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TMI Blog2019 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... y is engaged in manufacturing and trading of pharmaceutical products. While verifying the return of income filed for the impugned assessment year in the course of assessment proceedings, the Assessing Officer noticed that the assessee had claimed deduction @ 150% under section 35(2AB) of the Act towards capital and revenue expenditure incurred in the in- house research and development (R & D) facility. Therefore, the Assessing Officer called upon the assessee to furnish necessary details and justify its claim. In response, it was submitted by the assessee that it has not yet received certificate in Form no.3CL from the appropriate authority DSIR. From the details furnished by the assessee, the Assessing Officer found that research activity in respect of which the capital and revenue expenditure were claimed was not carried out in the in-house research facility but was done outside. Therefore, he called upon the assessee to explain why the deduction claimed under section 35(2AB) of the Act should not be disallowed. In response, the assessee filed a detailed reply stating that deduction claimed under section 35(2AB) of the Act is allowable even in respect of expenditure incurred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have considered rival submissions and perused the material on record. On a perusal of the impugned order of learned Commissioner (Appeals) and, more particularly, his finding in Para-8 to 8.4 of the impugned order, it is very much clear that he has fully allowed the claim of the assessee under section 35(2AB) of the Act. Therefore, we fail to understand how the assessee can be aggrieved with the decision of learned Commissioner (Appeals). Be that as it may, the Revenue has also challenged the decision of learned Commissioner (Appeals) on the issue of deduction claimed under section 35(2AB) of the Act. Undisputedly, the research and development activity in respect of which the assessee has claimed deduction under section 35(2AB) of the Act were not carried out in assessee's own in-house research and development facility. Therefore, the issue which arises for consideration is, whether the expenditure incurred for carrying out research and development activity outside by way of out sourcing or otherwise can be eligible for deduction under section 35(2AB) of the Act? As per the provision contained under section 35(2AB) of the Act, weighted deduction can be allowed in respect of expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges 0.75% as a guarantee fee for rendering financial guarantee. Thus, it was submitted, the letter issued by the HSBC India can be used as Comparable Uncontrolled price (CUP) to benchmark the arm's length price for guarantee fee. The Transfer Pricing Officer, however, did not accept the claim of the assessee and referring to certain comparable transactions he held that the guarantee fee chargeable on the corporate guarantee provided should be fixed @ 2.08%. Accordingly, he worked out the arm's length price of the guarantee fee at Rs. 54,92,778, which resulted in an adjustment of Rs. 35,12,209. The aforesaid amount was added back to the income of the assessee at the time of completion of assessment. The assessee challenged the aforesaid addition before the first appellate authority. 10. After considering the submissions of the assessee, learned Commissioner (Appeals) found that the guarantee commission charged by the assessee @ 0.75% is supported by the quotation obtained from HSBC India in respect of the same underlying transaction. He observed, HSBC India after assessing and carrying out due diligence of the assessee's account, etc., has fixed the commission rate @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, he computed the deduction under sections 80IB and 80IC of the Act by allocating the research and development expenditure which was claimed as deduction under section 35(2AB) of the Act. The assessee challenged the aforesaid decision of the Assessing Officer before the first appellate authority. 16. Learned Commissioner (Appeals) having found that identical dispute has been decided by the Tribunal in favour of the assessee in the preceding assessment year, followed the same and directed the Assessing Officer not to allocate research and development expenditure to units eligible for claiming deduction under sections 80IB and 80IC of the Act. 17. We have considered rival submissions and perused the material on record. The learned Counsels appearing for the parties have agreed that the issue has been decided in favour of the assessee by the Tribunal in the preceding assessment years. It is noticed, identical dispute arose in assessee's own case for the assessment years 2001-02, 2002-03, 2003-04, 2004-05 and 2005-06. In the latest order passed for the assessment year 2007-08, in ITA no.5557/ Mum./2012, dated 5th January 2018, the Tribunal, following its own decision for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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