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TMI Blog2019 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... e words used in section 35(2AB) of the Act, only those expenditures which are incurred in the in house research and development facility are eligible for deduction. In fact, while dealing with identical issue in assessee s own case in the assessment years 2002 03 to 2004 05 [ 2012 (4) TMI 743 - ITAT MUMBAI] the Tribunal decided the issue against the assessee. However, while deciding the same issue in assessee s own case in assessment year 2007 08, the Tribunal has restored the issue to the Assessing Officer for fresh adjudication keeping in view various decisions cited by the assessee including the decision of the Hon ble Gujarat High Court in Cadila Healthcare Ltd. [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] . Therefore, following the decision of the Tribunal in assessment year 2007 08, we are inclined to restore the issue to the Assessing Officer for de novo adjudication. While doing so, the Assessing Officer is also directed to examine the ratio laid down by the Hon'ble Supreme Court in Commissioner of Customs v/s Dilip Kumar Co. Ors. [ 2018 (7) TMI 1826 - SUPREME COURT] TP adjustment on the provisions of corporate guarantee - HELD THAT:- The assessee itself has cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Revenue : Ms. Amrita Ranjan For The Assessee : Shri Yogesh Thar a/w Shri Hardik Nirmal ORDER PER SAKTIJIT DEY. J.M. Aforesaid cross appeals arise out of the order dated 27th December 2010, passed by the learned Commissioner of Income Tax (Appeals) 15, Mumbai, for the assessment year 2006 07. ITA no.1967/Mum./2011 Assessee s Appeal 2. The only issue raised in this appeal pertains to the disallowance of weighted deduction under section 35(2AB) of the Income Tax Act, 1961 (for short the Act ). Pertinently, the Revenue has also challenged the decision of the learned Commissioner (Appeals) on this issue in ground no.3 of its appeal being ITA no.1875/Mum./2011. Since these grounds raised by the assessee and the Revenue are on a common issue, we proceed to dispose of these grounds together. 3. Brief facts are, the assessee company is engaged in manufacturing and trading of pharmaceutical products. While verifying the return of income filed for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. The learned Authorised Representative submitted, though, in assessee s own case for the assessment years 2002 03, 2003 04, 2004 05, the Tribunal has decided the issue against the assessee, however, while deciding identical issue in the assessment year 2007 08, the Tribunal has restored it to the Assessing Officer for fresh adjudication keeping in view the decision of the Hon ble Gujarat High Court in Cadila Healthcare Ltd. (supra). Thus, he submitted, the issue may be restored back to the Assessing Officer for fresh adjudication. 5. The learned Departmental Representative submitted, as per the provisions of section 35(2AB) of the Act, the assessee can claim deduction if the research and development activity is carried out in the in house research and development facility. He submitted, since the assessee has carried out such activity by out sourcing, it is not entitled to claim deduction under section 35(2AB) of the Act. However, he agreed that in the assessment year 2007 08, the issue has been restored back to the Assessing Officer for fresh adjudication. 6. We have considered rival submissions and perused the material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). While doing so, the Assessing Officer is also directed to examine the ratio laid down by the Hon'ble Supreme Court in Commissioner of Customs v/s Dilip Kumar Co. Ors., vide judgment dated 30th July 2018, in Civil Appeal no.3327 of 2007. Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. These grounds are allowed for statistical purposes. 7. In the result, appeal is allowed for statistical purposes. ITA no.1875/Mum./2011 Revenue s Appeal 8. In ground no.1, the Revenue has challenged the deletion of addition made of ₹ 35,12,209, towards transfer pricing adjustment on the provisions of corporate guarantee. 9. Brief facts are, in the course of proceedings before him, the Transfer Pricing Officer found that in respect of a loan taken by the assessee s Associated Enterprise (AE) in United Kingdom (UK), the assessee has provided corporate guarantee and has charged 0.75% per annum as guarantee fee. It was claimed by the assessee that the guarantee fee charged @ 0.75% is at arm's length, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission cannot be faulted with. It is necessary to observe, while deciding the appeal of the Revenue in assessee s own case in assessment year 2007 08, vide ITA no. 5557/Mum./2012, dated 5th January 2018, the Co ordinate Bench has held that guarantee fee charged @ 0.75% is at arm's length. It is relevant to observe, in various other cases involving similar nature of dispute not only the Tribunal but the Hon'ble Jurisdictional High Court has held that arm's length price of guarantee fee can reasonably be fixed @ 0.5%. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals). This ground is dismissed. 14. In ground no.2, the Revenue has challenged the decision of learned Commissioner (Appeals) in reversing the decision of the Assessing Officer to allocate research and development expenditure to section 80IB and 80IC units. 15. Brief facts are, the Assessing Officer noticed that the assessee has claimed deduction under sections 80IB and 80IC of the Act in respect of the eligible units. The Assessing Officer held that the expenditure incurred by the assessee on research and development activity which was claimed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to explain why the amount should not be disallowed under section 40(a)(i) of the Act. In response, the assessee submitted its reply stating that as per the double taxation avoidance agreement between India Canada, India UK and India USA, the payments made to the residents of these countries cannot be considered as fee for technical services, hence, there is no liability on the assessee to deduct tax at source under section 195 of the Act. The Assessing Officer, however, did not find merit on the submissions of the assessee. Relying upon the order passed by him under section 201 and 201(1A) of the Act for the assessment year 2005 06, he held that the payment made by the assessee is in the nature of fee for technical services, hence, the assessee was required to deduct tax at source. Accordingly, he disallowed an amount of ₹ 2,14,20,270, under section 40(a)(i) of the Act. While deciding assessee s appeal on the issue, learned Commissioner (Appeals) followed the decision of the Tribunal on identical issue arising in earlier years and deleted the addition made by the Assessing Officer. 21. We have considered rival submissions and perused the material on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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