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2019 (1) TMI 20 - AT - Income TaxDisallowing deduction u/s.35(2AB) - absence of Form No.3CL by the DSIR - expenditure on scientific research and in-house research and development facility which is 200% of actual expenditure - Held that:- Rule-6(7A)(b) of the Rules specifying the prescribed authority and conditions for claiming deduction u/s.35(2AB) has been amended by the Income Tax (10th Amendment) Rules, 2016 w.e.f. 1.7.2016, whereby it has been laid down that the prescribed authority, i.e., DSIR shall quantify the quantum of deduction to be allowed to an Assessee u/s.35(2AB). Prior to such substitution, the above provisions merely provided that the prescribed authority shall submit its report in relation to the approval of in-house R & D facility in Form No.3CL to the DGIT (Exemption) within 60 days of granting approval. Therefore prior to 1.7.2016 there was legal sanctity for Form No.3CL in the context of allowing deduction u/s.35(2AB). Prior to 1.7.2016 Form 3CL had no legal sanctity and it is only w.e.f 1.7.2016 with the amendment to Rule 6(7A)(b) of the Rules, that the quantification of the weighted deduction u/s.35(2AB) of the Act has significance. In the present case there is no difficulty about the quantum of deduction u/s.35(2AB) of the Act, because the AO allowed 100% of the expenditure as deduction u/s.35(2AB)(1)(i) as expenditure on scientific research. Deduction u/s.35(1)(i) and Sec.35(2AB) are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) and under Sec.35(2AB) are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) should be engaged in manufacture of certain articles or things. It is not in dispute that the Assessee is engaged in business to which Sec.35(2AB) applied. The other condition required to be fulfilled for claiming deduction u/s.35(2AB) is that the research and development facility should be approved by the prescribed authority. The prescribed authority is the Secretary, Department of Scientific Industrial Research, Govt. Of India (DSIR). It is not in dispute that the Assessee in the present case obtained approval in Form No.3CM as required by Rule 6 (5A) of the Rules. The deduction u/s.35(2AB) ought to have been allowed as weighted deduction at 200% of the expenditure as claimed by the Assessee and ought not to have been restricted to 100% of the expenditure incurred on scientific research. We hold and direct accordingly and allow the appeal of the Assessee.
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