9911796707
TMI Blog2018 (7) TMI 1867X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon'ble Gujarat High Court in the case of Cadila Healthcare Ltd. 2. The CIT(A) ought to have observed that the issue has not reached finality by way of Apex court has remitted the issue back to Gujarat High Court for fresh adjudication. 3. The CIT(A) erred in allowing expenditure towards Rates & Taxes and Travelling Expenses in connection with Clinical Drug Trials including Bio Analytical and Bio Equivalence studies conducted which also form part of expenditure incurred outside the 'in-house' R & D. 4. The CIT(A) ought to have considered the fact that rates & Taxes and Travelling Expenses in connection with Clinical Drug Trials forms part of expenditure incurred outside the 'in-house' R & D Facility and the issue is squarely covered in question of law involved for the purpose of law involved for the purpose of weighted deduction u/s 35(2AB) in the case of Cadila Healthcare Ltd which is still pending before Hon'ble Gujarat High Court." 3. Brief facts are that assessee has claimed weighted deduction u/s 32(2AB) in the computation of income and A.O. on examination of the claims with reference to the Form 3CL, issued by the Competent Authority, while allowing weighted dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Gujarat High Court wherein it was held that merely because the prescribed authority segregated the expenditure in two parts, viz; those incurred within the in-house facility and those incurred outside by itself would not be sufficient to deny the benefit to the assessee under section 35(2AB) of the Act. Thus, expenses incurred on drug trial outside the approved R&D facility would also be entitled to weighted deduction under section 35(2AB). 5. Ld. CIT(A) has analysed the facts and law on the issue and allowed the claim stating as under:- "8. The facts of the case and the grounds of the assessee Company are carefully considered. The Assessing Officer noticed that the claim made for R&D Expenditure in the return of income was more than the amount indicated in the certificate given in Form 3CL. At this point the A.R. filed a revised statement of expenditure on Scientific Research in the light of the Form 3CL. The subsisting variance was attributed to Bio-Equivalence Studies done outside the in-house R & D facility which is, therefore. necessarily outside the purview of Form 3CL Which reflects in-house R&D Expenditure alone. The assessee held that in the light of the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not as if that the said authority was addressing the issue for deduction ujs.35(2AB) of the Act in relation to the question hand. The certificate issued was only for the purpose of listing the total expenditure under the Rules." In fact the case of the assessee on the legal aspect of the claim is supported by the explanation placed below clause (1) whereby expenditure incurred on clinical drug trial by pharmaceutical companies is expressly made eligible for consideration as expenditure on scientific research in the context of Section 35(2AB). The case of the assessee that Bio-Equivalence Studies - also referred to clinical trials, are an intrinsic and necessary part of development of a new drug has to be accepted. The clinical drug trial sanctioned by the Explanation inserted below Section 35(2AB)(1) could not possibly have been carried out in an in-house facility. To require so would amount to an impossibility of performance. 8.3 It is seen that the Assessing Officer disallowed the above amount of Rs. 2,632.50 Iakhs and Rs. 3,400.02 lakhs on the premise that expenditure incurred has to be confined to the in-house facility. It is however, seen from the above that field t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke Rates & Taxes, Travelling Expenses, etc. The Ld. AR. relied upon the case of Intas Pharmaceuticals Ltd supra for the proposition that any revenue expenditure incurred in respect of the approved R&D facility is eligible for the weighted deduction. It is seen that the Hon'ble ITAT relied upon its earlier decision in the case of ACIT v. Torrent Pharmaceuticals Ltd, ITA No. 3569/Ahd/2004 dt.13.11.2009 in the context of the fact that there was no dispute that the assessee had actually incurred the impugned expenditure on building repairs and maintenance. In this light of the matter this amount of Rs. 1,72,91,656/- (Rs.1,28,31,395/- in AY. 2012-13) will be examined for broad account heads and the fact of which research unit the expenditure pertains to. To the extent it is a revenue expenditure pertaining to the approved R&D facility the assessee is eligible for weighted deduction. Alternatively, the claim will be allowed in terms of section 37 if actually incurred. Subject to this factual verification the claim is allowed." 6. It was the submission of the Ld. CIT-DR that the decision relied upon by the Ld. CIT(A) was set-aside by the Hon'ble Supreme Court as the Court has not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the case law placed on record. In the decision of Concept Pharmaceuticals Ltd (supra) the Coordinate Bench did not allow the expenditure spent outside the R & D unit but the Bench has not considered the explanation introduced with reference to 'Clinical Trials'. By very nature, the Clinical Trials cannot alone be done within research facility as they require cooperation from the Medical Doctors, Hospitals, Volunteers and patients, therefore such expenditure has to be necessarily spent outside the facility, but for the purpose of 'in-house' research. This issue was examined by the Coordinate Bench which was subject matter of appeal before the Gujarat High Court and Gujarat High Court has approved the same. As seen from the order of the Supreme Court in Special Leave to Appeal (C) No. 770/2015, dated 13.10.2015, the grievance of Revenue with reference to non-framing of three questions were considered by the Hon'ble Supreme Court as those three questions are considered to be 'substantial question of law' and referred to the Hon'ble High Court to hear the aforesaid three questions of law. However, the judgment already passed by the Gujarat High Court has not been set-aside. As Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
