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TMI Blog2022 (6) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out certain services to the assessee. In the absence of any documentary evidences or cogent material in support of the assessee s claim, we are inclined to reject the same. Since this issue is already considered in the case of Apex Laboratories (P.) Ltd.[ 2022 (2) TMI 1114 - SUPREME COURT] which is against the assessee. Respectfully following the decision of the Hon'ble Supreme Court, we are inclined to dismiss the grounds raised by the assessee. Weighted deduction @ 125% u/s. 35(1)(iia) in respect of the payment for R D - HELD THAT:- We observe that assessee has entered into a scientific research service agreement for the purpose of development of certain intermediates which will be useful for the production of the final products owned by the assessee - AR brought to our notice the various invoices raised by the M/s. Calyx Chemicals and Pharmaceuticals Ltd., which is nothing but the supply of technical staff for the purpose of research activities. No doubt it involves various research activities and which are agreed by the assessee to avail the services to develop chemical process and manufacturing of API and intermediates. This will help assessee to improve it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 1. On the facts and in the circumstances of the case and in law Ld. Commissioner of Income Tax(Appeals)-16, Mumbai erred in sustaining addition of sales promotion expenses of Rs. 10,78,000/- being payments made to general practitioners. 2. On the facts and in the circumstances of the case and in law Ld. Commissioner of Income Tax(Appeals)-16, Mumbai erred in sustaining addition of sales promotion expenses of Rs. 80,126/-. 4. Assessee filed modified additional ground only in A.Y. 2012-13 which is reproduced below: - 1. Modified Additional Ground No. 1: 1.1. On the facts and in circumstances of the case and in law, the Appellant prays that the expenditure of Rs. 4,80,00,000/incurred for scientific research be allowed u/s. 35 of the Act. 5. With regard to main grounds of appeal raised by the assessee in grounds of appeal filed for the A.Y. 2012-13 which is common in all the Assessment Years under consideration relating to addition on sales promotion expenses being payments made to general practitioners and other sales promotion expenses. 6. The relevant facts relating to the above ground is taken from the lead A.Y. 2012-13. During the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses have been incurred for the professional expertise of these doctors but no confirmation of such receipts have been filed, therefore, these expenses cannot be allowed. Accordingly, Assessing Officer proceeded to make the addition as per the above chart and proceeded to make the disallowance ₹.1.61,31,086/-. 9. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) after considering the submissions of the assessee sustained the addition with regard to payment made to doctors. With regard to the sales promotion expenses Ld.CIT(A) observed that the expenditure relating to sales promotion expenses incurred are less than 1% of the turnover which is well below the industries standards and the above said payments are not in violation of the IMC Regulations and hence disallowance u/s 37(1) is not warranted. However, he disallowed only certain amounts which is not relatable to selling distribution expenses. For this assessment year Ld.CIT(A) sustained only to the extent of ₹.80,126/-. 10. Aggrieved assessee is in appeal before us raising above said grounds of appeal. 11. At the time of hearing Ld. AR of the assessee submitted that no doubt the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. Autonomy of GP is not compromised: The Ld. Assessing Officer has stated that autonomy of GP is compromised from accepting the said receipts from Assessee. This statement is inaccurate as the GP have been made payments in consideration of GP expertise feedback on products of the Assessee. 'Autonomy' is the capacity of a rational individual to make an informed, un-coerced decision. In moral and political philosophy, autonomy is often used as the basis for determining moral responsibility and accountability for one's actions. Your Honour Autonomy- of GP does not get affected when expenses were incurred upon the professionals without any job carried out by them. Therefore, the professional autonomy of the GPs is not compromised when they are paid fees for their medical knowledge. 12. He submitted that this expenditure does not fall under freebies and the assessee has made the payment for the services rendered by those Doctors. However, at the time of hearing the Bench asked the Ld. AR to submit any documents which gives the details of the above submissions made by the assessee in terms of any agreement with those Doctors or any other relevant papers to support the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d relevant information to dispose of the above additional ground are already available on record, therefore the additional ground of appeal is admitted for adjudication. 17. Coming to the relevant facts relating to additional ground are, during the assessment proceedings, Assessing Officer observed that assessee has claimed weighted deduction @ 125% u/s. 35(1)(iia) of the Act amounting to ₹.6,00,00,000/- in respect of the payment for R D to Calyx Chemicals and Pharmaceuticals (Indian company) engaged in R D. The assessee was asked to furnish the details / evidences of incurrence of the said expenses. In response assessee filed submissions, for the sake of clarity it is reproduced below: - M/s. Calyx Chemicals and Pharmaceuticals Ltd is approved Research and development center vide registration No.TU-1V/2496/2010 dated 10.06.2010 having its R D facilities at its Plant in Dombivali. Company has R D facilities of over Rs. 100 Crores with use of various modern techniques and technologies. The Company is engaged in research and development activities in pharmaceuticals sectors having its main focus on developing new process, improving process and driving cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lyx Chemicals Limited and it is in the process of product development, which generally takes long time and as of now it has not yielded any knowhow. Therefore, this expense is treated as work-in-progress. As and when product development happens with the help of which the assessee earns income, the same may be granted depreciation by transferring it from WIP to the 25% block. 19. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and however, before the Ld.CIT(A) assessee has not pressed this ground. Therefore assessee raised this additional ground before us with the prayer that actual expenditure of ₹.4.8 Crores incurred for scientific research maybe allowed u/s. 35 of the Act not u/s. 35(1)(iia) of the Act. 20. At the time of hearing, Ld. AR submitted that assessee has incurred certain expenditure on scientific development by making payment to M/s.Calyx Chemicals and Pharmaceuticals Ltd. He brought to our notice Page No. 130 of the Paper Book as per which assessee has entered into service agreement entered with M/s. Calyx Chemicals and Pharmaceuticals Ltd., for the purpose of conducting chemical process and manufacturing method development services, for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the M/s. Calyx Chemicals and Pharmaceuticals Ltd., which is nothing but the supply of technical staff for the purpose of research activities. No doubt it involves various research activities and which are agreed by the assessee to avail the services to develop chemical process and manufacturing of API and intermediates. This will help assessee to improve its process and manufacturing activities and improvement in its intermediates. Since it involves lot of labour activities which assessee has utilized from M/s. Calyx Chemicals and Pharmaceuticals Ltd. Since there is no document or any evidence that assessee has created any capital assets by doing of such research activities, however, these activities are carried out for the purpose of business only. Therefore these expenditures can be considered to incur only for the purpose of business and initially assessee claimed weighted deduction u/s. 35(1)(iia) of the Act and since there is no proper documents submitted by the assessee to claim any benefit u/s.35(1)(iia), the Assessing Officer has rejected the claim of the assessee. However, we find that assessee has incurred these expenditures for the purpose of business and in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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