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Fermenta Biotech Limited DIL Complex, Ghodbunder Road, S. V. Road, Majiwada, Thane (W), Mumbai-400 610 Vs. Asst. CIT, Circle -1, Office of the Income Tax, Lower Ground Floor, Vardhaman Building, Wagle Industrial Estate, Thane (W)-400 604
November, 25th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI
,                                         ,
BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARORA, AM
./I.T.A. No. 7398/Mum/2012
(   / Assessment Year: 2009-10)
Fermenta Biotech Limited                           Asst. CIT, Circle -1,
`DIL' Complex, Ghodbunder Road,                    Office of the Income Tax,
S. V. Road, Majiwada, Thane (W),          /        Lower Ground Floor,
Mumbai-400 610                            Vs.      Vardhaman Building,
Wagle Industrial Estate,
Thane (W)-400 604
. /  . /PAN/GIR No. AAACF 2503 N
( /Appellant)                       :            (     / Respondent)
/ Appellant by                      :    Shri Nitesh Joshi
/Respondent by                    :    Shri Pawan Kumar Birla
/                   :    25.09.2014
Date of Hearing
:    24.11.2014
Date of Pronouncement
/ O R D E R
Per Sanjay Arora, A. M.:
This is an Appeal by the Assessee directed against the Order by the Commissioner
of Income Tax (Appeals)-II, Thane (`CIT(A)' for short) dated 15.10.2012, dismissing the
assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 (`the
Act' hereinafter) for the assessment year (A.Y.) 2009-10 vide order dated 09.11.2011.
2.     The first issue, raised per ground no. 1, relates to the claim for deduction
u/s.35(2AB), made at Rs.2,88,32,702/-, since confirmed for disallowance by the first
ITA No. 7398/Mum/2012 (A.Y. 2009-10)
Fermenta Biotech Limited vs. Asst. CIT
appellate authority. Section 35(2AB) provides for weighted (i.e., at 1.5 times) deduction
qua the expenditure incurred by a company engaged in the business of biotechnology or
in the manufacturing or production of any article or thing (not being an article or thing
specified in the eleventh schedule to the Act) on scientific research (other than on the cost
of any land or building) carried out in-house per a research and development facility,
which stands approved by the prescribed authority. The reasons for the disallowance in
the instant case are as under:
a) the approval is not in the prescribed form (Form 3CM);
b) the approval is not by the prescribed authority, i.e., the Secretary, Development of
Scientific and Industrial Research, Government of India (DSIR), but by Scientist
`G', DSIR;
c) the renewal of recognition (copy not on record) furnished by the assessee for the
purpose itself clarifies, per the terms and conditions of the recognition, that the
recognition accorded is not meant for tax exemption/quantum of tax concession;
d) the relevant expenditure includes qua payments made to M/s. Research Support
International Pvt. Ltd., a subsidiary company, for research and development
services, clearly indicating that the expenditure claimed as incurred on scientific
research is not wholly carried out as or by way of in-house research, but also
includes that out-sourced.
The assessee's case is that once it has made an application in the prescribed form
(Form 3CK) to the prescribed authority, it cannot be faulted with for the purpose. DSIR
has since clarified (vide its letter dated 12.10.2011), and with reference to its official
website, that the responsibility for according recognition by it to in-house R & D centres
is given by Scientist `G'. The assessee also relies before us on the order by the Tribunal
in its case for A.Y. 2008-09 (in ITA No.4341/Mum/2012 dated 12.02.2014/copy on
record), which was also adverted to during hearing.
3.      We have heard the parties, and perused the material on record. We find ourselves
in complete agreement with the view by the tribunal in the assessee's own case, which
discusses this issue vide paras 11-13 of its order dated 12.02.2014 (supra). In our clear
view, except where and to the extent it leads to defeating the legislative intent, the
assessee is obliged to comply with the prescription of the provision. The approval, the
quantum of deduction being not the subject matter thereof, is to be in the prescribed form.
Though apparently procedural, the same, it may be appreciated, has a substantive aspect
to it in-as-much as the same only conveys that the in-house research and development
facility under reference is an approved one. It is only this that would exhibit that all the
conditions for granting the approval (which the tribunal in the assessee's case for A.Y.
2008-09 lays emphasis on) are met, and which can only be regarded as an essential
requirement for the claim of deduction u/s. 35(2AB).
As regards the prescribed authority, we are again in agreement with the tribunal,
i.e., that if the concerned body (DSIR) has itself assigned the relevant function, i.e., for
granting approval to in-house R & D centres, to Scientist `G', the said authority can or is
to be considered as having signed the relevant form for and on behalf of the Secretary,
DSIR, the prescribed authority.
The issue that therefore obtains in the present case is if the approval granted by
DSIR is indeed in the prescribed form (not on record). If not, the same is not valid, so
that the signatory becomes inconsequential. There is in that case no purpose in insisting
on acceptance of Scientist `G' as competent for the purpose. In this regard, the contents
of the official website of DSIR can only be considered as official pronouncement/s by it.
