9911796707
TMI Blog2013 (11) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the said years, however, were subsequently re-opened by the A.O. in March, 2009 after recording the following reasons, which are identical for all the relevant years except the variation in the corresponding amounts. "Return of income disclosing a total income of Rs.6,35,926/- was furnished on 30-10-2004. In the return of income the assessee claimed deduction u/s 80IB amounting to Rs.90,76,103/- from the Gross Total Income of Rs. Rs.47,77,254/-. The assessee paid taxes u/s.115JB of the Income Tax Act, 1961 on Book Profit of Rs.1,03,13,157/-. Along with the return of income, Auditors Report in Form No. 10CCB was also furnished. Scrutiny assessment for A.Y.200-06 was completed on 16/11/2006 after allowing a deduction u/s. 80IB(8A) of Rs.90,76,103/- from the Gross Total income of Rs.97,12,029/-. On examination, it is found that the assessee had conducted trials of pharmaceutical products manufactured by others and had no facility for laboratory, testing and analysis. Therefore, the assessee is not involved in any research and development activities leading to technology development, improvement of technology and transfer of technology developed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofessionals from diverse backgrounds like medicine, pharmacy, and biostatistics. SIRO's huge clinical networks of working with large government hospitals and private clinical institutes in the country give it the reach and breadth to work with the best medical professionals in the country who conduct clinical research for SIRO. Based on the above explanation of our research and development activities carried out by SIRO Clinpharm, we would like to present our position with regards to your notice of 26.03.2009, for your kind consideration as follows: 1. In specific reference to the notice received by Siro we would like to inform that the Prescribed Authority, i.e., The Secretary, Deptt. of Scientific & Industrial Research, Ministry of Science & Technology, Government of India approve companies who are exclusively engaged in scientific research and development under section 80IB(8A) of the Income Tax Act, 1961. SIRO Clinphamn Pvt Limited is one such company. 2. Before allowing us the above exemption, Deptt. of Scientific & Industrial Research (DSIR) had assessed and inspected our premises and only after satisfying their criteria such as faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years 2003-04 to 2006-07, the assessee preferred appeals before the ld. CIT(A) challenging the validity of the said assessment as well as disputing the addition made therein by the A.O. on account of disallowance of deduction claimed u/s 80IB(8A) of the Act. Similarly, appeals were also filed by the assessee before the ld. CIT(A) against the orders passed by the A.O. u/s 143(3) of the Act for assessment years 2007-08 and 2008-09 disputing the disallowance made u/s 80IB(8A) of the Act as well as the disallowance on account of software expenses and disallowance made u/s 14A of the Act. The ld. CIT(A) did not find merit in the preliminary issue raised by the assessee challenging the validity of assessments made by the A.O. u/s 143(3) read with section 147 of the Act for assessment years 2003-04, 2004-05 and 2006-07 and upholding the validity of the said assessments, he decided this issue against the assessee. He also confirmed the disallowance made by the A.O. u/s 80IB(8A) of the Act in all the six years under consideration and further confirmed the disallowance made by the A.O. on account of software expenses in assessment years 2007-08 and 2008-09. The disallowance made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. clearly on the basis of change of opinion which is not permissible in law. In support of this contention, he inter alia relied on the decision of Hon'ble Gujarat High Court in the case of Cliantha Research Limited (Formerly known as BA Research) vs. DCIT (Special Civil Appeal No. 1547 of 2013 dated 30-4-2013) wherein assessment reopened by the A.O. on similar reasons to withdraw the deduction claimed and allowed deduction u/s 80IB(8A) in the original assessment was held to be not in accordance with law as the same was based merely on change of opinion and the notice u/s 148 of the Act was quashed by the Hon'ble Gujarat High Court. 10. The ld. D.R., on the other hand, relied on the order of the ld. CIT(A) in support of Revenue's case on this issue. He also contended that the assessments for all the relevant four years were reopened by the A.O. on the basis of reasons recorded by him in accordance with law and the validity of reassessments made by the A.O. on the basis of the said reasons was rightly upheld by the ld. CIT(A). 11. We have considered the rival submissions and also perused the relevant material available on record. The validity of the reassessments made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.80IB(8A)". 