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2018 (11) TMI 1591 - ITAT DELHIEnhancement of income made by CIT (A) u/s 251(1)(a) - tax the entire gross receipts as the income of the appellant by disallowing entire revenue expenditure debited to Profit & Loss Account - HELD THAT:- Expenditure considered in notice of enhancement by Ld.CIT (A) had been subjected to the process of assessment. Merely because assessment order is silent about this item and there is no discussion thereupon, would not mean that Assessing Officer had not considered it. We draw our support from assessment order, wherein assessee was required to furnish details of expenses and receipt which were examined by Ld.AO on test check basis. Issuance of notice of enhancement under section 251(1) of the Act, and applying ratio laid down by Hon’ble Supreme Court and various High Court to facts of present case, we are of considered opinion that, enhancement notice has been issued on an issue which was subject matter during assessment proceedings, details of which are already placed on record by assessee itself. We thus hold that Ld.CIT (A) has rightly exercised powers under section 251 (1) of the Act. Disallowance of expenditure holding it to be capital in nature - CIT(A) disallowed entire expenditure by holding that research activity carried on by assessee has resulted in enduring benefits to assessee - test of enduring benefit - HELD THAT:- As observed expenditure incurred by assessee is in its normal course of business. Further, it is also not disputed that assessee has been remunerated as per contract, under which assessee is required to incur expenditure. Ld. AO/CIT(A) did not dispute that expenditure has not been incurred for purposes of research activity carried on by assessee in its normal course of business. We draw our support from decision of Empire Jute Company Ltd vs. CIT [1980 (5) TMI 1 - SUPREME COURT] wherein laid down that test of enduring benefit cannot be applied blindly and mechanically without having regard to facts and circumstances of a given case. We are therefore are of considered opinion that assessee has to be granted benefit of expenditure incurred by it, incurred in due course of business activity. Deduction u/s 80IB(8A) - Assessee has been granted approval by Department of Scientific and Research, Ministry of Science and Technology u/s 80IB(8A) since A.Y. 2003-04 - HELD THAT:- Assessee has received approval from prescribed authority, which has been renewed from time to time. This clearly shows that assessee fulfils all required criteria to claim deduction under section 80 IB (8A) of the Act read with Rule 18 DA of Income Tax Rules, 1963. Further we do not find any requirement for assessee to own research conducted/carried out, in its ordinary course of business activity for claiming deduction Disallowance of payments made towards sub-contracting part of research work to the sister concern by invoking provisions of section 80 IB (13) - sub-contract entered into with its sister concern so arranged that transaction had an effect of producing more profit than ordinary profits - assessee is engaged in business of scientific research and informatics services, for drug discovery units - HELD THAT:- As decided in assessee's own case A.Y. 2008-09, 2009-10 and 2010-11 the income earned by the assessee from its connected company, namely, JB is less than the ordinary profits, being, the amount charged by the assessee from Eli Lilly & Co., USA. Under these circumstances, it becomes evident that the provisions of section 80IA(10) are not triggered. If we ignore this aspect, there is nothing in the assessment order to substantiate the claim of the Revenue that the assessee charged exorbitantly from JB so as to divert income from loss making JB to the assessee so as to enable it to claim higher deduction. In our considered opinion, that the CIT(A) took an unimpeachable view on the issue by deleting the addition made by the Assessing Officer.
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