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2019 (10) TMI 73 - ITAT MUMBAIWeighted deduction u/s 35(2AB) - AR submitted, assessee is entitled to claim deduction of revenue and capital expenditure incurred towards research and development activity even if such activity is not carried out in the in–house research and development facility of the assessee - HELD THAT:- Undisputedly, the research and development activity in respect of which the assessee has claimed deduction under section 35(2AB) of the Act were not carried out in assessee’s own in–house research and development facility. Therefore, the issue which arises for consideration is, whether the expenditure incurred for carrying out research and development activity outside by way of out sourcing or otherwise can be eligible for deduction under section 35(2AB) of the Act? As per the provision contained under section 35(2AB) of the Act, weighted deduction can be allowed in respect of expenditure on scientific research carried out in the in–house research and development activity as approved by the prescribed authority. Therefore, going by the plain meaning of the 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 charged guarantee commission on the corporate guarantee provided to the AE @ 0.75%. The guarantee fee charged has been benchmarked by the assessee by obtaining a quotation from HSBC India which has been used as an external CUP. The method adopted by the assessee to benchmark the guarantee 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, 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. Allocate research and development expenditure to section 80IB and 80IC units - HELD THAT:- Commissioner (Appeals) having found that identical dispute has been decided by the Tribunal in favour of the assessee in the preceding assessment year, followed the same and directed the Assessing Officer not to allocate research and development expenditure to units eligible for claiming deduction under sections 80IB and 80IC of the Act. TDS u/s 195 - payment to non–residents on account of pilot bio study, clinical research, etc., without withholding / deducting tax at source - disallowance made under section 40(a)(i) of the Act for failure to deduct tax at source - HELD THAT:- Both the parties have agreed before us that the issue has been decided in favour of the assessee by the Tribunal in the preceding assessment year. It is observed, while deciding the appeal arising out of an order passed under section 201 and 201(1A) of the Act in Assessment Year 2007–08 fastening liability on the assessee due to non–deduction of tax under section 195 of the Act on similar payments made by the assessee to the non–resident, the Tribunal in [2010 (7) TMI 1081 - ITAT MUMBAI] has held that the payment made by the assessee to the non–residents cannot be treated as fee for technical services. Hence, the assessee was not required to deduct tax at source under section 195 of the Act - Decided in favour of assessee.
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