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2015 (8) TMI 763 - AT - Income TaxValidity of Section 153A proceedings - Held that - Initiation of impugned Section 153A proceedings in this set of four assessment years in absence of any incriminating material found in search conducted after finalization of regular assessments is not sustainable. We quote Delhi tribunal s decision ACIT vs. PACL India Ltd. 2013 (10) TMI 520 - ITAT DELHI and hold that assessments framed u/s.143(1) and 143(3) of the Act have to be treated at par in such cases. - Decided in favour of assessee. Disallowance of weighted deduction u/s. 35(2AB) in respect of clinical trial expenses - CIT(A) deleted the addition - Held that - It is an admitted fact that assessee has incurred the amount in question on specified purposes only. We find that the hon ble jurisdictional high court in case of CIT vs. Cadila Healthcare Ltd. 2013 (3) TMI 539 - GUJARAT HIGH COURT takes into account explanation to Section 35(2AB)(1) introduced by the Finance Act, 2001 w. E. F. 01.04.2002 and holds that where an assessee company incurs expenses on clinical trials for developing its pharmaceutical products outside a lab facility approved by the prescribed authority (the DSIR), the impugned weighted deduction has to be granted as purpose of this beneficial provision is to encourage scientific research. The Revenue does not point out any distinction on facts and law. Nor does it highlight any factual infirmity in assessee s claim that the impugned sum has not been incurred on clinical research. We reject the Revenue s corresponding ground accordingly in A.Y. 2007-08. - Decided against revenue. Weighted deduction of ₹ 3,07,245/- disallowed in the course of assessment - Held that - There is no dispute has actually incurred the impugned building repair and maintenance sum. The authorities below have invoke the impugned disallowance for want of DSIR approval. It is to be seen that a coordinate bench in ACIT vs. Torrent Pharmaceuticals Ltd. 2009 (11) TMI 819 - ITAT AHMEDABAD dealt with an identical issue and held that when an Assessing Officer treats such a building repair and maintenance sum as revenue expenditure, the same is also allowable u/s.35(2AB) of the Act as well. The Revenue fails to quote any case law to the contrary. We accept corresponding ground in its Cross Objection accordingly. Its legal ground challenging initiation of Section 153A proceedings is dismissed as not pressed - Decided partly in favour of assessee. Assessment of book profit u/s.115JB as per original return instead of the revised one - Held that - CIT(A) at the first instance holds that the assessee s revised return was filed on 30.12.2009 i. E. on the date of framing of assessment itself. Thereafter, he observes that this revised return was given to the Assessing Officer on 31.12.2009 i.e. after framing of the assessment. There is no justification forthcoming that when revised return was filed on the former date, how it could be given to the Assessing Officer on the next date. Be that as it may, the fact remains that the assessee has sought to compute its book profit afresh. The said computation on merits is yet to be examined. We quote the case law of Goetze (India) Ltd. Vs. CIT 2006 (3) TMI 75 - SUPREME Court and hold that entertaining such a plea in absence of a revised return does not bar any appellate authority from exercising its jurisdiction. This said case law clarifies that jurisdiction of appellate authority under the Act is not impinged upon. The Revenue does not point out any case law to the contrary. We observe in these facts that the assessee s revised return seeking to re-compute its book profit deserves to be examined as per law. Its corresponding ground raised in this appeal is set aside to the file of Assessing Officer. - Decided in favour of assessee for statistical purposes
Issues Involved:
1. Validity of Section 153A proceedings. 2. Section 80HHC deduction. 3. Quantification of Section 80JJAA deduction. 4. Section 80G deduction. 5. Disallowance of staff welfare expenses. 6. Disallowance of miscellaneous expenses. 7. Disallowance of interest expenditure under Section 14A and 36(1)(iii). 8. Weighted deduction under Section 35(2AB) for clinical trial expenses. 9. Assessment of book profit under Section 115JB. Issue-wise Detailed Analysis: 1. Validity of Section 153A Proceedings: The primary issue across the assessment years 2002-03 to 2005-06 was the validity of Section 153A proceedings initiated by the Assessing Officer. The assessee argued that since no incriminating documents or assets were found during the search, the proceedings under Section 153A were invalid. The Tribunal noted that the assessments for these years had already been completed before the search and no incriminating material was found during the search. Citing the Special Bench decision in All India Cargo Logistics and the Bombay High Court decision in Continental Warehousing Corporation, the Tribunal held that Section 153A proceedings could not be initiated without incriminating material. Consequently, the Tribunal quashed the assessments for these years. 2. Section 80HHC Deduction: For the assessment years 2002-03 to 2005-06, the assessee claimed deductions under Section 80HHC, which were disallowed by the Assessing Officer. However, since the Tribunal quashed the Section 153A proceedings for these years, the disallowances under Section 80HHC were rendered infructuous and not adjudicated on merits. 3. Quantification of Section 80JJAA Deduction: Similar to the Section 80HHC deductions, the quantification of Section 80JJAA deductions was also rendered infructuous due to the quashing of the Section 153A proceedings for the relevant years. 4. Section 80G Deduction: The disallowances under Section 80G for the assessment years 2002-03 to 2005-06 were also not adjudicated on merits as the Section 153A proceedings were quashed. 5. Disallowance of Staff Welfare Expenses: For the assessment years 2003-04 to 2005-06, the Revenue contested the deletion of disallowances related to staff welfare expenses by the CIT(A). Since the Section 153A proceedings were quashed, these disallowances were rendered infructuous. 6. Disallowance of Miscellaneous Expenses: The disallowance of miscellaneous expenses for the assessment years 2003-04 to 2005-06 was similarly rendered infructuous due to the quashing of the Section 153A proceedings. 7. Disallowance of Interest Expenditure under Section 14A and 36(1)(iii): The disallowance of interest expenditure under Sections 14A and 36(1)(iii) for the relevant years was also not adjudicated on merits as the Section 153A proceedings were quashed. 8. Weighted Deduction under Section 35(2AB) for Clinical Trial Expenses: For the assessment years 2007-08 and 2008-09, the Revenue challenged the deletion of disallowances related to weighted deduction under Section 35(2AB) for clinical trial expenses. The Tribunal upheld the CIT(A)'s decision, noting that the expenses were incurred for specified purposes and were eligible for the deduction. The Tribunal relied on the jurisdictional High Court decision in Cadila Healthcare, which allowed such deductions even if the expenses were incurred outside an approved lab facility. The Tribunal also allowed the assessee's claim for building repair and maintenance expenses under Section 35(2AB), citing the decision in Torrent Pharmaceuticals. 9. Assessment of Book Profit under Section 115JB: For the assessment year 2008-09, the assessee challenged the assessment of book profit under Section 115JB based on the original return instead of the revised return. The Tribunal noted that the revised return was filed on the date of the assessment order and directed the Assessing Officer to examine the revised computation of book profit as per law, setting aside the corresponding ground for re-examination. Conclusion: The Tribunal allowed the assessee's appeals for the assessment years 2002-03 to 2005-06 by quashing the Section 153A proceedings and rendered the related disallowances infructuous. For the assessment years 2007-08 and 2008-09, the Tribunal upheld the CIT(A)'s deletion of disallowances related to weighted deductions under Section 35(2AB) and directed the Assessing Officer to re-examine the computation of book profit under Section 115JB for the assessment year 2008-09. The Revenue's appeals were dismissed.
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