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TMI Blog2013 (7) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... essment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. In a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition - Following decisions of Gujarat Tea Processors & Packers Ltd. v. Deputy Commissioner of Income-Tax [2012 (12) TMI 899 - GUJARAT HIGH COURT] and CIT v. Usha International Ltd. [2012 (9) TMI 767 - DELHI HIGH COURT] - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 1547 OF 2013 - - - Dated:- 30-4-2013 - AKIL KURESHI AND MS. SONIA GOKANI, JJ. For the Appellant : R.K. Patel. For the Respondent : Mrs. Mauna M. Bhatt. ORDER:- PER : Akil Kureshi Heard learned counsel for the parties for final disposal of the petition. 2. Petitioner has challenged a notice dated 21.3.2012 annexed at Annexu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich Rs.2734.15 lakh is from Bio Equivalence Study and the balance Rs.14.39 lakh is from 'Other income'. Thus whatever research done by the assessee company is on behalf of leading pharmaceutical formulations manufactures. In fact, the manufacturers are contributing towards industrial development since they are developing the formulations investing entire funds and also making huge payments to the assessee company for bio equivalence study in connection with formulations under development. The risk of investing funds for development of formulation is taken by the manufacturers of formulation (Pharmaceutical Companies). The role of the assessee company is merely providing professional services (analysis of clinical samples) to the manufactures for which they are being paid. Therefore, the condition of eligibility of deduction under Section 80-IB(8A) that the assessee's main object should be scientific and industrial research and development, has not been fulfilled by the assessee Company. The irregular deduction resulted in under- assessment of Rs.11,64,52,937/-. In view of above, I am satisfied that this is a fit case for 'income escaping assessment under Sec.147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be made as the condition laid down in Rule 18DA of the I.T. Rules, 1962 not fulfil by you. In view of the above, you are requested to furnish you submissions/comments and attend the office of the undersigned on 24/12/2012 at 3.00 p.m. Failure to comply with the requirement of this notice may result in invoking the penal and other legal provisions of the I.T. Act, 1961. Authorized Representative without proper authorization of the assessee will not be allowed to represent the case. Adjournment will not be given in normal circumstances." 6. The petitioner thereupon raised the objections to the notice for reopening under a communication dated 4.1.2013. It was contended that the entire claim was examined at length in the original assessment. Reopening, therefore, was not permissible since the same would only be on the basis of change of opinion. The petitioner relied on the decision of the Apex Court in the case of CIT v.Kelvinator of India Ltd. reported in [2010] 320 ITR 561(SC) besides other authorities of this Court in the case of Gujarat Tea Processors Packers Ltd. v. Deputy Commissioner of Income-Tax reported in [2012](28) Taxmann.com (187)(GUJ) and in the case of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pl. furnish note on claim of deduction under Section 80-IB of the I.T. Act and produce necessary evidence in support of such claim. Also furnish a note on how all the conditions laid down under Rule 18DA have been adhered to. ** ** ** 18. Pl. furnish details of simple storage income and state how the same is considered eligible for deduction under section 80-IB(8A) of the I.T. Act. 19. Pl. furnish details of misc. income of Rs.1.83 lacs and state how the same is considered eligible for deduction under Section 80-IB(8A) of the I.T. Act." 12. In response to such queries and further queries which were raised by the Assessing Officer during the assessment proceedings, the petitioner filed several replies on 2.11.2009. The petitioner conveyed to the Assessing Officer as under:- "1. The details of transactions with the following parties are furnished herewith for your perusal: a. Cadila Healthcare Ltd-Annexure-1A. b. Lupin Ltd.- Annexure-1B. c. Apotex Research Pvt. Ltd.-Annexure-1C. d. Ipca Laboratories Ltd.-Annexure-1D. e. Dr. Reddy's Laboratories Ltd.-Annexure-1E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ientific and Industrial research, Technology development and transfer of technology developed. To develop adequate infrastructure such as laboratory facilities, for carrying out diagnostic test, scale-up/ expansion of facilities for undertaking scientific and collaborative research." The in-patient clinical operations are performed in its first clinical facility that accommodates up to 120 volunteers with state-of-the-art techniques provide methods, which allow for processing of large number of samples utilizing LC/MS/MS, HPLC and other analytical techniques. Analytical method development for the quantitation of drugs and metabolities in biological fluids is the backbone of BA Research India. The research chemists develop and validate analytical methods for pharmaceutical compounds and their metabolities using LC/MS/MS and HPLC with an emphasis on quality, accuracy and speed. BA Research India also develops and validates methods in various biological matrices. It has started its second Centre at Baroda in March, 2007 in rental premises. This state of art centre at Baroda includes a 200-bedded facility spread across a single floor of approx 21000 square feet. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e General of Health Services under Ministry of Health and Family Welfare. Moreover, the manufacturer of a new drug is required to get approval from the licensing authority under provisions of The Drugs and Cosmetics Act, 1945. Sec. 122A(2) of The Drugs and Cosmetics Act,1945 provides as hereunder: "S. 122-B. Application for approval of manufacture new drug other than the drugs classifiable under Schedules C and C(1).