9911796707
TMI Blog2013 (11) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... are regarding disallowance of claim of deduction under section 10B and under section 80HHE. The assessee is engaged in three different business activities i.e. Contract Research Organization (CRO), Medical Transcription Activity(MT) and Trading and Marketing Activity. The CRO is acting as a support centre to do clinical research and trials undertaken by foreign pharmaceutical companies in India on Indian patients and provides human resource support for carrying out clinical research activity and also acts as an assembler and exporter of databases generated from the report or investigators appointed by the company. The assessee also has a State of Art medical transcription facility in which it converts medical file which is in voice form into computer generated text files. The assessee claimed deduction under section 10B and section 80HHE in respect of CRO and Medical Transcription activities whereas the trading and marketing activities were normal business activities not eligible for any special deduction. In assessment year 2003-04, the turnover and profit position in respect of three activities were as under :- S.No. Activity Turnover (Rs.) Profit (Rs.) 1. CRO 1,40,97,760 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0B. 4.2 In appeal, CIT(A) agreed with AO that since there was net loss from CRO and M.T. activities, the assessee was not eligible for deduction under section 10B and section 80HHE. CIT(A) also upheld the order of AO and rejected the claim of deduction on the ground that approval of the assessee as 100% export oriented undertaking had been received only in the subsequent year. Moreover, the CIT(A) also noted that the approval had been given subject to certain conditions and assessee did not show whether those conditions were fulfilled. In relation to alternate claim of the assessee that deduction may be allowed under section 80HHE, CIT(A) agreed with the finding of the AO that the activities of the assessee were not eligible for deduction under section 80HHE which was available only if the assessee was engaged in the business of providing technical services outside India in the development and production of computer software. CIT(A) also upheld the order of AO that brought forward losses were required to be set off before considering any claim of deduction under section 80HHE. He placed reliance on the judgment of Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. vs. DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose by the competent authority. Deduction under section 80HHE is available in respect of profit from the export of computer software or from its transmission to a place outside India or from providing technical services outside India in connection with development/production of computer software. The assessee in this case is engaged in contract research activity on behalf of the foreign pharmaceutical companies and is also engaged in medical transcription activity. The assessee claimed that these activities were eligible for deduction under section 10B or alternatively under section 80HHE. The Assessing Officer held that these activities were not eligible on which CIT(A) has given no finding as he has confirmed the disallowance on technical grounds. Both the AO and CIT(A) have clubbed both the activities for the purpose of deduction and there being net loss have not allowed the claim. It has also been held by them that brought forward losses have to be adjusted before allowing claim of deduction. They have also pointed out technical fault in the prescribed audit report not being filed. It has also been noted that the approval as EOU had been given in the subsequent year but it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are expenses amounting to Rs.17,160/-. The ld. AR did not press this ground at the time of hearing of the appeal and, therefore, this ground is dismissed as not pressed. 11. We are now left with only the ground No.4 which is regarding disallowance of expenses treating the same as capital in nature. The AO during the assessment proceedings noted that the assessee had incurred repair expenses of Rs.27,57,933/- at the office of the director. The AO noted that the expenditure had been incurred on account of furniture and fixtures and not on repair of the building which was capital in nature. It was observed by him that such expenditure on furniture and fixtures could not be allowed even if the same were incurred in rented premises. The AO accordingly treated the expenditure as capital in nature and allowed depreciation @ 15%, i.e., Rs.4,13,690/- and thus, balance amount of Rs.23,44,243/- was disallowed. In appeal CIT(A) observed that the assessee had not produced agreement with the landlord. He agreed with the AO that the expenditure was capital in nature and accordingly confirmed the disallowance aggrieved by which assessee is in appeal before the Tribunal. 11.1 We have heard both p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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