TMI Blog2022 (9) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... been incurred for the formulation activity. Of course the assessee has since then accepted allocation of R D expenses to this extent. But despite all the above it cannot still be said that the assesses claim was found to be totally unfounded. Mere statement of a technical person is not sufficient to hold the claim of the assessee as being totally incorrect in law. The same has to be established from the facts of the case whether the R D expenses actually had nexus with the manufacturing activity of the units. For the same reason the acceptance by the assessee of the allocation in preceding years does not establish that its claim was totally unfounded. Further even the said technical personnel has only stated that 10% expenses are in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-2, Vadodara, (in short referred to as CIT(A)), dated 30-11-2016, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the Act ) pertaining to Assessment Year (A.Y) 1999-2000 confirming the levy of penalty u/s 271(1)(c) of the Act. 2. At the outset itself, it was pointed out that the grievance of the assessee in the present appeal is with respect to levy of penalty for concealing/furnishing inaccurate particulars of income pertaining to excess deduction claimed by the assessee amounting to Rs.50,17,054/- u/s 80IA of the Act on account of non allocation of R D expenses of the same amount to its unit in Silvassa eligible to such deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciated that there was no nexus between the R D expenses incurred and eligible undertakings, on account of which the Appellant did not allocate R D expenses to eligible units and that several courts have later on affirmed the principle on which the Appellant has relied on for non-allocation of R D expenditure to the eligible units. 4. The arguments of the Ld.Counsel for the assessee were to the effect- That all particulars of the R D expenses incurred were truly disclosed by the assessee, its claim for not allocating any expenses was bonafide being in accordance with judicial decisions in this regard to the effect that in the absence of direct nexus established between the said expenses and manufacturing activity no expenses can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on reduction of deduction claimed u/s. 80IA by Rs.50,17,034/- on account of allocation of R D expenses to the eligible units. Undisputedly, the appellant company was carrying out R D and incurred huge expenses thereon. The R D activities were pertaining to the production of bulk drugs formulation business carried out in the units eligible for deduction u/s. 80IA. Accordingly, the assessee's own expert in A.Y. 1995-96 had given an opinion that 10% of R D expenses should be treated as pertaining to formulation business. However, the appellant with clear cut intention to claim more deduction u/s. 80IA has not debited any R D expenses in eligible unit. The Assessing Officer has allocated R D expenses of Rs.50,17,034/- to eligible unit loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15JA and assessment was made on income of Rs.5,10,02,030/- u/s. 115JA since the income assessed under regular provisions was lower. The book profit u/s. 115JA was increased by reducing the deduction claimed u/s. 80IA as deduction claimed u/s. 80IA was to be reduced from the book profit. It is an established legal position that when tax is charged on the basis of book profit u/s. 115JA, the addition/disallowances made to book profit are liable for imposition of penalty u/s, 271(l)(c). In this regard reliance is placed on the decision in the cases of SBI DFHI Ltd, Vs. ACIT (2016) 71 taxmann.com 178 (Mum-ITAT), Shri Gokulam Hotels India Pvt. Ltd, Vs. ACIT (201.4) 49 taxrnann.com 543 (Mad-HC) and CIT Vs. Citi Tiles Ltd. (2014) 46 taxmann.com 34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation activity. Of course the assessee has since then accepted allocation of R D expenses to this extent. But despite all the above it cannot still be said that the assesses claim was found to be totally unfounded. Mere statement of a technical person is not sufficient to hold the claim of the assessee as being totally incorrect in law. The same has to be established from the facts of the case whether the R D expenses actually had nexus with the manufacturing activity of the units. For the same reason the acceptance by the assessee of the allocation in preceding years does not establish that its claim was totally unfounded. Further even the said technical personnel has only stated that 10% expenses are in relation to formulation activity. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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