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Quintiles Research (India) Private Limited Versus Deputy Commissioner of Income Tax - Circle - 3 (1) (2) Ahmedabad

2016 (9) TMI 111 - GUJARAT HIGH COURT

Reopening of assessment - beyond a period of 4 years - Entitlement to deduction under Section 80-IB(8A) - Held that:- Assessing Officer in the order of assessment had disallowed the entire claim of deduction, he had, thereafter, not made any observations with respect to parts of such claim including with respect to the interest income. When the Tribunal was thus examining the entire claim of deduction, it was perhaps open for the Revenue to argue by way of alternative contention that even though .....

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the notice has been issued beyond a period of four years from the end of the relevant assessment year. Despite strenuous efforts on part of the counsel for the Revenue, we are unable to see where in a situation like one on hand the condition of failure of true and full disclosure can be done away with when the Assessing Officer has resorted to reopening of the assessment beyond a period of four years. - Special Civil Application No. 3924 of 2016 - Dated:- 19-7-2016 - Akil Kureshi And A. J. Shast .....

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h, one of the major claims was of deduction of ₹ 31.32 crores under Section 80-IB (8A) of the Income Tax Act, 1961 ['the Act' for short]. The Assessing Officer called upon the assessee to justify the claim. In the process, the Assessing Officer also raised several other queries including the following: An amount of ₹ 4,97,03,172/- shown as other incomes in (Schedule K) and deduction u/s. 80IB(8A) is also claimed in the said income. Please explain the nature of the income and .....

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eived from various parties) 10,219,214 Total 49,703,172 As per Accounts 49,703,172 Term on term deposits of ₹ 14,250,127 The interest income earned by the assessee company was in respect of surplus funds which it intended to use for the purpose of its business of research and development and is accordingly derived from the business of the assessee company. During the aforesaid assessment year the assessee company has neither carried on any other business activity other than research and de .....

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, in its judgement dated 07.12.2014, provided as under: 30. in the present case, it is not disputed that the entire receipts of the assessee are from contract research and not own research. It is also pertinent to mention that in the appendix to the form for approval to the renewal there is a specific column namely col. no. 2 and 3 dealing with contract research. The said column seek details of sponsorship fee (if any) name of the sponsors if, any. It is, thus clear that the forms contemplates a .....

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n the case of Fortis Clinical Research Ltd., also supports the aforesaid view. In the aforesaid case, though the issue as to whether the CRO are also covered u/s. 80IB(8A) of the Act was not directly in issue, yet, it is an authority for the proposition that any violation of the conditions of the Rule 18DA(8A) can be looked into only by the prescribed authorities and not by the AO, while competing the assessment. In that view of the matter, we are of the view that the revenue authorities fell wi .....

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that the impugned notice came to be issued. The Assessing Officer had recorded following reasons for issuing the notice: The assessee company Quintiles Research (India) Pvt. Ltd. engaged in the business of clinical research for pharmacy. The assessee company filed its return of income for the AY 2008-09 on 29.09.2008 declaring a gross total income of ₹ 31,32,49,090/- and after claiming the deduction u/s. 80IB(8A) the total income declared is Nil. The assessment was completed u/s. 143(3) r. .....

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₹ 1,42,50,127/-. As the interest income earned on Fixed Deposits has no direct nexus with the profits derived from the undertaking, the same was not eligible deduction u/s. 80IB and hence it is a case where income chargeable to tax has escaped assessment within the meaning of sec. 147 of the IT Act. Therefore, I have reason to believe that the income chargeable to tax to the extent of ₹ 48,43,618/- has escaped assessment within the meaning of Sec. 147 of the IT Act. 7. The petitioner .....

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accepted. According to the Assessing Officer, such claim included interest income of ₹ 1.42 crores received on fixed deposits. This income cannot be stated to have been derived from the eligible business of the assessee and, therefore, the deduction to such extent should have been refused. In order to do so, he issued the impugned notice. 9. Having heard learned counsel for the parties and having perused the documents on record, in our opinion, the Assessing Officer had no authority to is .....

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on part of the assessee to disclose any of the material facts. The claim of deduction under Section 80-IB (8A) of ₹ 31.32 crores from the outset included several heads including sum of ₹ 1.42 crores by way of interest from fixed deposits. There was, thus, full disclosure on part of the assessee. Additionally, during the original assessment itself, the Assessing Officer had noticed different limbs of this deduction and specifically called upon the assessee to give justification regard .....

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