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TMI Blog2015 (12) TMI 1373X X X X Extracts X X X X X X X X Extracts X X X X ..... e eligible for deduction u/s 35(2AB) of Rs. 2,13,60,603/- at Goa Pharma Technology Development (Goa FTD) to Goa undertaking. Goa PTD being an independent research centre and not forming part of the Goa Undertaking, expenditure incurred at Goa PTD ought to have been allocated to the units eligible for deduction u/s 80IB and 80IC in the ratio of turnover of such units to the total turnover of the company. b) Excluding the turnover of Roha and Pithampur units from the total turnover, while computing the ratio of sales of various units for the purpose of allocating the Revenue Expenditure on Scientific Research incurred at the R & D unit at Mumbai amongst the different units. On the facts and in circumstances of the case the Assessing Officer ought to have accepted the ratio of turnover of sales computed by the appellant." 4. The assessee company is in the business of manufacturing and trading of Formulations and Bulk Drugs. The company has six manufacturing units located at different locations. Two Units i.e. Roha Unit and Pithampura Unit are engaged in manufacturing of Bulk Drugs whereas the other units manufacture Formulations. During the year under consideration, the company c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricting the expenses of Goa R & D Unit to Goa itself. There is, however, no written communication registering any specific objection. While maintaining the stand that the R & D expenses incurred at Goa should be allocated to all the other Units in the ratio of Sales turnover as has been done for other indirect expenses, the assessee vide letter dated 19/12/2008, has submitted a "without prejudice" computation giving Unit-wise profit & loss account after allocating the R & D expenditure incurred at the Goa R &D Unit only to the Goa Unit. The other point that arose for discussion pertains to allocation to other Units of expenditure of Mumbai R & D Unit. It was seen from the allocation Chart furnished by the assessee company that expenditure relating to Bulk Drug of R & D Unit, Jogeshwari, has been allocated only to Roha & Pithampur. In response to query as to why the said allocation has not been made to other Units, the Authorised Representative has replied vide letter dated 2212/2008, that this was done since Bulk Drugs are manufactured only at Roha & Pithampur. This is consistent with the assessee's earlier submission that Roha & Pithampur are engaged in the manufacture of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment (PTD), which is approved by Department of Scientific & Industrial Research. Thus, Goa PTD was independent of Goa undertaking. Goa-PTD is conducting research in relation to formulation. The benefit of formulation research is available to all the units of the appellant. 3. Since, the expenditure incurred at Goa-PTD benefits all units; the appellant has allocated these expenditures in the turnover ratio of the respective units. 4. In the AY 2005-06 relevant to previous year 2004-05 when the Goa-PTD was set up, the appellant had allocated expenditure of Goa-PTD to all units on the ground that it is an independent R&D centre separate from Goa undertaking; the R&D undertaken at Goa PTD benefits all the units. The allocation made by the appellant has been accepted in the assessment u/s 143(3) of the Act. 5. We may also mention that in the subsequent year (i .e. AY 2007- 08) the appellant's contention that the expenditure incurred at Goa- PTD should be allocated to all units in the turnover ratio of the respective units has also been accepted in the assessment u/s 143(3) of the Act. As there is no change in facts in relation to the basis of allocation of expenses of Goa P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to have disturbed the position accepted in all the earlier assessment years. It is very well accepted that the principle of res judicata does not apply to tax proceedings; however, where the position of the parties on a matter, point or issue has remained settled for considerable length of time, such position should, normally, be not disturbed without compelling reasons evidenced by material change in facts and/or in law. In this connection, reliance is placed, inter alia, on the following decisions - Kerala High Court in CIT vs Velimalai Rubber Co. Ltd (181 ITR 299) When a question of law or fact is decided in assessee's own case for an earlier assessment year and the identical question comes up for consideration for a later year, the Tribunal will be justified in placing reliance on the earlier decision to base its conclusion. Kerala High Court in CIT vs Kaltetta Estates Ltd (221 ITR 635) The principles of res judicata do not apply, but the Tribunal would be justified in placing reliance on earlier decision in the absence of any new material or change in the circumstances. Ahmedabad tribunal in Poonjabhai Vanmali & Sons vs. ITO (33 TTJ 91) While appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon by the assessee in this respect are thus not applicable. 