TMI Blog2018 (7) TMI 1867X X X X Extracts X X X X X X X X Extracts X X X X ..... ME COURT] the grievance of Revenue with reference to non-framing of three questions were considered 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. CIT(A) has followed the Coordinate Bench decision, which was approved by the Gujarat High Court and as no contrary High Court judgment has been placed on record, we approve the order of the CIT (A) and reject the Revenue contentions. - Decided in favour of assessee. - I.T.A. No. 1604 & 1605/HYD/2016 - - - Dated:- 20-7-2018 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For the Appellant : Shri C.P. Ramaswami For the Respondent : Smt. Alka Rajvanshi Jain, CIT - DR ORDER PER B. RAMAKOTAIAH, AM These are Revenue appeals against the common of Ld. CIT(A)-11, Hyderabad, dated 24.08.2016. The only issue in these appeals is with reference to weighted deduction allowed by Ld. CIT(A) on the clinical trials conducted outside the in-house R D facility which was disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved by the prescribed authority DSIR and Form No. 3CMs were already submitted, during the course of assessment proceedings and the expenditure is wholly and exclusively incurred by the company on its duly approved in-house research facilities. As far as Form NO. 3CL is concerned, it is only a report to be submitted by the prescribed authority to the Director General (Income Tax Exemptions). Simply because DSIR has not reported a particular amount it should not be disallowed when the expenditure incurred by the company is wholly and exclusively for and on its Approved Facility. It is expressly provided in the Explanation to clause (1) of section 35(2AB) I that the expenditure on clinical drug tails in relation to drugs pharmaceuticals is part of scientific research expenditure eligible for weighted deduction. For conducting Bio Analytical and Bio Equivalence Studies it requires hospital type facility and hence normally these studies will be conducted in outside facility duly approved for this purpose. In view of the above, it was submitted that the expenditure on Bio Analytical and Bio Equivalence Studies which forms part of clinical drug trials and which is must for product / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee does not dispute the methodology and quantification of this amount of ₹ 2,632.50 lakhs ₹ 3,400.02 lakhs. It is stated that this amount comprises of ₹ 24,59,59,344/- spent on Bio Equivalence Studies and ₹ 1,72,91,656/- spent on Rates Taxes, Travelling Expenses, etc., pertaining to Research Units in A.Y.2011-12. For A.Y.2012-13 it is similarly submitted that these figures are ₹ 32,71,70,605/- and ₹ 1,28,31,395/-, respectively. It is the claim of the assessee that the expenditure on Bio Equivalence Studies is an integral part of the activities of the in-house R D facility as supported by the Gujarat High Court decision in the case of Cadila Health Care Ltd. supra, and other expenses (of ₹ 1,72,91,656/- and ₹ 1,28,31,395/-) are eligible u/s. 35(2AB) in so far as they are revenue expenses actually incurred in respect of the research facility, and relied for this purpose on the case of Intas Pharmaceuticals Ltd v. DCIT 2015 TaxPub(DT) 3549 (Ahd- Trib). 8.2 On a careful consideration of the above it is seen that the factual matrix considered by the Gujarat High Court in the above cited decision of Cadila Health Care Ltd. is id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elop dosage forms and value added generics; To develop platform technologies and novel patentable formulations. Apart from the legal nature of reasons for the disallowance, the Assessing Officer has not gone into the fact of whether expenditure claimed can be seen as having been incurred on clinical trials tbat seek to further the above stated research objectives for which the assessee company-has- been recognised as an approved facility for the purposes of Section 35(2AB). The two tests for a factual ascertainment of this matter would be (i) if any part of the expenditure incurred on Bio-Equivalence Studies undertaken by it is attributable to contract research undertaken for other parties, the said weighted deduction is not admissible; and, (ii) the terms of engagement with the Clinical Research Organisations employed for carrying out the Bio-Equivalence Studies conducted has to be correlated with the stated research objectives of the assessee before the DSIR as listed above. In other words the assessee's claim for weighted deduction will have to be considered with reference to the object it sub-serves rather than the location of the expenditure whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court has not been set-aside. He further referred to the Explanation-2 to section 32(2AB) and relied on the following case law:- (i) ITAT Ahmedabad decision in the case of Intas Pharmaceuticals Ltd v. DCIT (ITA Nos. 807/Ahd/2010 and others, dated 14.08.2015); (ii) CIT vs. Cadila Healthcare Ltd (214 Taxman 0672); (iii) SRI Biotech Laboratories India Ltd vs. ACIT (36 ITR (Trib) 88); (iv) CIT vs. Claris Lifesciences Ltd (326 ITR 251) (Guj) and (v) CIT vs. Sandan Vikas (India) Ltd (335 ITR 117) (Guj) 8. Referring to the decision of Concept Pharmaceuticals Ltd (supra) it was submitted that the later decision of the ITAT has analysed the Explanation to section 32(2AB) which was approved by the Gujarat High Court. Since the decision has not considered the Explanation given, the decision need not be followed. It was further contended that when there are two possible views, the one which is in favour of the assessee should be followed as held by the Hon ble Supreme Court in the case of CIT vs. Vegetables Products Ltd (88 ITR 192) (SC). It was the submission that the Hon ble Supreme Court has referred additional three questions to Gujarat High Court and has not stayed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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