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TMI Blog2017 (4) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... he Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VIA is admissible on the profits so enhanced by the disallowance. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/Tribunals may be withdrawn/not pressed upon Deduction under Section 80IB on account of disallowance of R&D expenses - Held that:- A.O. Has made this disallowance holding that the profits of the appellant were overstated on account of no expenses being debited for R&D facilities. The appellant has submitted that the reimbursement expenses were made to cover a host of facilities and services that were availed of from SPIL and that the expenses on account R&D for products developed and launched were included in that. As find that the notional disallowance on account of R&D expenses has been made on similar lines as the disallowances made for royalty, management fees and selling and distribution expenses. As discussed above, the said notional disallowances were found untenable by the Tribunal and were deleted in its order dated 12.06.2012. No addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was justified in deleting the deduction u/s., 80IB of the Act on account of disallowance of remuneration under Section 40 (b) of the Act and disallownace under Section 43B of the Act ? [F] Whether the Tribunal was justified in deleting the deduction under Section 80IB of the Act on account of disallowance of R D expenses, without appreciating that the assessee had itself admitted that it had reimbursed expenses on account of R D to M/s. SPIL and hence, the same would not partake the character of remuneration for technical services relating to R D activity ? Having heard Shri K.M Parikh, learned advocate appearing on behalf of the appellant-Revenue and Shri S.N Soparkar, learned senior advocate appearing on behalf of the respondent-assessee, the present Tax Appeal is admitted to consider the following Questions of law : [A] Whether on the facts and circumstances of the case and in law, the ITAT was right in holding that : (i) The Industrial Undertaking of the assessee firm at Dadra was not formed by splitting up or reconstruction of the existing business of M/s. Sun Pharmaceutical Industries Limited, the major partner in the assessee-firm ? (ii) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent, would be income from other sources referable to Section 56 of the Income Tax Act, any deduction that is to be made, can only be made from income from other sources and not from profits and gains of business, which is a separate and distinct head as recognized by Section 14 of the Income Tax Act. Shri Radhakrishnan is not correct in his submission that assistance by way of subsidies which are reimbursed on the incurring of costs relatable to a business, are under the head income from other sources , which is a residuary head of income that can be availed only if income does not fall under any of the other four heads of income. Section 28(iii)(b) specifically states that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax under the head profits and gains of business or profession . If cash assistance received or receivable against exports schemes are included as being income under the head profits and gains of business or profession , it is obvious that subsidies which go to reimbursement of cost in the production of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val Construction [2013]33 taxmann.com 277 (Guj.) * Commissioner of Income-tax IV, Nagpur v. Sunil Vishwambharnath Tiwari [2016]63 taxmann.com 241 (Bom.) (ii) If deduction under section 40A(3) of the Act is not allowed, the same would have to be added to the profits of the undertaking on which the assessee would be entitled for deduction under section 80-IB of the Act. This view was taken by the court in the following case: * Principal CIT, Kanpur v. Surya Merchants Ltd. [2016] 72 taxmann.com 16(All.) The above views have been attained finality as these judgments of the High Courts of Bombay, Gujarat and Allahabad have been accepted by the Department. 3. In view of the above, the Board has accepted the settled position that the disallowances made under sections 32, 40(a) (ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VIA is admissible on the profits so enhanced by the disallowance. 4. Accordingly, henceforth, appeals may not be filed on this ground by officers o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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