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TMI Blog2012 (7) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... to P.F. ESIC Rs. 3,95,172/-." 3. It was submitted by Ld. AR of the assessee that this issue is covered in favour of the assessee by the judgment of Hon'ble Apex Court rendered in the case of CIT vs. Alom Extrusions Ltd., (2009) (319 ITR 306). The Ld. DR of the Revenue supported the orders of authorities below. 4. We have considered the rival submissions and perused the material on record and have gone through the orders of the authorities below and the judgment of Hon'ble Apex Court cited by the Ld. AR of the assessee. We find that it is noted by the Ld. CIT (A) in paragraph 7 of his order that the assessee had objected to the addition in respect of PF/ESI payments within grace period. In our considered opinion, the payment of PF/ESI within grace period as allowable as per the provisions of respective Act has to be accepted as the payment made within due date. Even if the payment is made after the grace period, but before the due date of filing of the return of income, no disallowance can be made as per this decision of Hon'ble Apex Court cited by the Ld. AR of the assessee. Respectfully following this judgment of Hon'ble Apex Court, we delete the disallowance made by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted in 112 ITD 307 (Ahd) and he also placed reliance on the decision of Hon'ble Gujarat High Court rendered in the same case of CIT vs. Claris Life sciences Ltd.,(2010) 326 ITR 251 (Guj.) It was also submitted that the disallowance of the claim of the assessee regarding weighted deduction was rejected on the basis of the report of DSIR. It is on this basis that these expenses are not incurred for in-house R & D facility of the Company and the payment to institutes are sponsored research and that for the clinical trials undertaken etc., R & D is not covered by weighted deduction provisions as per section 35(2AB). It was his submission that the A.O. has based his decision on report of DSIR and held that these expenses are incurred not for in house approved R & D facility of the company and it was held that the payments to institutes are 'sponsored research' and that the clinical trials are undertaken outside the R & D. He further clarified that these are only a part of the research work for which the work of National Laboratories - Government Institution are availed and not really sponsored research and the nature of these is like processing the research material for in house resea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee vide the copy of the letter reproduced hereinabove has very clearly explained as to how the entire expenditure claimed by the assessee is allowable. Thus there was no justification in harping upon the figure contained in Form No.3CL as is done by the Assessing Officer. The provisions of the Act it does not contain any specific conditions for the allowance of expenditure to the Effect that it will be restricted that contained inform No.3CL.Needless to point out that such allowable expenditure is reported by the DSIR to DG (Income tax Exemption),Kolkata without giving an opportunity of being heard to the assessee wherever he quantifies the expenditure which is less than that claimed by the assessee. We further find that the assessee has included a sum of Rs. 51.26 lakhs as eligible expenditure being Revenue expenditure relating to building and another sum of Rs. 133.92 lakhs being revenue expenditure other than building, which was considered as revenue by the Assessing Officer himself. These items clearly are within the purview of allowable u/s. 35(2AB) of the Act as weighted deduction. The security expenses are also directly related to in-house research as proper securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Under these facts, we feel that this issue should go back for fresh decision with regard to allowability of deduction u/s. 35(2AB) in respect of payment of Rs. 68,60,981/- to various institutions and if it is found that the same is not in respect of full research but only in respect of procuring of some material or service then the same should also be considered for weighted deduction. With regard to the amount of Rs. 5 lakhs spent by the assessee for clinical trial expenses, we hold that the same is squarely covered by the Tribunal decision and is eligible for weighted deduction u/s. 35(2AB) of the Act. 11. Now we discuss the contention of the Ld. DR of the Revenue that this should also be in-house as per the main provisions of section 35 (2AB) of the Act. We would like to observe that from the main section 35 (2AB) and Explanation to this section, it is seen that as per the main provisions, expenditure on scientific research are eligible for weighted deduction with the condition that it should be incurred on in house research and development facility as approved by the prescribed authority. As per the Explanation, expenditure on scientific research in relation to drug and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule] ] incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of [a sum equal to [one and one-half] times of the expenditure] so incurred. Explanation - For the purposes of this clause, "expenditure on scientific research, in relation to drugs an pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970)." 13. In view of the above discussion, we find that the disallowance made by the A.O. and confirmed by the Ld. CIT (A) for allowing weighted deduction in respect of clinical drug trial is unwarranted and therefore, the same is deleted and we direct the A.O. to allow weighted deduction in respect of Rs. 5 lakhs incurred by the assessee in the present case for clinical drug trial because it is not the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an admitted fact in the present case that this expenditure was incurred by the assessee in respect of loan from the bank which were used for acquisition of certain plant and machinery. This ground of the assessee is rejected. 19. Ground No.5 is as under:- "5. The Hon'ble CIT (A) has erred in law and on the facts of the case in confirming the disallowance made by A.O. in calculating Arms Length Price in respect of International transaction with Associate Enterprisers Rs. 1,39,10,552/-.The disallowance may be cancelled." 20. We find that this issue has been decided by the Ld. CIT (A) in paragraph 11.2 which is reproduced below:- "11.2. I have considered the submission of the appellant. I have also perused the order of the TPO date 28-2-2005 and I find that TPO has considered the objections raised by the appellant in the order thoroughly and given various reasons for not accepting the objection and had concluded that the international transactions were not at arms length and therefore I find that the adjustment made by the TPO/A.O. are based on correct appreciation of facts and law. Therefore, the addition made by the A.O/TPO is ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- '7. The Hon'ble CIT (A) has erred in law and on the facts of the case in confirming the action of the A.O. in not allowing MAT Credit before charging interest u/s. 234B & 234C of the I.T. Act. The A.O. may be directed to allow MAT credit." 26. The Ld. AR of the assessee placed reliance on the judgment of the Hon'ble Apex Court rendered in the case of CIT vs. Tulsyan Nec Ltd. as reported in 330 ITR 226 (SC). The Ld. D.R. supported the orders of the authorities below. 27. We have heard the rival submissions, perused the material on record and gone through the orders of the authorities below and the judgment cited of the Ld. A.R. of the assessee. We find that in this case, it was held by the Hon'ble Apex Court that for the purpose of computation of interest payable by the assessee u/s. 234B and 234C, the credit of tax allowable in terms of section 115JAA of the Act, 1961 has to be set off against the advance tax payable before calculating such interest. We direct the A.O. accordingly. This ground of the assessee is also allowed. 28. Ground No. 8 is as under:- "8. The Hon'ble CIT (A) has erred in law and on the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asoned order after providing sufficient and proper opportunity of being heard to both sides. This ground is allowed for statistical purpose. 37. Ground Nio.4 is as under:- "4. The Hon'ble CIT(A) has erred in law and on the facts in disallowing a sum of Rs. 6,59,192/- towards Prior Period expenses. The disallowance may be cancelled." 38. The ld. A.R. of the assessee reiterated the submissions made before the Ld. CIT (A) on pages 55 to 70 of the paper book. The Ld. DR supported the order of the A.O. 39. We have considered the rival submissions, perused the material on records and have gone through the orders of authorities below. We find that as per the details available on page 55, the total prior period expenses of Rs. 7,34,792/- includes the amount of Rs. 1,46,513/- on account of advertisement expenses, Rs. 75,000/- for cost audit fee and Rs. 5,12,679/- on account of raw material purchased. Regarding the first item Rs. 1,46,513/-, it was submitted by the Ld. AR before the Ld. CIT (A) that the payment of these invoices was made in the year under consideration. We do not find any force in this contention because it could not be shown that the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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