 for A.Y. 2012-13 to the following effect: “193. At the outset we note that the issue raised by the assessee in its grounds of appeal for the AY 2012-13 is identical to the issue raised by the assessee vide ground no. 3 in ITA No. 1285/AHD/2017 for the assessment year 2009-10. Therefore, the findings given in ITA No. 1285/AHD/2017 shall also be applicable for the year under consideration i.e. AY 2012-13. In fact, the appeal of the assessee for the assessment 2009-10 has been decided by us vide modified paragraph No. 25.3 as above of this order in favour of assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the ground of appeal filed by the assessee is allowed. - 7 - MA Nos. 65 to 68/Ahd/2022 Torrent Pharmaceuticals Ltd. Vs. ACIT Asst.Years – 2009-10 to 2012-13 14. Accordingly, the Tribunal order dated 22.02.2022 passed in ITA No.1397/Ahd/2018 is, thus, modified to the extent above and be affected and read accordingly. 15. In the result, all Miscellaneous Applications filed by the assessee are allowed. This Order pronounced on 17/03/2023 Sd/- Sd/- (WASEEM AHMED) ( MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 17/03/2023 True Copy S. K. SINHA आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A). 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ!धकरण, अहमदाबाद / ITAT, Ahmedabadition 11.2019Date on which is placed