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2021 (3) TMI 710 - AT - Income TaxDeduction u/s 35(2AB) - expenditure incurred on R&D centre - AO held that in the absence of Form 3CL, such deduction is not allowable - CIT (A) supported the contention of the Assessing Officer reiterating that in the absence of Form 3CL, the claim of the assessee cannot be quantified and verified - HELD THAT:- It is the responsibility of the AO to obtain the copy from the DSIR. We also find that the DSIR has also submits copy to the Jurisdictional Chief Commissioner of Income Tax too. There was no dispute regarding the expenditure incurred by the assessee. With regard to the issue before hand, we have also gone through the judgment of Hon’ble High Court of Gujarat in the case of CIT Vs Sun Pharmaceutical Industries Ltd. [2017 (9) TMI 1416 - GUJARAT HIGH COURT] where in it was held that “having heard learned counsel for the parties and having pursued the orders on record, we are broadly in agreement with the view of the Tribunal. Undisputedly, the research and development facility set up by the assessee was approved by the prescribed authority and necessary approval was granted in the prescribed format. The communication in form 3CL was thereafter, between the prescribed authority and the department. If the same was not so surely the assessee cannot be made to suffer. To this extent the Tribunal was perfectly correct and the Commissioner was not, in observing that in absence of such certification, claim of deduction under Section 35(2AB) was not available. Tribunal in the case of Century Seeds Pvt. Ltd. Vs DCIT [2018 (8) TMI 663 - ITAT HYDERABAD] held that AO has correctly allowed the deduction and there is no error in the order passed by AO u/s 143(3). Once a research facility is approved entire expenditure incurred on department of R&D has to be allowed weighted deduction as provided u/s 35(2AB). Relying on the case of DCIT Vs Famy Care Ltd. [2014 (11) TMI 987 - ITAT MUMBAI] on the same facts, the Tribunal in the case of Efftronics Systems Pvt. Ltd. [2016 (11) TMI 1251 - ITAT VISAKHAPATNAM] laid down the proposition that in case Form 3CL is not available, the appellant should not be penalized and weighted deduction cannot be denied. Similarly, the ITAT Mumbai Bench in the case Mahindra & Mahindra Ltd. Vs DCIT [2013 (9) TMI 522 - ITAT, MUMBAI] wherein it was held that while deciding the issue related with benevolent provisions like 35(2AB), liberal and practical approach should be followed. Hence we hold that the assessee should not be shorned of the legal right bestowed upon by the provisions of the Income Tax Act. The revenue may disallow the claim of the asseseee if it can prove that the claim of the assessee is wrong after obtaining the report in Form 3CL from the concerned authority. The matter is being sent back to the file of the Assessing Officer. Education Cess disallowance - addition u/s 40(a)(ia) - allowable revenue expense u/s 37(1) - HELD THAT:- Surcharge on income-tax finds place in the First Schedule, but that is not the case so far as Education Cess is concerned. Therefore, the education cess on this reasoning cannot be equated as tax or surcharge. Based on this, it can be said that since the word 'Cess' is not specifically included in the definition, it cannot be considered a part of tax, and accordingly, it should not be disallowed in u/s 40(a)(ii) of the Act. We also find that the proceeds from collection of “Education Cess” are not credited to Consolidated Fund but to a non-lapsable Fund for elementary education-“Prarambhik Shiksha Kosh”. Since the proceeds from collection of Education Cess are kept separate for a specified purpose, applying the principles in the aforesaid decision of Apex Court in the case of M/s Dewan Chand Builders [2011 (11) TMI 405 - SUPREME COURT], it can be said that the same is not in the nature of tax. Hence, it is allowable as deduction. Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income ‘Tax’ is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction. Referring to provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66ITJ(19), the orders of Co-ordinate Benches of ITAT and judicial pronouncements we hereby hold that the assessee is eligible to claim the deduction of the ‘Education Cess’ as per the provisions of Section 37. Incentive under Foreign Trade Policy - assessee has received incentive under “Focus Product Scheme” (FPS) from Government of India for exports of goods - HELD THAT:- There is no dispute that this incentive is an export incentive. The matter has been well considered by the order of the Co-ordinate of ITAT Chennai in the case of Eastman Exports Global Clothing Pvt. Ltd. [2016 (7) TMI 951 - ITAT CHENNAI] The order dealt with the similar issue of market linked focus products scheme scripts has been deliberated and the same has been treated as a capital receipt in view of the decision of the Hon’ble Apex Court in the case of Ponni Sugars and Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] Thus MLFPS received by the assessed is to be treated as capital receipt only . Appeal of the assessee is allowed.
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