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TMI Blog2014 (11) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... the business carried on by assessee – Decided against revenue. Admission of additional evidence – Held that:- Since the CIT(A) undertook examination of documents placed and has also coterminus powers with that of AO - both AO as well as Addl. CIT misdirected themselves in rejecting the contentions of assessee - both A.O. and Addl. CIT acknowledges that assessee’s capital R & D expenditure was incurred with reference to in-house products as well as contract research – decided against revenue. Judgment delivered in M/s. Enem Nostrum Remedies P. Ltd., vs. ACIT [2008 (8) TMI 384 - ITAT BOMBAY-E] considered or not – Held that:- The facts in the case is entirely different from the facts of assessee, wherein the present assessee is not only involved in research for in-house products which are also commercially exploited but also for contract research of the excess capacity available in R & D, which is also yielding good returns to assessee - the case law relied on by Revenue does not apply to the facts of the case – Decided against revenue. - ITA. No. 371/Hyd/2012 - - - Dated:- 12-11-2014 - Shri B. Ramakotaiah And Smt. Asha Vijayaraghavan,JJ. For the Petitioner : Mr. Raja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities from its inception in 1995. The main object of R D for manufacture was speciality chemicals, drug intermediates and export of drug intermediates. On the basis of the annual reports, Ld. CIT(A) noted that R D was carried out by the company in respect of Mifepristone, Camptothecin analogs and projects on Prostaglandins. Further, Ld. CIT(A) noted that on Prostaglandins and on the synthesis of mesoprostos and kesobidopa and in the case of anti-ancillary drugs which have been initiated on two products viz., bicalgtamide and anastorazole assessee was doing research. It was further noted that in addition to its own R D projects, AVRA scientists have worked out several contract research projects of R D level to optimize the laboratory process and then undertaken scale-up and production. Ld. CIT(A) also noted that assessee has been claiming capital expenditure for R D under section 35 for A.Y. 2003-04 of ₹ 24,30,722, for A.Y. 2004-05 ₹ 48,15,718 and these expenses were allowed. Only in this year A.O. raised objection. Ld. CIT(A) also noted that contribution of revenue based on the research products in respect of the domestic and export business and the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these facts. Not only that, even if additional capacity was used for contract research work, the provisions of IT Act does not disentitle assessee in claiming the deduction. Therefore, we uphold the order of Ld. CIT(A) and reject revenue ground on this issue. 6. The jurisdictional High Court in the case of CIT vs. Yamuna Digital Equipments P. Ltd., 238 ITR 717 has clearly held that from a reading of section, it is clear that it does not say that expenditure should be wholly and exclusively used for research and development. In the absence of word wholly and exclusively used for research and development the contention of the Revenue cannot be accepted. Hence, the expenditure which is of a capital nature when used for scientific research relating to the business carried on by assessee, the assessee is entitled to the deduction of the claim. There is no dispute with reference to the fact that assessee has used the assets for scientific research and expenditure incurred is for the business carried on by assessee. In view of this, we do not find any merit in the contentions that expenditure would facilitate the business of third party and not that of assessee. A.O. did not consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for contract research. As rightly held by Hon ble jurisdictional High Court the section does not say that expenditure should be wholly and exclusively for in-house products only. So long as the expenditure is for the purpose of business and in R D activity, the expenditure has to be allowed. Therefore, we do not find any merit in ground No.2. 10. As far as ground No.3 is concerned, the decision relied on by Revenue does not apply to the facts of the case. In the case of M/s. Enem Nostrum Remedies P. Ltd., vs. ACIT 314 ITR 47 that company has undertaken research and development work for its parent company in USA and the capital expenditure of R D was disallowed on the ground that assessee was not involved in the business of either manufacturing or selling any products for its own business. In that case, the benefits of laboratory services were utilized by others and not by the company. On those facts, the disallowance was approved. Similarly in the case of M/s. Ciba India P. Ltd., vs. ITO 305 ITR (AT) 75 that assessee also indulged in the business of carrying on specialized research activities for two companies in Switzerland and USA and the expenditure was disallowed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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