13. A perusal of the above reasons recorded by the A.O. clearly shows that the assessments originally completed by the A.O. u/s 143(3) of the Act for all the relevant years were reopened by him not on the basis of any new material or information which had come to his possession after the completion of the original assessments. The assessments originally completed u/s 143(3) of the Act thus were reopened by him on the basis of same material which was available even at the time of completion of original assessments as well as on the basis of same set of facts and this position has not been disputed either by the ld. CIT(A) in his impugned order or even by the ld. D.R. at the time hearing before us. The ld. CIT(A), however, still upheld the validity of initiation of reassessment proceedings rejecting the contention raised on behalf of the assessee about the same being based on change of opinion on the ground that there was no application of mind by the A.O. on the issue of assessee's claim for deduction u/s 80IB(8A) of the Act in the assessment completed originally u/s 143(3) of the Act. He held that the concept of change of opinion would arises only when some opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reassessment proceedings in the present case was not based on any new material or information which had come to the possession of the A.O. after the completion of original assessment u/s. 143(3). The same thus was based merely on a fresh application of mind by A.O. to the same set of facts and to the same material on record as was available at the time of completion of the assessment originally u/s. 143(3). This being the undisputed position, we are of the view that the initiation of reassessment proceedings was based on a mere change of opinion of the A.O. which is not permissible in law as held by the Hon'ble jurisdictional High Court in the case of Asian Paints Ltd.(supra), Hon'ble Gujarat High Court in the case of Cliantha Research Limited (Formerly known as BA Research) vs. DCIT (supra) and the full Bench of Hon'ble Delhi High Court in the case of Kelvinator India Ltd. (supra). Respectfully following the said decisions of the Hon'ble jurisdictional High Court, Hon'ble Gujarat High Court and Hon'ble Delhi High Court, we hold that the initiation of reassessment proceedings for the relevant four years i.e assessment years 2003-04, 2004-05, 2005-06 and 2006-07 itself in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to judge afresh whether the activity of the assessee company was in the nature of research and development. It was also contended that the action of the A.O. in denying the claim of the assessee for deduction u/s 80IA(8A) of the Act disregarding the approval given by the prescribed authority was not good in law especially when the said approval was granted after examining all the relevant aspects. 19. The ld. CIT(A) did not find merit in the submissions made on behalf of the assessee on this issue and upheld the action of the A.O. in disallowing the assessee's claim for deduction 80IB(8A) of the Act for the following reasons given in para No. 3.3 to 3.8 of his impugned order:- "3.3. I have considered the facts of the case. Section 80-IB(8A) reads as under:- "The amount of deduction in the case of any company carrying on Scientific Research and Development shall be 100% of the profits and gains of such business for a period of 10 consecutive assessment years beginning from the initial assessment year, if such company - i) is registered in India, ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own rules, criteria's and conditions for approval. It is for the Assessing Officer to examine the fulfillment of all these conditions. Therefore, I do not accept the appellant's argument that since the company is approved by prescribed authority i.e., Secretary, Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India, there was no reason or basis for the A.O. to examine the issue. 3.6 Now the question is whether the assesses fulfills all the conditions. From the facts, there is no doubt that the assessee fulfills condition (i) and (iii). The A.O. has also not denied It. The issue is whether the observation of the A.O. that the assessee company does not fulfill condition (ii) and (iv) is correct or not. 3.7. Following Important relevant aspects, in appellant's own words, emerges from the paper book submitted during the appellate proceedings: 1) The primary objective of the company is to undertake Scientific and Medical studies on behalf of various companies belonging to pharmaceutical industry. 