×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
06-09-2019, Sun Pharmaceutical Industries, Section 263, 80IC, Tribunal Ahmedabad
The instant appeal filed by the assessee is directed against the order dated 31.03.2015 passed by the Pr. Commissioner of Income Tax -1, Vadodara-2, under section 263 of the Income Tax Act, 1961 (in short ‘the Act’) for the Assessment Year 2008-09.
2. The assessee, a pharmaceutical company filed its return of income declaring total income of Rs.(-)32,08,64,172/- under normal provisions and book profit u/s.115JB of the Act of Rs.2,66,89,19,663/- which was finalized u/s.143(3) of the Act dated 19/12/2011 whereby and whereunder the income of the assessee was assessed at Rs.4,76,42,33,280/- under normal provision and Rs.3,14,81,31,195/- as book profit u/s.115JB of the Act. Further that Assessment Order was finalized u/s.143(3) r.w.s 147 of the Act on 14.02.2014 determining total income at Rs.5,59,68,08,333/- and u/s.115JB of the Act at Rs.3,14,81,31,195/-
3. The Ld.ACIT disallowed Rs.2,50,44,500/- towards R & D expenses. Subsequently Ld. Pr. CIT, u/s.263 of the Act held the assessment order dated 14.02.2014 is erroneous in so far as prejudicial to the interest of Revenue to the extent of non disallowance of R&D expenditure allocated to Sun Pharmaceutical Industries (partnership firm). The said expenditure has been enhanced at Rs.5,23,16,934/- and added to the total income of the assessee . Hence, the instant appeal before us
4. At time of hearing of the instant appeal the Ld.Sr.Counsel appearing for the assessee submitted before us that on merit the issue is squarely covered in assessee’s own case for Assessment Year 2010-11 by the Co-ordinate Bench in ITA No.1417/Ahd/2016 for A.Y. 2010-11; copy whereof has also been submitted before us.
5. However, the Ld.DR, has also not brought anything on record contrary to the argument advanced by the Ld.Sr.Counsel appearing for the assessee.
6. We have heard the parties, we have perused the relevant material available on record. We find that the addition on account of capital Research & development allocated to Sun Pharmaceutical Industries (partnership firm) has been challenged before us. We have also gone through the order passed by the Co-ordinate Bench in ITA No.1417/Ahd/2016 for A.Y. 2010-11. While dealing with identical issue and deciding the same in favour of the assessee, the Co-ordinate Bench observed as follows:
“…7. Ground No.4 relates to the addition on account of Capital R&D expense allocated to Sun Pharmaceuticals Industries (Partnership Firm) of Rs.22,93,81,646/-.
8. At the very outset of hearing of the instant appeal, the Learned Sr. Counsel appearing for the assessee submitted that the issue is covered in assessee’s own case passed by the Co-ordinate Bench in ITA No.929/Ahd/2017 or A Y. 2010-11; copy of the same was also handed over to us. However, the Learned DR failed to controvert the contention made by the Learned AR.
9. We have heard the respective parties, perused the relevant materials available on record. We have also carefully considered the order passed by the Co-ordinate Bench deciding the identical issue in favour of the assessee. The relevant portion thereof is as follows:
“39. The issue raised by the assessee in ground No. 7 is that the Ld.CIT (A) erred in confirming the order of the AO by allocating the research and development expenses incurred by t to the other partnership firms and accordingly made the disallowance of such e penses proportionately.
40. The assessee is a partner in two partnership firms namely Sun Pharma Industries and Sun Pharma Sikkim (for short SPI and SPS). Both the partnership firms were engaged in manufacturing the drugs. However, the assessee was carrying out research and development expenses for the drugs manufactured by both the firms. Accordingly, the assessee claimed the deduction for all the research and development expenses incurred by it in its books of accounts.
41. The AO during the assessment proceeding observed that both the partnership firm are claiming deduction under section 80IC of the Act. As such both the partnership firms were showing a huge amount of profit which was allocated to the partners of the firm. The assessee being a major shareholder in the firms received a huge amount as a share of profit which was claimed as exempted under section 10(2A) of the Act. Accordingly, the AO was of the view that the research and development expenses incurred by the assessee on the drugs manufactured by the partnership firms should be allocated to these partnership firms. Thus the AO worked out the research and development expenses pertaining to the firms for Rs.