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II. Direct Tax Case law:
1. Zandu Pharmaceuticals Works Ltd. Vs. CIT, ITA No. 8 of 2007, DATE: 12.09.2012, Bombay High Court
Decision: In favor of Assessee
Section: 80IA of Income Tax Act 1961
Cases Referred:
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CIT vs. Sterling Foods, (1999) 4 SCC 98 = (1999) 237 ITR 579
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Bush Boake Allen (India) Ltd. Vs. Asst.CIT (Mad), (2005) 273 ITR 152
Whether
on the facts and in the circumstances of the case the ITAT was
justified in confirming the allocation of Research and Development
expenses incurred by the Head Office among the four manufacturing units
on the presumption that the expenditure so incurred is for the benefit
of these manufacturing units, when in fact such research conducted had
no connection with the business of the said units, nor any benefit is
received by them from the said research?
In
the present case, the assessee is carrying on the business of
manufacturing of medicines and ointments. The head office as well as the
units carry on research and development activities and have their own R
& D departments for research. Assessing Officer reduced the
appellant claim for the said deductions u/c VI-A. CIT(A) and the
tribunal upheld the assessment order. Further the tribunal held that the
expenditure incurred do not pertain to manufacturing units and
disallowed the expenses and it is also important to note that different
units manufacture different products and carries out independent R&D
work ie there must be a direct nexus between industrial undertaking and
expenditure incurred.
The
High Court held that an enterprise can s assign the benefit of research
in favor of third party and that presumption of nexus between the
R&D activities and industrial units is not well founded. The
decision was given in favor of assessee and thus the case got dismissed.
(Please click here for judgment)
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