10. Now coming to the facts of the case, The ld. AR in this respect has relied upon page 45 of the paper book which is a copy of letter dated 30th March 2010 addressed to the CIT(A), relevant part of which, for the sake of convenience, is reproduced as under: "In our submission dated 15.02.2010 and 12.03.2010 we have submitted that the appellant is allocating R&D expenditure incurred at Goa PTD to all the units in the ratio of turnover of the respective units. In the course of the hearing your honour has asked us to furnish the details of some of the specific technology developed by Goa-- PTD and goods manufactured based on that technology with manufacturing location. The details of some of the technologies developed by Goa-PTD and the manufacturing location: Products developed at Goa-PTD Unit manufacturing the product Anti-arrhythmic (Amiodarone tablets) Ghaziabad unit for Brazil Market Anti-fungal agents (Terbinafme tablets) Ghaziabad unit for Brazil Market Anti Histaminic (Cetirizine tablets) Goa unit for USA market Cardiovascular Agents Goa unit Anti-allergic Agents Goa unit Lipid loweri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain units of the assessee and also in respect of limited items and not in respect of all the research work carried out at Goa-PTD unit. Under such circumstances, it cannot be said that the benefit of R & D activity at Goa- PTD unit has benefited all the manufacturing units of the assessee during the year. Even as discussed above, the assessee has not allocated expenditure of Banglore R&D unit on the ground that the assessee's formulation units were not deriving benefit from the activity carried in Bangalore unit, hence applying the same analogy, the issue in the light of observations made above is required to be relooked into by the AO. We further find that even the above explanation was not offered by the assessee before the AO. The explanation given vide letter dated 30.03.10 for the first time was offered to the Ld. CIT(A), who has also not discussed it in the impugned order. Thus the above submissions of the assessee that the benefit of R&D activities of the assessee has been enjoyed by the other units manufacturing formulations have not been examined by either of the lower authorities. Even by the above submissions made before us without any supporting evidence are not suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a case where no exempt income was received by the assessee despite making investments for earning exempt income. It is also not the case of the Revenue that the exempt income earned by the assessee was very less or not in proportion to the investments made by the assessee for this purpose. Under such circumstances the different coordinate benches of this Tribunal have observed that in such cases certain percentage of exempt income can constitute a reasonable estimate for making disallowance for the years earlier to assessment year 2008-09. The Hon'ble Bombay High Court in the case of CIT vs. 'Godrej Agrovet Ltd.' (supra) has upheld the order of the Tribunal directing the AO to restrict the disallowance to the extent of 2% of the total exempt income earned by the assessee. Under the circumstances, the proposition of law which emerges from the order of the Hon'ble High Court in the case of 'Godrej Agrovet' (supra) is that certain percentage of exempt income can constitute a reasonable estimate for making disallowance for the years earlier to assessment year 2008-09 and not that in each every case, such percentage is to be restricted @2% only. The Ld. CIT(A), in the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include any tax, duty, cess or fees actually paid or incurred to bring the goods to the place of its location and condition as on the date of valuation. In this case the assessee was following Exclusive method in respect of raw material, packing material and spare parts and therefore adjustment on account of tax/duty is required to be made in respect of such items in the purchase/ sales, opening stock and closing stock. The auditors had computed the adjustment under section 145A at Nil as per clause 12(b) of the auditors report which has not been accepted by the AO without giving any reasons. The AO has made his own adjustment which does not give details of adjustment made in relation to opening stock, sales and closing stock in relation to items mentioned by him. The matter in our view requires fresh verification and AO is required to give specific finding as to how adjustment prepared by auditors was not found acceptable. We, therefore, set aside the order of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination in the light of our observations made above and after allowing opportunity of hearing to the assessee." 5. Since the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentatives of the parties. We find that the AO has allowed the repair expenses in respect of other units except a few expenses about which the assessee could not substantiate its claim as discussed in the assessment order. In respect of Mumbai Unit, the AO had called upon the invoices of Rs. 50,000/- and above. It is an admitted fact on the file that the assessee has no evidence to support the claim as the same has allegedly been destroyed in fire. The AO thus could not verify the said claim of expenditure. The AO, despite the above fact, considering the overall facts of the case, has allowed the claim but has retained only 5% adhoc disallowance for want of supporting evidences, which action seems to be quite justified. We do not find any infirmity in the order of the AO in this respect. This ground is therefore dismissed. Now coming to the Revenue's appeal i.e. ITA No.4996 for A.Y. 2006-07. ITA No.4996/M/2011 for A.Y. 2006-07 17. The Revenue in this appeal has taken two effective grounds of appeal. Vide ground No.1, the Revenue has agitated the action of the AO in restricting the disallowance under section 14A to the extent of 5% of the dividend income as against the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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