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TMI Blog2020 (10) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... y by the prescribed authority and therefore, the Assessing Officer erred in disallowing the deduction. Tribunal has rightly held that issue with regard to violation of conditions mentioned in Rule 18DA can be looked into only by the prescribed authority and not by the AO. Admittedly, the approval was granted to the assessee, which was renewed from time to time, therefore, the question of remand does not arise in the facts of the case. We are in respectful agreement with the view taken in case of B.A.RESEARCH INDIA LTD [ 2016 (6) TMI 853 - GUJARAT HIGH COURT] - Decided against revenue. - I. T. A. NO. 282 OF 2014 - - - Dated:- 14-10-2020 - THE HON'BLE MR. JUSTICE ALOK ARADHE And THE HON'BLE MR. JUSTICE H.T.NARENDRA PRASAD FOR THE PETITIONER : Mr. E.I. SANMATHI, ADV. FOR THE RESPONDENT : BY Mr. PERCY PARDHWALLA, SR. ADV., A/W Mr. K.R. VASUDEVAN, ADV., AND Mr. ANKUR PAI, ADV. JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2008-09. The appeal was admitted by a bench of this Court vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer and remitted the question of determination of the question of Arm's Length Price (ALP) to the Transfer Pricing Officer (TPO) for fresh consideration. In the result, the appeal was partly allowed. In the aforesaid factual background, this appeal has been filed. 4. Learned counsel for the revenue while inviting the attention of this court to provisions of Section 80-IB(8A) of the Act as well as Rule 18DA(1)(c) of the Rules and submitted that the assessee is not entitled to deduction under the aforesaid provision as the assessee does not have adequate infrastructure such as laboratory facility, qualified manpower, scale of facilities and prototype development facilities for undertaking scientific research and development of its own. It is further submitted that without establishing laboratory facilities and necessary instruments / equipments it is not possible for the assessee to engage in scientific research and development. It is also pointed out that infrastructure facility referred to by the assessee in Bangalore, Mumbai and Ahmedabad is only an office space and not a facility that supports scientific research and development activity. It is contended that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch and development but in the instant case, from the material on record, it is evident that the assessee was dealing with regulatory authorities, preparation of protocol and study materials, identification of laboratory / investigation sites etc. It is also urged that Tribunal ignored the findings of the assessing authority and Dispute Resolution Panel with regard to clauses in the agreement. It is also submitted that Assessing Officer is competent to ascertain whether conditions mentioned in Rule 18DA are complied with or not. Alternatively, it is submitted that the Tribunal should have directed the assessing authority to send a report to prescribed authority for reporting violation and the prescribed authority after examining the issue of violation, could have taken appropriate action and the assessing authority could have passed a final order of assessment in the light of the action, which may have been taken by the prescribed authority. It is also urged that exemption notification of clause should be strictly construed. In support of aforesaid submissions, reliance has been placed on decision of Supreme Court in 'COMMISSIONER OF CUSTOMS (IMPORT) MUMBAI VS. DILIP KUMAR AN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015) 60 TAXMANN.COM 309 (KARNATAKA), 'GESTETNER DUPLICATORS PVT. LTD. VS. COMMISSIONER OF INCOME-TAX', (1979) 1 TAXMAN 1 (SC) and 'COMMISSONER OF INCOME-TAX VS. PARRYS (EASTERN) (P.) LTD.', (1989) 42 TAXMANN 62 (BOM). 7. We have considered the submissions made by learned counsel for the parties and have perused the record. Section 80-IB of the Act provides for deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Before proceeding further, we may take note of the relevant statutory provisions viz., Section 80-IB(8A), Rule 18D and Rule 18DA of the Income Tax Rules, 1962, which read as under: Section 80-IB(8A) (8A)The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of ten consecutive assessment years, beginning from the initial assessment year, if such company-- (i) is registered in India; (ii) has its main object the scientific and industrial research and development; (iii) is for the time being approved by the prescribed authority at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) is engaged exclusively in scientific research and development activities leading to technology development, improvement of technology and transfer of technology developed by themselves; (f) submits the annual return alongwith statement of accounts and annual report within eight months after the close of each accounting year to the prescribed authority. (2) Every company which is approved under sub-rule (2) of rule 18D shall-- (a) sell any prototype or output, if any, from its laboratories or pilot plants with the prior permission of the prescribed authority; (b) intimate the change, if any, in its memorandum of association and articles of association relating to its main objects and forward the altered copy of its memorandum of association and articles of association to the prescribed authority; (c) apply for extension of the approval at least three months before expiry of the approval already granted by the prescribed authority; (d) have a system of monitoring the cost of research and development projects. (3) If, at any stage, it is found that-- (a) the approval granted to the company referred to in sub-rule (2) of rule 18D is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mandates the prescribed authority to be a body, which can minutely examine the highly technical and scientific requirements in case of a company. Therefore, once the prescribed authority grants approval and such approval holds the field, it would not be open to the Assessing Officer or any other revenue authority to sit in appeal over such approval certificate and re-examine the issue of fulfillment of conditions mentioned in Sub-Rule (1) of Rule 18DA of the Rules. The prescribed authority is a specialized body having expertise in the field of scientific research and development and the requirements being extremely complex, scientific requirements have therefore, being rightly placed in the hands of the expert body. There appears to be no plausible reason as to why Assessing Officer should be allowed to sit in appeal over the decision of a body, which is prescribed under the Rules. In this connection, reference may be made to Section 85C of the Act also, which deals with deduction of tax on royalties etc. received from certain foreign companies. The assessee in order to claim the benefit of deduction under Section 85C of the Act was required to obtain approval of the Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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