- (1) ......................., (2) The manufacturer of a new drug under sub-rule (1) when applying for approval to the Licensing Authority mentioned in the same sub-rule, shall submit data as given in Appendix 1 to Schedule Y including the results of clinical trials carried out in the country in accordance with the guidelines specified in Schedule Y and submit the report of such clinical trials in the same format given in Appendix II to the said Schedule. (3) The Licensing Authority after being satisfied with the clinical trials, shall grant permission in Form 45 or Form 45-A or Form 46-A, as the case may be, subject to the conditions stated therein. Provided that the Licensing Authority shall, where the data provided on the clinical tria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d development activities. As per sub-section 8A of Section 80-IB of the Income Tax Act, 1961, deduction is hundred per cent of the profits and gains of business of the company carrying on scientific research and development. Section 80IB(8A) of the Income Tax Act, 1961 is reproduced below for your honour's ready reference: "(8A) The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of ten consecutive assessment years, beginning from the initial assessment year, if such company- (i) is registered in India; (ii) has its main object the scientific and industrial research and development. (iii) is for the time being approved by the prescribed authority at any time after the 31st day of March, 2000 but before the 1st day of April, 2007; (iv) fulfills such other conditions as may be prescribed." From the above mentioned facts and law, it become amply clear that sample storage income is part of the income earned by the assessee company carrying on the scientific research and development business and profit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and is not so arranged that the business transacted between them produced the Assessee Company more than the ordinary profit which might be expected to arise for the purposes of claiming deduction under Section 80-IB(8A)." 16. It was after such detailed examination of the petitioner's claim for deduction that the Assessing Officer framed scrutiny assessment in which he disallowed part of the petitioner's claim of such deduction. The Assessing Officer was of the opinion that sample storage income of Rs.13.45 lakhs generated by the petitioner would not be eligible for deduction under section 80IB (8A) of the Act. He gave detailed reasons for coming to such a conclusion. It is not necessary to reproduce the entire portion of his order in this respect. We may, however, briefly quote his conclusions in this regard: "The above submissions of the assessee have been perused and the claim of the assessee regarding eligibility of sample storage income for the purpose of deduction under Section 80IB(8A) of the I.T. Act is not found acceptable. It is seen that sample storage income is of the nature of miscellaneous income arising to the assessee. The claim of the assessee that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ueries were not restricted to sample storage income alone. For example, in his communication dated 21.10.2009 he called upon the petitioner to furnish details of transactions with various companies, such as M/s Cadila Healthcare Ltd., Lupin Ltd. Etc. These are the companies with whom the petitioner had entered into detailed agreements for carrying out scientific research. In paragraph 4 of such notice, he called upon the petitioner to furnish note on claim of deduction under Section 80IB(8A) of the Act to produce necessary evidence in support of such claim. He also directed the petitioner to furnish note on how all the conditions laid down under Rule 18DA were fulfilled. 18. In addition to such queries with respect to the entire claim, he also raised pointed queries with respect to sample storage income and miscellaneous income for which the petitioner had claimed deduction. 19. In response to such queries, the petitioners had given detailed replies and produced voluminous material to support the claim of deduction. It cannot be stated by any stretch of imagination that such claim of deduction under Section 80IB(8A) of the Act was not examined by the Assessing Officer in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts upon courts have held that an assessment previously framed cannot be reopened on a mere change of opinion. It is stated that power to reopening cannot be equated with review. 42. Bearing in mind these conflicting interests, if we revert back to central issue in debate, it can hardly be disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the Assessing Officer allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the Assessing Officer, over which the assessee beyond trying to persuade the Assessing Officer, would have no control whatsoever. Therefore, while framing the assessment, allowing the claim fully or partially, in what manner the assessment order should be framed, is totally beyond the control of the assessee. If the Assessing Officer, therefore, after scrutinizin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that there is no true and full disclosure by the assessee in the original assessment, resulting into escapement of the income in the year under consideration. It is demonstrated by the petitioner assessee that at the time of original assessment, in reply to the specific query raised, specific reply had been furnished with regard to the amount of discount paid by way of trade incentive slab scheme and the query also was whether on the amount paid, tax was deducted at source or not. Having furnished all the requisite details, if the Assessing Officer chose not to deem it fit to reflect its consideration in the assessment order originally passed after scrutiny, on the very same grounds and materials when it seeks to reopen the assessment on the ground of escapement of income it is required of the respondent to point out as to how this is not a mere change of opinion and what are the cogent and relevant materials available with it to form an opinion that the said expenditure was required to be disallowed under Section 40(a) (ia) of the Act, for not having deducted TDS. With the satisfactory details furnished by the petitioner and with the discussion of provisions hereinabove, it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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