TMI Blog2022 (8) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... AT:- We observe from the record that the ITAT in assessee s own case in particular A.Y. 2011-12 [ 2018 (2) TMI 2081 - ITAT MUMBAI] has decided in favour of the assessee and against the revenue. Disallowance of Consultancy charges - Consultancy charges paid to the consultants for the purpose of business only, we direct the Assessing Officer to verify the genuineness of the claim and if it is within the category of other consultancy charges which this bench as allowed in Ground we direct him to allow the same - ITA.NO. 7401/MUM/2019 - - - Dated:- 4-8-2022 - SHRI VIKAS AWASTHY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER Assessee by: Shri Vishwas Mehendale Department by: Shri S.N. Kabra ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of Learned Commissioner of Income-tax (Appeals)-22, Mumbai [hereinafter for short Ld. CIT(A)] dated 30.09.2019 for the A.Y.2013-14. 2. Brief facts of the case are, assessee filed its return of income on 28.09.2013 declaring income of Rs.4,20,890/-. The case was selected for scrutiny under CASS and notice u/s. 143(2) and 142(1) of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing offered Technical Dossiers and product etc. 20,97,025 5. Venture Corp Consultants Pvt Ltd Prof Fees for preparation of business plan 7,50,000 TOTAL 67,40,685 5. The Assessing Officer perused the above details and observed that above expenditure is not capital in nature and assessee was asked why the above amount should not be disallowed. In response assessee vide letter dated 19.02.2016 submitted that except for the disallowance on account of the payment made to Dr. May Pharma and Ventures Corp Consultants all other disallowances have been deleted by the Ld. CIT(A) so it should 'not be disallowed again. Payment made to Dr. May Pharma which was disallowed by Ld. CIT(A) is allowed by ITAT for A.Y.2008-09 and A.Y. 2009-10 hence it should not be considered for disallowance during this year. Assessing Officer rejected the submissions of the assessee and proceeded to disallow the same and added to the total income by considering the same as capital in nature. 6. Aggrieved assessee preferred an appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 750000 The above Prof. fees have been disallowed by the AO as per last year but except Dr. May Pharma, CIT appeal in appeal for Asst year 12.13 allowed the same and the departments appeal is dismissed by the ITAT for Asst year 2012.13. The ITAT in its order for Asst year 2012.13 even allowed Appellants appeal and allowed the expenses paid to Dr. May Pharma. The ITAT order for Asst year 12.13 is enclosed. Even your honour has given the decision in favour of the appellant in A. Y. 10.11 in the case of disallowance of may Pharma. Submissions: Based on the ITAT order for Asst year 12-13 we submit the entire disallowance may please be deleted. 7. After considering the submissions of the assessee Ld.CIT(A) sustained the additions made by the Assessing Officer on R D expenditure and with regard to professional fee, he partly allowed with regard to Dr. May Pharma and Ventures Corp Consultants, he sustained the addition with the following observations: - Next issue in this ground of appeal-3 is the disallowance of expenditure of Rs. 3,70,354/- made to Asian Patent Bureau (APB for short) as fees for product registration. Assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining a claim of Rs.796,85,000/- Under section 35(2AB) claimed by the appellant during the course of assessment based on the decision of the Mumbai ITAT and Karnataka High court decision. 3. The learned CIT (A) was not justified in confirming disallowance of Rs.3,70,354/- being the amount paid to Asean Patent Bureau as capital expenditure. 4. The learned CIT (A) was not justified in confirming disallowance of Rs.5,85,448/- being the amount paid to John A Macrerie as capital expenditure. 5. the Learned CIT(A) was not justified in confirming disallowance of Rs.29,37,858/- being the amount paid to Dr. Dilip Snavordekar as capital expenditure. 9. At the time of hearing, Ld. AR brought to our notice Page No 4 and 5 of the Paper Book which is the revised claim of the assessee which assessee has claimed before the Ld.CIT(A) relying upon the decision of the Hon'ble Karnataka High Court in the case of CIT v. Micro Lab Ltd. [383 ITR 0490] and he submitted the revised claim as under: - Asstt.Year- 2013-14 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Eligible Expenditure (1) + (3) 393.72 170.51 397.30 170.51 1,028.26 C CALCULATION OF DEDUCTION 200% of the Total Eligible Expenditure 341.02 341.02 D Appellants' Calculation - [(A-1) * 2] + (A-2) Note #5 503.35 506.93 1,137.89 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction u/s. 35(2AB) of the Act is relating to expenditure incurred in R D. Therefore, as per the Hon'ble High Court decision the income from the R D should not be reduced from the expenditure incurred in R D while allowing the deduction u/s. 35(2AB) of the Act. Accordingly, he prayed that the bench may allow the revised claimed made by the assessee. 11. With regard to other grounds raised by the assessee these issues are covered in favour of the assessee in assessee s own case in earlier Assessment Years from A.Y. 2007-08 to A.Y. 2011-12. The relevant orders are placed on record. 12. On the other hand, Ld.DR relied on the findings of the lower authorities and he brought to our notice Para No. 3.3 and Para No. 5.3 of the Ld.CIT(A) order. 