2022 (5) TMI 890 - AT - Income Tax

Assessment u/s 153A - incriminating material found in search - HELD THAT - As in the original assessment, the additions were made by the AO on this issue and the appeal on the issue is already pending before the Hon ble High Court, as noted above. So in the fresh assessment proceedings carried out u/s 153A of the Act, since there is no reference of any incriminating material relating to the aforesaid issue, therefore, this issue in the light of the settled law cannot be read-judicated in the second appeal before this Tribunal, especially when this issue has already been considered and adjudicated in the first appeal and the matter is pending before the Hon ble High Court. Whatever, the findings will be given by the Hon ble High Court that will apply to the case of the assessee for the assessment year under consideration. There cannot be allowed two parallel proceedings running, one in the High Court and the other Tribunal on the same issue and relating to the same assessment year. This appeal of the Revenue, in view of this, is hereby dismissed subject to our observation that the finding arrived at in appeal before the High Court on this issue will accordingly apply to the case of the assessee for the assessment year under consideration. Allocation of the expenditure relating to the R D unit to the other units which are exempt u/s 80IC - HELD THAT - The issue is clearly covered in favour of the assessee in the own case of the assessee for the earlier assessment year, wherein, the Tribunal, after considering the relevant facts, has held that the expenditure incurred in research and development activity at R D Unit cannot be allocated to the other manufacturing units. No distinguishing facts have been brought on record. In view of this, respectfully following the order of the Tribunal for earlier assessment year in the own case of the assessee, this issue is accordingly decided in favour of the assessee. No other ground or issue raised or argued. The appeal filed by the assessee is accordingly stands allowed.

Summary

Issues:
1. Disallowance of expenditure on freebies paid to doctors.
2. Allocation of Research & Development expenses to various units.

Issue 1: Disallowance of expenditure on freebies paid to doctors:
The Revenue appealed against the deletion of the disallowance of Rs.58,70,63,515 made on account of freebies paid to doctors. The Assessing Officer disallowed the expenditure, considering it unrelated to the business income of the assessee and unethical. The Ld. CIT(A) initially confirmed the additions, but the Tribunal later deleted them based on similar case laws. However, the Revenue challenged this decision in the Hon’ble High Court, where the matter was pending. Subsequently, during a search action, the Assessing Officer re-affirmed the additions under section 153A, but the Ld. CIT(A) again deleted them. The Tribunal held that without fresh incriminating material, re-adjudication of issues from concluded assessments is impermissible. Citing relevant case laws, the Tribunal dismissed the Revenue's appeal, stating that the findings of the High Court would apply to the assessment year under consideration, avoiding parallel proceedings.

Issue 2: Allocation of Research & Development expenses to various units:
The assessee contested the allocation of Research & Development (R&D) expenses to units eligible for deductions under sections 80IB and 80IC of the Income Tax Act. The Ld. counsel argued that R&D activities were not directly related to manufacturing units but focused on future products and innovations. Relying on a previous Tribunal order, the counsel asserted that R&D expenses could not be attributed to other units. The Tribunal noted that the issue was decided in favor of the assessee in a prior assessment year, where it was held that R&D expenses from the R&D unit should not be allocated to manufacturing units. As no distinguishing facts were presented, the Tribunal ruled in favor of the assessee, allowing the appeal. The Revenue's appeal, in this case, was dismissed.

In conclusion, the Tribunal upheld the deletion of disallowed expenses on freebies paid to doctors and ruled in favor of the assessee regarding the allocation of R&D expenses to various units. The judgments were based on legal precedents and the absence of fresh incriminating material, ensuring consistency and adherence to established principles in tax assessments.