2) It aims to be Premier Research Organization in delivery of superior services i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to provide Quality Assurance review and report on sponsor's study", "Sponsor has collected the data. The objective is to manage the data, statistical analysis of the data and writing a report using result of the analysis", "The objective is to provide audit support for the study" etc. 3.8. From the above, it is evident that objective of the company Is to undertake, in appellant's own words "Scientific & Medical Studies" on behalf of pharmaceutical companies. There is nothing like Scientific and Industrial Research and Development. The activity of Scientific and Industrial Research and Development involves various stages such as idea concept, arrangement of manpower and Infrastructure, research resultant product, testing of the product, approval of such product by regulatory authority and then transfer of the product to earn income. Out of these, the appellant is involved only in the stage of testing of the product and that too on behalf of others. Its only job is to conduct clinical trials on behalf of various pharmaceutical companies, collect datas as per their instructions/ requirements and earn income in this process. It is a case of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the prescribed authority having given the approval to the assessee company for the purpose of claiming deduction u/s 80IB(8A) of the Act after having examined and satisfied that the conditions prescribed in Rule 18DA were fulfilled, the A.O. was not empowered to sit in appeal against such approval and disallow the assessee's claim for deduction u/s 18IB(8A) of the Act disregarding such approval. In support of this contention, he relied on the decision of the Tribunal in the case of M/s Rubicon Research Pvt. Ltd. vs. ITO (ITA No. 6122/Mum/2009 order dated 24-2-2010) as well as the decision of Hon'ble Bombay High Court in the case of Indian Planetary Society v. Central Board of Direct Taxes (2009) 318 ITR 102 (Bom.). 21. The ld. D.R., on the other hand, strongly supported the impugned order of the ld. CIT(A) confirming the disallowance made by the A.O. on account of assessee's claim for deduction u/s 80IB(8A) of the Act. He contended that the approval of the prescribed authority is one of the conditions to be satisfied for claiming deduction u/s 80IB(8A) of the Act and there are other conditions also which are required to be satisfied commutatively in order to claim the said dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g deduction u/s 80IB(8A) of the Act are satisfied by the assessee or not. It is pertinent to note in this context that the voluminous paper book filed by the assessee giving details and documents furnished before the prescribed authority is sufficient to show that the approval was not only granted by the prescribed authority but was also renewed/extended twice after having satisfied about the main objective of the assessee company, the research and development activities carried on by it and infrastructure facilities available with it such as laboratory, qualified manpower etc. which clearly shows that the conditions stipulated in Rule 18DA were found to be satisfactorily fulfilled by the assessee and on such satisfaction, the approval as required u/s 80IB(8A) of the Act was given by the prescribed authority and extended further twice. 23. In the case of Rubicon Research Limited (supra), a similar issue arose for consideration of the co-ordinate Bench of this Tribunal and it was held by the Tribunal that when the approval was initially granted and further renewed only when the assessee had satisfied the prescribed authority that it was carrying on the activity of scientific and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fees. Ground No. 3 of assessee's appeal for A.Y. 2007-08 is accordingly treated as allowed for statistical purpose. 25. Now, we shall take up the appeal of the assessee for A.Y. 2008-09. Ground No. 1 & 2 of which relating to disallowance made by the A.O. u/s 14-A of the Act and confirmed by the ld. CIT(A) have not been pressed by the ld. counsel for the assessee at the time of hearing before us in view of the smallness of the amount involved. The same are accordingly dismissed as not pressed. 26. As regards the issue involved in ground No. 3 & 4 of assessee's appeal for A.Y. 2008-09, it is observed that the issue involved therein relating to the disallowance made by the A.O. and confirmed by the ld. CIT(A) on account of assessee's claim for deduction u/s 80IB(8A) of the Act is similar to the one involved in ground No. 1 & 2 of assessee's appeal for A.Y. 2007-08 which has been decided by us in the foregoing portion of this order. Following our conclusion drawn in A.Y. 2007-08, we direct the A.O. to allow the claim of the assessee u/s 80IB(8A) of the Act. 27. As regards ground No. 5, it is observed that the issue involved therein relating to disallowance of software expenses mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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