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2020 (2) TMI 654 - AT - Income TaxRevision u/s 263 - allowability of deduction claimed u/s 35(2AB) of the Act when Form No.3CL is absent on record and issued show cause notice proposing to revise the said order of AO - as per CIT no evidence on record to decipher that the AO examined the contents i.e. expenditure incurred on R&D as claimed u/s 35(2AB) - HELD THAT:- We find the failure to file Form No.3CL to the authority does not make orders erroneous. The claim is very much allowable provided the expenditure portion is examined and found allowable under the said provisions. In any case, such expenditure can also be allowable u/s 37 of the Act, provided the conditions are met. Further, we also examined the judgment in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. [2017 (8) TMI 933 - GUJARAT HIGH COURT] Claim of deduction u/s 35(2AB) of the Act cannot be denied merely for want of Form No.3CL subject to fulfilment of other conditions under Rule 7 of IT Rules. It is merely a procedural lapse. Further, it is also a decided issue that the expenditure which is claimed under the said section is allowable after due process of verification by the concerned authorities. Therefore, the Hon’ble High Court directed the AO to verify the actual expenditure incurred by the assessee in that case. Neither the AO nor Pr.CIT gave finding of fact on the R&D nature of expenditure under consideration. There, we cannot examine them and give a finding of fact. Ld. AR also requested for remand for verification. Considering the above settled nature of the issue, we are of the opinion that the deduction u/s 35(2AB) of the Act cannot be denied merely for the procedural lapses. Therefore, the order of the PCIT needs modification. Modification include (1) the judgment of Hon’ble High Court of Gujarat in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. (supra) and other judgments, if any, on the subject, are required to be following by the PCIT; and (2) Due verification of the expenditure and the allowability of expenditure u/s 35(2AB) of the Act has to be examined by the PCIT too. We modify the orders of Pr.CIT accordingly, for both assessment years. PCIT is directed to pass consequential order after hearing the assessee. The assessee is directed to demonstrate the allowability of the said expenditure. Appeals of the assessee is partly allowed.
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