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2022 (7) TMI 155 - ITAT MUMBAIDeduction u/s 80IC - allocation of R&D expenditure - R&D expenditure nexus to the Baddi units - As per CIT-A no apportionment of R&D expenses to Baddi unit is required for computing deduction u/s 80IC - HELD THAT:- Assessee is having six units and deduction under section 80IC of the Act is being claimed qua one unit only namely Baddi unit No.1 and the assessee company is having two approved R&D facilities one at Mahape and another one at Sinnar. At the same time, it is also undisputed fact on record that the assessee does not have any R&D centers at Baddi. CIT(A) has returned factual finding that no R&D activities have been carried out by the assessee company in its Mahape and Sinnar R&D facilities qua the products/drugs manufactured by the assessee company on its Baddi units during the year under assessment. In the subsequent assessment years 2010-11 to 2013-14 identical issue has been decided by the Revenue in favour of the assessee by holding that R&D expenses incurred by the assessee company at Mahape and Sinnar units are not allocable to Baddi unit as there is no direct nexus between the R&D activities carried out and product manufactured by the assessee company at Baddi unit 1. Even the AO in his remand report discussed by the Ld. CIT(A) in para 5.1 of the impugned order categorically mentioned that the assessee’s “list of products manufactured at Baddi plant during the year under assessment show that the R&D expenses incurred at approved R&D centers situated at Mahape and Sinnar pertain to different products and not to the ones being manufactured at Baddi unit”. This contention of the assessee has not been controverted by bringing on record any fact or evidence by the AO by filing any counter reply. Rather the AO has mentioned in its remand report that he has perused all the documents submitted by the assessee carefully. Also brought on record by the assessee company that there is a gestation period of 10/14 years before any commercialization of product is achieved or even after lapse of such period there can still be no commercial production. But at the same time it is admitted fact that none of the products being manufactured by the assessee company at Baddi units has any nexus with the R&D activities being carried out at Mahape and Sinnar units. So we are of the considered view that when there is no direct nexus between the expenditure incurred on R&D activities by the assessee company at its Mahape and Sinnar units and manufacturing activity at the Baddi Units are not sustainable in the eyes of law. We are of the considered view that the Ld. CIT(A) has returned the findings on facts in the light of the decisions rendered by Hon’ble Bombay High Court in case of Zandu Pharmaceutical Works (2012 (9) TMI 620 - BOMBAY HIGH COURT) and Bush Boake Allen (India) Ltd. [2003 (12) TMI 10 - MADRAS HIGH COURT]. So we find no ground to interfere into the impugned order passed by the Ld. CIT(A). Resultantly, appeal filed by the Revenue is dismissed.
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