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TMI Blog2014 (4) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... issued for the relevant assessment year – Decided partly in favour of Assessee. Disallowance of bad debt – Held that:- In the case of Auribindo Pharma, the assessee had shown the amount of bad debt written of at Rs. 8,24,978 - the AO has taken the figure of Rs. 1,08,48,951, which pertained to different parties - to this extent, only the figure of Rs. 8,24,978 should be taken into consideration for the purpose of adjudication - otherwise the observation and conclusion of the CIT(A) are absolutely correct and is in accordance with the law that the AO has to examine the conditions laid down in section 36(1)(vii) and whatever amount has been written of in the books of account as bad debts the same should be allowed – Relying upon TRF. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT – there was no infirmity in the order of the Commissioner (Appeals) – Decided partly in favour of Assessee. Claim of Deduction u/s 80G and section 80IB of the Act – Held that:- The contention of the assessee is legally tenable because at the time of filing of return of income, the net income was in loss - the claim of deduction u/s 80IB had no meaning - if the income is asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax (Appeals) erred in giving direction to the assessing officer to verify the claim for deduction under Section 80G of the Act in respect or donations paid. It is submitted that based on the documentary evidences available on record, learned Commissioner of Income-tax (Appeals) ought to have quantified and given specific directions to allow deduction under section 80G of the Act. 5. The learned CIT(A) erred in giving direction to the Assessing Officer to verify the claim for deduction under section 80IB in respect of profits derived by the eligible undertaking. 3. Brief facts, qua the issue involved in ground no.1 above are that, the assessee is a company which is engaged in the business of manufacturing, marketing and processing of drug intermediates pharmaceuticals, chemicals and bulk drugs. On a perusal of the return of income, the Assessing Officer observed that the assessee has claimed deduction of Rs. 1,05,65,392 on account of expenditure made on inhouse scientific research under section 35(2AB)(1). In response to the show cause notice, the assessee filed a copy of renewal of recognition of inhouse R D unit issued by the Department of Scientific and Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction under section 35(2AB). Thus, he disallowed the assessee's claim and upheld the action of the Assessing Officer. 5. Before the learned Commissioner (Appeals), the assessee also took alternate plea that the actual expenditure incurred by the assessee on the inhouse R D unit is revenue in nature because the same has been incurred wholly and exclusively for the purpose of business and, therefore, same should be allowed as business expenditure under section 37. The learned Commissioner (Appeals) rejected this plea also on the ground that expenditure on scientific R D does not come under the category of day-to-day business expenses, but it is incurred keeping in view the long term benefit to the company. The expenditure incurred in R D will have only long term enduring benefit which is capital in nature. 6. Before us, the learned Counsel for the assessee submitted that once the assessee has applied for renewal of recognition and approval of inhouse research and R D facility in the prescribed form and the same has been issued by the DSIR, then, insofar as the assessee is concerned, the obligation gets discharged. He strongly referred to the decision of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basic requirements then the exemption cannot be denied. 7. The learned Counsel for the assessee further submitted that the order of approval in Form no. 3CM for the subsequent years i.e., 1st April 20011 to 31st March 2012 and 1st April 2012 to 31st March 2015 has been granted by the DSIR which has been signed by the Scientist-G for and on behalf of the Secretary, DSIR. This goes to show that the assessee is eligible for making claim under section 35(2AB). By way of an alternative submissions, he submitted that if such an expenditure cannot be allowed as deduction under section 35(2AB), then the same should be allowed as revenue expenditure to the extent of Rs.70,43,595. He pointed out to the relevant details, as appearing in Page-120 of the paper book, of such expenses and submitted that these are purely incurred for material purchase, employee's cost and other expenses which are exclusively and wholly for the purpose of assessee's business. In support of his contention that such expenditures are to be allowed, he relied upon the decision of the Tribunal, Delhi Bench, in ACIT v/s Parabolic Drugs Ltd., [2011] 141 TTJ 662 (Del.). 8. The learned Departmental Repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the Secretary, DSIR, Government of India, then the assessee shall be allowed sum equal to 1 times of the expenditure so incurred. Provisions of sub-section (4) provides that prescribed authority shall submit its report in relation to the approval of the said facilities to the Director General in such form and within such time as may be prescribed. Rule-6 lays down the procedure for making application and obtain approval in the prescribed form which is form no.3CK and the prescribed authority is required to grant or approval in form no. 3CM. Thus, for the purpose of claiming deduction on scientific research expenditure under section 35(2AB), it has to be approved by the prescribed authority and the rules provide that application should be made in proscribed form and also the approval is to be granted in the prescribed form. 11. Once the assessee has filed the application in the prescribed form before the prescribed authority, then insofar as the assessee is concerned, it has fulfilled its obligation. However, there is a rider that such an application form has to be approved or has to be passed by the prescribed authority in form 3CM. These conditions are essential but such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an order is not being provided by the assessee, then the Assessing Officer shall examine the nature of expenditure incurred by the assessee for the purpose of scientific research, relating to its business and also examine whether such expenditure can be allowed under section 35(1) or as revenue expenditure under section 37. We order accordingly. Thus, the ground no.1 and 2 raised by the assessee are treated as partly allowed for statistical purposes. 14. Ground no.3, relates to disallowance of bad debt of Rs. 1,08,48,954. 15. The Assessing Officer noted that the assessee company has written of bad debt pertaining to Aurubindo Pharma. In response to the show cause notice, the assessee submitted that the said party was their customer for the last several years and they have not paid the amount due from them, despite making continuous effort for recovery of this amount, therefore, the same were written of in the books of account during the year with the approval of the Board of Directors. The Assessing Officer did not accept the assessee's explanation and disallowed the claim on the ground that the assessee could not substantiate its claim by producing any documentary evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine the conditions laid down in section 36(1)(vii) and whatever amount has been written of in the books of account as bad debts the same should be allowed in view of the principles laid down by the Hon'ble Supreme Court in TRF Limited (supra). Thus, we do not find any infirmity in the order of the learned Commissioner (Appeals) to the extent stated above. Thus, the assessee's ground is treated as partly allowed. 20. In ground no. 4 and 5, the assessee has contended that the learned Commissioner (Appeals) has directed the Assessing Officer to examine and give specific findings regarding the claim of deduction under section 80G and the claim of deduction under section 80IB without himself allowing the same. 21. The learned Counsel for the assessee submitted that insofar as the claim of deduction under section 80G is concerned, the assessee's net income itself was in loss, therefore, this ground has not much significance. Hence, the ground is dismissed. However, with regard to the claim under section 80IB, he submitted that in case there is a positive income after giving effect of this order, then the Assessing Officer should be directed to allow the claim for ded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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