TMI Blog2013 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ltd., [2011 (2) TMI 66 - DELHI HIGH COURT] and CIT Vs. Claris Lifesciences Ltd., [2008 (8) TMI 579 - Gujarat High Court] and in the light of certificate issued by DSIR, Government of India dated 16.06.2009, we set aside the issue to the file of the AO to grant weighted deduction u/s 35(2AB). The balance expenditure if any not approved by the DSIR will have to be considered for deduction under section 35(1) or under normal provisions of the Act. The expenditure has been incurred by the R & D facility of the assessee approved by the Government of India. Merely because part of the expenditure incurred by the approved R & D facilities is not considered for weighted deduction under Section 35(2AB) would not render expenditure is not towards R & D or not for the purposes of the business. Allowability of such expenditure u/s 35(1) or under other appropriate provisions of the Act will have to be considered - Decided partly in favour of Revenue. - ITA No. 906/Hyd/2009, ITA No. 1415/Hyd/2008 C.O. No. 47/Hyd/09 - - - Dated:- 9-5-2012 - Shri Chandra Poojari And smt. Asha vijayaraghavan,JJ. For the Petitioner : Mr. V. Srinivas For the Respondent : Mr/s. S. Ravi A. V. Raghu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved by the order of the CIT(A), the revenue is in appeal before us. 5. We have heard arguments of both the parties, perused the record and gone through the orders of the authorities below. In the case of foreign agents who procure orders for exports to Indian Assessees, services are rendered by the agents outside India and the remuneration for such services will constitute business profits of the foreign agents. They are not rendering technical services for procuring orders and hence remuneration for procuring orders cannot be considered as fees for technical services. As the agent did not have any permanent establishment in India no part of the commission payable for procuring export orders is taxable in India. Recently, the Hon ble High Court of Delhi in the case of CIT Vs EON Technology reported in 246 CTR 40 has held that payment of sale commission to non resident cannot be disallowed under Section 40(a)(i). Respectfully following the decision of the Delhi High Court(supra), we uphold the order of the CIT(A) in this regard and dismiss the ground of appeal of the revenue. 6. Second ground of appeal of the revenue is against the direction given by the CIT(A) that the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication received by the appellant from the Ministry of Science Technology for renewal of recognition of the in house R D Unit as also decisions of ITAT, Special Bench in the case of JCIT Vs. ITC (112 ITD 57) as also the decision of the Hon ble Jurisdictional High Court in the case of CIT Vs. Yamuna Digital Electronics Pvt. Ltd. (238 ITR 717). I had also allowed 100% deduction u/s 35(1)( iv) on the capital expenditure incurred on the R D activity. While allowing the deduction u/s 35(1)( iv), I had relied on the decision of Hon ble Madras High Court in the case of Tube Investments of India Ltd., 260 ITR 94. Since the appellant itself has added back the expenditure on research and development while computing the income, it will tantamount to double disallowance if the amount is not allowed u/s 35(1)/35(1)(iv). Since the issue in the year under consideration is identical to the one decided by me in appelllant s own case for the ASSESSMENT YEAR 2005- 06, following the stand taken therein, the Assessing Off icer is directed to allow deduction u/s 35(1) for the expenditure incurred by the appellant on the revenue and capital account for the detail reason mentioned in the appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to weighted deduction of any and all expenditure so incurred. The Tribunal had, therefore, come to the conclusion that on plain reading of section 35(2AB) itself , the assessee was entitled to weighted deduction on expenditure so incurred by it for development of facil ity, and it had also considered rule 6(%A) and Form No. 3CM and came to the conclusion that a plain and harmonious reading of rule and form clearly suggests that once facility is approved, the entire expenditure so incurred on development of R D facility has to be allowed for weighted deduction as provided by section 35(2AB). The Tribunal had also considered the legislative intention behind above enactment and observed that to boos up R D facil ity in India, the Legislature has provided this provision to encourage the development of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted is development of facility, intention of the Legislature by making above amendment is very clear that the entire expenditure incurred by the assessee on development of facility, if approved, has to be allowed for the purpose of weighted deduction. Thus, the reasoning given by the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the prescribed authority. 18. As per the statement of total income enclosed to the return, the assessee had claimed deduction u/s 35(2AB), for Rs. 1,11,79,738/-. In support of its claim for deduction, the assessee had filed copies of the letter received from the Ministry of Science and Technology, Department of Scientific and Industrial Research dated 26/08/05. In the said letter, recognition to the in-house R D unit of the assessee company at Hyderabad was accorded up to 31/03/08 subject to different terms and conditions. In the assessment order, the Assessing Officer elaborately noted down all the terms and conditions but ultimately the assessee s claim for deduction u/s 35(1) was not considered for the simple reason that the assessee failed to substantiate that it had carried out the R D activity. The Assessing Officer observed that most of the evidences and details filed by the assessee showed that they pertain to the regular business activity of manufacturing of pesticides. Accordingly, the expenditure claimed to have been incurred for R D was not considered for deduction u/s 35(1) and depreciation on the capital expenditure as per IT Rules was allowed. Aggrieved, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s No. 11 of DSIR for import of the equipment for Rs. 23,41,517/- claimed to have been utilized for R D activity. At page 8 of the order, the Assessing Off icer has mentioned the condition No. 11. As per the condition No. 11, disposal/sale of imported raw materials, equipments and products/intermediates emanating from material and equipment imported for R D shall not be made without prior permission of DSIR irrespective of the f irm holding industrial license or not except if the same is to a public sector undertaking. In case of a sale to public sector undertaking, the f irm has only to intimate the DSIR within 30 days of all details of sale. In my view the Assessing Off icer had not properly interpreted the condition No. 11 which basically speaks of disposal/sale of imported equipments, products etc. In the case under consideration, there are no sale/disposal of imported equipments of Rs. 23,41,517/-. Apparently, the assessee had f iled all the details relating to the imported equipment and intimation thereof to DSIR vide letter dated 29/12/04. Further, the fact that the prescribed authority has renewed the recognition of R D house up to 31/03/2011 indicated that the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
