MYLAN LABORATORIES LIMITED (FORMERLY KNOWN AS MATRIX LABORATORIES LIMITED), HYDERABAD,HYDERABAD vs. DCIT, CIRCLE-16(2), HYDERABAD, HYDERABAD

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ITA 954/HYD/2017Status: DisposedITAT Hyderabad22 June 2022AY 2008-094 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the AO's decision to reject the R&D expenditure claim of Rs. 56,35,712/- because the assessee did not furnish the required details even after the matter was set aside for examination.

What were the facts?

The assessee claimed R&D expenditure, and after previous litigation, the Tribunal directed the AO to examine and allow a balance of Rs. 56,35,712/-. However, the assessee failed to provide necessary details of this expenditure to the AO.

What were the issues?

Whether the assessee is entitled to a deduction for R&D expenditure when it fails to provide necessary details for examination as directed by the Tribunal.

Which sections of the Income-tax Act were involved?

Section 35(1),Section 35(2AB)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad

Before: Shri Rama Kanta Panda & Shri Laliet Kumar

For Appellant: Shri K.A.Sai Prasad, CA
For Respondent: Shri Rajendra Kumar,CIT-DR
Hearing: 20.06.2022

Per Shri Rama Kanta Panda, A.M. This appeal filed by the assessee is directed against the order dated 31.03.2017 passed u/s. 143(3) r.w.s. 92CA/144C of the I.T.Act by the Additional Commissioner of Income Tax, Range-16, Hyderabad for the AY 2008-09.

2.

Grounds raised by the assessee are as under:-

1.

the order of the Assessing Officer u/s. 143(30 r.w.s. 144C and 92CA of the Income Tax Act, 1961 passed on 31.03.2017 is contrary to facts and law. 2. the Assessing Officer erred in not following the Hon’ble Tribunal’s directions and thereby did not allow the deduction at 100% in respect of the R&D expenditure of Rs. 56,35,712/- for which the prescribed authority denied weighted deduction.

3.

This is second round of litigation before the Tribunal.

1.

2 ITA 954/Hyd/2017 4. Facts of the case, in brief, are that the assessee company is engaged in pharmaceutical business and filed its return of income on 30.09.2008 declaring total income of Rs. Nil under the normal provisions of the I.T.Act and book profit of Rs. 139,20,21,393/- u/s. 115JB of the I.T.Act. Since, the assessee has entered into certain international transactions with its AE’s, the AO referred the matter to the TPO for determination of the ALP of the international transactions. After receiving the order of the TPO, the AO passed the draft assessment order on 28.12.2011, taking into account the Transfer Pricing order and determined the total income at Rs. 337,90,03,852/- under normal provision and Rs. 140,86,17,801/- as book profit u/s. 115JB of the I.T.Act. Assessee objected to the draft assessment order before the ld. DRP, who vide order dated 27.09.2012 accepted certain objections and rejected certain objections. Subsequently, the AO passed the final order u/s. 143(3) on 30.11.2012 wherein total income was computed at Rs. 135,55,82,161/- under normal computation and income u/s.115JB of the Act was not disturbed. The assessee preferred appeal before the Tribunal and the Tribunal vide order dated 10.01.2014 in restored the issue of R&D expenditure which is the subject matter of this appeal to the Tribunal by observing as under “58. This ground is consequent to the earlier ground. Briefly stated the assessee has originally claimed weighted deduction on an amount of Rs.49,94,14,696/- consisting of actual expenditure of Rs.33,29,43,131/- in respect of approved three R & D units. The prescribed authority however certified the actual eligible expenditure for weighted deduction at Rs.32,73,07,418/-. The balance of expenditure at Rs.56,35,712/- (Rs.33,29,43,131/- (-) Rs.32,73,07,418/-) is not eligible for weighted deduction, but quantifies for deduction under section 35(1) at 100%. This amount however is not allowed. We do not see any reason in not allowing this amount. We are of the opinion that both Assessing Officer and DRP has not applied their mind to the amounts involved. Since the entire claim of the assessee was rejected summarily without examining the facts, we are of the opinion that this expenditure of Rs.56,35,712/- in respect of R & D expenditure is to be considered under section 35(1), if not for the weighted deduction under section 35(2AB). Assessing Officer

3 ITA 954/Hyd/2017 is directed to examine the necessary expenditure and allow the claim. Ground No.17 is allowed for statistical purposes.”

5.

Since the assessee did not produce any details before the AO, during the set aside proceedings, the AO in the consequential order passed on 31.03.2017, rejected the relief claimed/s. 35(2AB)of the I.T.Act by observing as under:-

5. With regard to the relief claimed u/s. 35(2AB) of I.T.Act, as per the order of ITAT vide para 56, ITAT directed to allow balance 50% of the amount of Rs. 32,73,07,418/- which was allowed based on the certificate issued by the DSIR previously. As seen from the computation filed by the assessee from the assessment record, the assessee has claimed a deduction of Rs. 49,94,14,696/- which is weighted deduction u/s. 35(2AB). Therefore, 50% of Rs.32,73,07,418/- which works out to Rs. 16,36,53,709/- is not allowed consequent to the order of the Hon’ble ITAT. As regards, the balance R&D expenditure of Rs. 56,35,712, the ITAT has directed to examine the necessary expenditure and then allow the claim. As per the record, there was no details of such expenditure regarding Rs.56.35 lakhs, and hence any examination of such claim is not possible. Even during the consequential order proceedings, there is no information filed like details of expenditure-nature, purpose and invoices because of which no relief could be granted on this issue.

6.

Aggrieved with such order of the AO, the assessee is in appeal before the Tribunal.

7.

We have heard the rival arguments made by both the sides and perused the record. We find the Tribunal had directed the AO to allow balance R&D expenditure of Rs. 56,35,712/- by examining the necessary expenditure and then allow the claim. Since, no details of such expenditure regarding Rs. 56.35 lakhs were filed, the AO held that such claim is not possible, since the assessee even during the consequential order proceedings did not file any information like details of expenditure, nature, purpose and invoices. Even before us also, the assessee could not file any details so as to take a contrary view than the view taken by the AO on this issue. We, therefore do not find any infirmity in the order of the AO in rejecting the balance claim of R&D expenditure

4 ITA 954/Hyd/2017 of Rs. 56,35,712/-The request of the ld. Counsel for the assessee that this matter may be set aside to the file of the AO does not hve any force since despite the direction given by the Tribunal, the assessee failed to produce the details for allowing the claim. Therefore, the order of the AO on this issues is upheld and the grounds raised by the assessee are dismissed.

8.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the Open Court on 22nd June, 2022.

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