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The Deputy Commissioner of Income Tax Versus M/s Shasun Pharmaceuticals Ltd. (Formerly M/s. Shasun Chemicals & Drugs Ltd.)

2015 (9) TMI 1164 - ITAT CHENNAI

Disallowance of share issue expenses to be amortized u/s.35D - CIT(A) deleted the addition - Held that:- A similar issue came up for our consideration in assessee's own case for the assessment year 1999-2000 [2011 (4) TMI 556 - MADRAS HIGH COURT] wherein held there is no particulars with regard to the expenditure incurred by the assessee to claim deduction and further the expenditure incurred by the assessee is to be treated as a capital expenditure and not as a revenue expenditure. The decision .....

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computation of addition of depreciation on the basis of final opening WDV - Held that:- The Commissioner of Income Tax (Appeals) gave direction to the Assessing Officer to recompute the depreciation on the basis of written down value after giving effect to the Tribunal order in assessee's own case for the assessment year 2002-03. Being so, we find no infirmity in the order of the Commissioner of Income Tax (Appeals). This ground of the Revenue is rejected.- Decided in favour of assessee.
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rd, fourth and fifth proviso to section 80HHC (3), only to the extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees who export turnover is above ₹ 10 crores. Since, in the present case, the assessment year involved is 2003-04, being so, the issue of amendment has no consequence to the assessee's case. Accordingly, we uphold the finding of the Commissioner of Income Tax (Appeals) on thi .....

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the expenses claimed are like civil work including refurnishing of floor, painting work, carpentry work, general housekeeping, gardening, false ceiling, cleaning door, repairing, salary paid to personal in R & D unit whose serves Associated Enterprise in administrative in nature, security guard expenses, interest expense etc. The expenses are essentially incurred for repair and maintenance of existing R&D facility and for general upkeeping of the R &D unit which was subject to inspection by var .....

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ppeal by Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-VI, Chennai, dated 29.11.2013 for the assessment year 2003-2004. 2. The first ground in this appeal is that the Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to delete the disallowance of share issue expenses of ₹ 4,55,189/- to be amortized u/s.35D of the Income Tax Act. 3. After hearing both the sides, a similar issue came up for our consideration in assessee's ow .....

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not as a revenue expenditure. The decision of the Assessing Officer is also liable to be confirmed for another reason. In the appeals before the Commissioner of Income-tax and the Tribunal, both the authorities have not gone into the merits of the case or perused the materials to show the expenditure incurred by the assessee. On the other hand, both the authorities by simply stating that the claim of the assessee for the previous assessment years had been allowed, the claim of the assessee. If .....

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that the Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to recompute the addition of depreciation of ₹ 1,74,55,191/- on the basis of final opening WDV relying upon the decision of ITAT in the assesee's own case for the assessment year 2002-03 in ITA No.553/Mds/2006, Dated 06.07.2007. 6. We have heard both the parties and perused the material on record. The Commissioner of Income Tax (Appeals) gave direction to the Assessing Officer to recompute the depre .....

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ve profit and also on the issue of consideration of export incentives without application of eligibility conditions in the 3rd and 4th proviso to sec 80HHC (3) of the I.T. Act and allow deduction accordingly. 8. The facts of the case are that the Assessing Officer in denying deduction u/s.80HHC of ₹ 3,42,13,823/- on the ground that the computation of profit claimed by the assessee u/s.80HHC is a negative figure. The Assessing Officer had also observed that 90% of the following amounts had .....

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missioner of Income Tax (Appeals). 9. On appeal, the Commissioner of Income Tax (Appeals) observed that this issue of adjustment of the negative profit with 90% of the export incentives, the Supreme Court of India in the case of IPCA Laboratory reported in 256 ITR 521 held that the deduction should be computed after adjustment of negative profit with the 90% of the export incentives in proportion of the export turnover to the total turnover. Subsequently, fifth proviso was inserted by Taxation L .....

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d and fourth proviso to sec 80HHC, on the direction of Supreme Court of India, the Gujarat High Court heard the issue at length, considered various decisions of the Apex Court including the cases of Topman Exports reported in 342 ITR 49 (SC), IPCA Laboratory Ltd v. DCIT reported in 266 ITR 521 (SC) on the issue of taxability of DEPB and allowability of deduction u/s.80HHC and passed an order dated 02.07.2012 which was reported in 348 ITR 391 in the case of Avani Exports & Others v. Commissio .....

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nd at the same time, for depriving the benefit earlier granted to a class of the assessees whose assessments were still pending although such benefit will be available to the assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assessees. We, accordingly, quash the impugned amendment only to th .....

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. Act shall be adjusted against the profit of the export incentives in proportion of the export turnover to the total turnover. The Supreme Court in the case of Topman Exports (supra) also allowed the claim of deduction of 80HHC on the issue of DEPB sales. Respectfully following the decision of the Gujarat High Court in the case of Avani Exports (supra), and Apex Court decisions in the cases of IPCA Laboratory Ltd (supra), Topman Exports (supra), the Commissioner of Income Tax (Appeals) of the c .....

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e Gujarat High Court has not become final and the department has preferred an SLP which is pending before the Supreme Court. The ld. Departmental Representative further submitted that the decision of the Tribunal relied upon by the Commissioner of Income Tax (Appeals) in ITA No.1633/Mds/2006, dated 19.11.2007 in the assessee's own case has not become final and the Department had preferred an appeal before the High Court of Madras. 11. On the other hand, the ld. Authorised Representative for .....

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proviso to section 80HHC (3), only to the extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees who export turnover is above ₹ 10 crores. Since, in the present case, the assessment year involved is 2003-04, being so, the issue of amendment has no consequence to the assessee's case. Accordingly, we uphold the finding of the Commissioner of Income Tax (Appeals) on this issue. This gro .....

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In other words, this ground of the assessee is also dismissed by the Commissioner of Income Tax (Appeals) as not pressed. Hence, this ground is dismissed as infructuous. 15. The next ground is that the Commissioner of Income Tax (Appeals) erred in holding that the assessee is eligible for ₹ 70,65,156/- and not for weighted portion of the claim of ₹ 35,32,578/- u/s.35(2AB) relying upon the decision by the Tribunal in ITA No.949/Mds/2005 for the assessment year 1999-2000. 16. The facts .....

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sessee went on appeal before the Commissioner of Income Tax (Appeals). 17. On appeal, the Commissioner of Income Tax (Appeals) observed that the Assessing Officer has not disputed the incurrence of expenditure of ₹ 70,65,156/- but only disallowed on account of the approval not granted by the competent authority at weighted perecented. The Assessing Officer has also not disputed the nature of the expenditure. The sec 35(1) provides for deduction of expenditure other than the capital expendi .....

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mp;D facility and for general upkeeping of the R &D unit which was subject to inspection by various authorities like US FDA etc. and not for construction of new building or extension of the existing building. Even otherwise, these expenses are allowable u/s.37 of the I.T. Act, 1961. Looking at the nature of the expenses claimed by the assessee, the Commissioner of Income Tax (Appeals) confirmed the view of the assessee had incurred an expenditure of ₹ 70,65,156/- as revenue expenditure .....

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3. Having heard the rival contentions and going through the case records, it is observed that the Assessing Officer as well as the Commissioner of Income Tax (Appeals) has repeated the same mistake. It is seen that the assessee is entitled to claim for deduction on scientific research under Sec.35(2AB) of the Act but the lower authorities have restricted the revenue expenditure to the extent of ₹ 128.38 lakhs and capital expenditure of ₹ 28.82 lakhs restricted to ₹ 26.50 lakhs. .....

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