13. Considered the rival submissions and material placed on record, with regard to enhanced claim of the assessee on R D expenses u/s.35(2AB) of the Act, assessee made the excess claim u/s. 35(2AB) of the Act heavily relying on the decision of the Hon'ble Karnataka High Court in the case of CIT v. Micro Lab Ltd. (supra) and ongoing through the decision of above said case; the Hon'ble Karnataka High Court held as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeds need not be reduced from the R D expenditure. In our view, the reason for not including sales realization arising out of products emanating out of R D work done and sold is because such sales would be reflected as receipts by the assessee in its books of account and income from business would be computed treating such sale as part of business receipts. The receipts arising out of sale of products will not go to reduce the expenditure on R D, whereas the assets acquired in the process of carrying out the R D if they are sold, such sales realization would go to reduce the expenditure on scientific research and that is why sales realization arising out of assets sold is required to be offset against R D expenditure. The above explanation will be sufficient to hold that the order passed by the CIT(A) u/s. 154 of the Act is unsustainable. Nevertheless, we will also examine as to what is the exact nature of receipts from sale of products. 14. A copy of license and supply agreement which was filed by the assessee before the AO as well as CIT(A) is at pages 5 to 26 of the assessee's paperbook. The sale of products is nothing but the sale of Dossiers by the assessee to pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of R D because these sales are part of normal sales. 17. It is clear from the sample copy of the license and supply agreement filed before us that the product development charges received by the assessee will not be covered under clause 5(vii) of the DSIR guidelines. As we have already seen, these receipts are credited to profit loss account are part of normal sales. They are, therefore, not to be reduced from the expenditure incurred by the assessee on carrying out scientific research on which deduction u/s. 35(2AB) has to be allowed. We are, therefore, of the view that there is no merit in ground No.2 raised by the revenue and that the order passed by the CIT(A) DATED 9.4.2014 U/S. 154 of the Act cannot be sustained and the same is hereby reversed. Thus, ITA No.764/B/14 by the assessee is allowed, while ground No.2 raised by the revenue is dismissed. The aforesaid paragraphs show that the Tribunal has proceeded on the premise that when the regular work is in the nature of R D work done and sold, it becomes a business income and chargeable as business income. It is only when the assets acquired in the process of carrying on R D work, if they are sold, such realizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts regarding the products that would emanate from carrying out scientific research which are similar to the Dossiers (knowhow) prepared by the assessee and gives the same to the assessee so that they can get their licence for marketing the same either within the India or outside India. Therefore, if these products which are emanating out of R D work similar to the Dossier, process sheet, product development guide etc., which are distinct from the product and assets developed by the R D centre. 16. Coming to the present case, we observe that Ld. AR brought to our notice that auditor of the assessee company had certified the expenditure incurred by them which include capital as well as revenue expenditure to the extent of Rs.1255.05 lakhs and assessee has credited the R D services income in its Profit and Loss Account (in Schedule 22 of the balance sheet notes to financial statements) to the extent of Rs.857.75 lakhs. As observed from the Hon'ble Karnataka High Court decision as per which assessee can exclude the income earned from the product emanating out of R D work like dossier etc., in the given case assessee has only submitted the R D services earned by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asian Patent Bureau, Dr. Dilip Snavordekar and also to SwormTechnologies. Therefore, we declines to interfere in the relief granted by Ld.CIT(A). 19. Facts being identical, respectfully following the above said decision, we allow the ground raised by the assessee. 20. With regard to Ground No. 5, which is in respect of confirming disallowance of Rs.29,37,858/- being the amount paid to Dr. Dilip Snavordekar as capital expenditure, we observe from the record that the ITAT in assessee s own case in particular A.Y. 2007-08 has decided in favour of the assessee and against the revenue and the relevant findings are given below: - 25. It is not in dispute that the services of Dr. Dilip Sanvordekar have been utilized for the purposes of assessee s business. It is also not in dispute that the payments made by the assessee are genuine. As per the record, it is seen that and which has also been accepted by the A.O. that the services of Dr. Dilip Sanvordekar, Consultant have been utilized for some projects which are part of assessee s running business. Considering all these facts of the case, we do not find any reason to tamper with the findings of the ld. CIT(A) and accordingly we ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
