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2015 (9) TMI 994 - ITAT AHMEDABAD

2015 (9) TMI 994 - ITAT AHMEDABAD - Entitlement to Section 80IB(8A) deduction - whether the assessee’s sample storage incomes are to be held as derived from the eligible business for granting the impugned deduction or not? - Held that:- There is no dispute about the fact that the assessee is in the research and development field duly approved by the competent authority and already held entitled for Section 80 IB (8A) deduction. It enters into Master Service Agreement with its clients for conduct .....

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remises storing samples in question in May 2014. This letter issued by Department of Health and Human Services, Public Health Service, Food & Drug Administration, Silver Suffering, MD 20993 to this effect is dated 01.07.2015. The Revenue fails to rebut this factual position.

The case file further reveals that the assessee’s clients have to exercise an option of discarding, returning and retention of samples in lieu of paying the impugned storage studies. We put up a specific query to .....

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or its sample storage income is of such a nature which can be held as not ‘derived’ from the eligible business. The Revenue’s argument is accordingly rejected. Thus the assessee’s sample storage income is very much derived from its research and development activity only. - Decided against Revenue. - ITA. Nos. 2431 & 2432/Ahd/2012 - Dated:- 14-8-2015 - SHRI ANIL CHATURVEDI AND SHRI S. S. GODARA, JJ. For The Revenue : Shri D. C. Mishra, Sr.D.R For The Assessee : Shri Mukesh M. Patel ORDER PER S. S .....

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(in short the Act ). 2. Both parties state at the outset that the sole issue involved in these two appeals is that of Section 80IB(8A) deduction i.e. whether the assessee s sample storage incomes hereinabove are to be held as derived from the eligible business for granting the impugned deduction or not. We take up ITA No. 2431/Ahd/2012 as the lead case. 3. The Assessing Officer in the course of scrutiny noticed assessee s sample storage income of ₹ 13,45,928/- in its P&L account inclu .....

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tion. The assessee stated that the said sample would be retained pending license approval application and inspection procedures. It explained that these pharmaceutical studies sample required specific storage conditions instead of general ones. The Assessing Officer was not impressed. He observed in assessment order dated 23.12.2009 that impugned sample storage income had to be characterized as a miscellaneous one only, there was no material produced of pending license approvals, the assessee s .....

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port and appellant s submission and rejoinder. Appellant claimed deduction under section 80 IB (8A) on profit of business from scientific research including sample storage income being integral part of scientific research. Assessing Officer disallowed the claim of deduction on sample storage income on the ground that this activity is not integral part of scientific research and that this income was separately shown in P&L account. It is not in dispute that appellant is approved as R&D co .....

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e pharmaceutical industry. For this purpose, the appellant carried out analysis of clinical samples. Clinical samples collected are required to be stored as per regulatory guidelines until the necessary licensing approval is granted to the Pharma companies. This is because re-analysis of the samples may be necessary to support the research findings and to resolve the queries raised by regulatory authorities. Since storage of the samples for required period is to be done under special conditions, .....

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of records is part of the said agreement. Appellant s business of scientific research and development extends till the fulfillment of all regulatory requirements. During this process, samples collected are to be stored and preserved in specific conditions and environment for the required period. Since the period of storage is different for different samples and regulatory requirements, the charges are variable based on the period for which samples were preserved. In view of this, the charges for .....

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research and development, the said profit is eligible for deduction under section 80IB(8A). In view of this, just by mentioning the sample storage income separately in P&L account, the same will not become independent source of income other than scientific research and development. Appellant relied upon the judicial decisions in which it is held that interest from overdue debtors and erection and commissioning charges are not directly derived from industrial undertaking but the same are int .....

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of Liberty India vs. CIT (2009) 183 TAXMAN 349 (SC) and strongly argues that the CIT(A) ought to have upheld the Assessing Officer s action in disallowing the impugned claim of Section 80IB(8A) deduction qua the sample storage income in question. The assessee supports the lower appellate authority s order. There is no dispute about the fact that the assessee is in the research and development field duly approved by the competent authority and already held entitled for Section 80 IB (8A) deductio .....

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