Besides, nobody prevents the Revenue from seeking clarification from DSIR directly,
i.e., in     case of doubt, which it can in fact do on central basis, considering that such
issues would arise in every case. The quantum of deduction would have to, in any case,
be decided by the Assessing Officer (A.O.).
In view of the foregoing, we, under the circumstances, only consider it fit and
proper that the matter is restored back to the file of the A.O. for an adjudication afresh
after allowing the assessee to present its case. The assessee's submissions dated
27.06.2011, 20.09.2011 and 12.10.2011 (PB pgs.121-128), we find relevant in this regard
in-as-much as they do not bear any reference to any expenditure per payments to an
outsider. Further, the assessee has, in pursuance of its application u/s.154 dated
21.11.2011, already secured deduction u/s.37(1) qua the revenue component of the
relevant expenditure, so that we may not issue any separate direction/s qua the same (PB
pgs.137-138, 139), as was done by the tribunal for A.Y. 2008-09 vide para 13 of its
order. Needless to add, where and to the extent the assessee's deduction is allowed u/s.
35(2AB), deduction u/s.37(1), since allowed, would require being withdrawn. We decide
accordingly.
4.     The assessee's second ground agitates the issue of disallowance of deduction
u/s.80-IB of the Act in respect of profit of its new industrial undertaking set up in March,
2004 in the state of Himachal Pradesh. The reason for the disallowance by the A.O., as
well as its confirmation by the ld. CIT(A), is the non-furnishing of the audit report in
terms of section 80-IB(13) r/w s. 80-IA(7). Though the A.O. also states of non-preference
of the claim by the assessee per its return or revised return of income (but only vide its
letter dated 20.09.2011), so that it was not eligible for being considered in view of the
decision by the apex court in Goetze (India) Ltd. vs. CIT [2006] 284 ITR 323 (SC), we
find the same as without basis. This is for the reason that the assessee had vide its
statement of income (PB pg.1) clearly specified its' claim for the impugned deduction
u/s.80-IB for the current year, being the 6th year of its operations, at Rs.1,05,20,567/-,
adverting to Form-10CCB, the prescribed form, also stating that the same would though
not impact its taxable income for the year in the absence of a positive gross total income
(GTI). The letter dated 20.09.2011, vide which the claim is said to have been made for
the first time, is only by way of abundantly clarifying matters in view of the eminent non-
disallowance of its claim u/s.35(2AB) and, in result, a positive GTI. The said objection,
which also found approval by the ld. CIT(A), would, therefore, be of no moment.
As regards the furnishing of the audit report in the requisite form, as afore-said,
reference thereto has already been made per the return of income. The copy of the same,
dated 26.09.2009, the same date on which the audited accounts have been signed by the
Directors and Auditors, is on record (PB pgs.103-112). Reference thereto is also made at
para 26 of Form 3CD, i.e., the audit report prescribed u/s.44AD. Even assuming that the
report stood omitted to be filed along with the return of income, the same has since been
made good. Under the circumstances, we find no merit in the objection raised by the
Revenue. We decide accordingly.
5.     The third and the final ground raised by the assessee is in respect of disallowance
of deduction u/s.80-G, i.e., qua donation to Prime Minister's National Relief Fund in the
sum of Rs.54,698/-. Both the authorities below have denied the same in the absence of
the assessee furnishing the relevant receipt, and which fact stands accepted by the
assessee, who only prays for being allowed leave to produce the same before the
assessing authority, by admitted the same as additional evidence. The authorities below
have denied the claim on the ground of non-furnishing the relevant receipt, without
appreciating that no claim toward the same has been made by the assessee per its return
of income itself in the absence of any positive income. The consideration of the claim by
the Revenue on merits, thus, itself shows that, in contradiction to its stand qua deduction
u/s.80-IB, a claim could be pressed subsequently where the conditions justify the same.
The relevant receipt (No.929069 dated 01.12.2008) stands adduced by the assessee along
with its application for admission of additional evidence dated 23.09.2014. We, therefore,
in the circumstances, accept the assessee's prayer and admit the said additional evidence
under Rule 29 of the Appellate Tribunal Rules, 1963. The matter would, accordingly,
stand restored to the file of the A.O. to examine the assessee's claim on merits, allowing
it a reasonable opportunity of being heard. We decide accordingly.
6.     In the result, the assessee's appeal is partly allowed and partly allowed for
statistical purposes.
Order pronounced in the open court on November 24, 2014
Sd/-                                      Sd/-
(Joginder Singh)                             (Sanjay Arora)
/ Judicial Member                           / Accountant Member
Mumbai;  Dated : 24.11.2014
. ../Roshani, Sr. PS
/Copy of the Order forwarded to :
1.  / The Appellant
2.  / The Respondent
3.     () / The CIT(A)
4.      / CIT - concerned
5.           ,     ,  / DR, ITAT, Mumbai
6.     / Guard File
/ BY ORDER,
/  (Dy./Asstt. Registrar)
,  / ITAT, Mumbai