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TMI Blog2014 (10) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... changed its earlier CA M/s. Akasam & Associates and appointed a new CA in the month of October, 2012 to look after and handle tax matters of assessee from financial year 2009-10 onwards. It was submitted, the impugned order of CIT(A) passed on 15.11.2012 was served on assessee on 4.12. 2012. Therefore, ordinarily appeal should have been filed before the ITAT on or before 2.2.2013 which was ultimately filed on 5.3.2014 with a delay of 396 days. In this context, it was submitted that, Managing Director of the company who controlled business affairs of the company used to take decision on all the important matters. As per the normal procedure, the Managing Director was forwarded a copy of the order passed by CIT(A) in the month of December, 2012 for taking further action. However, as the MD was seriously ill during the relevant point of time due to heart problem was not able to attend the office regularly. Ultimately the MD had to undergo medical treatment including open heart surgery during the period January to June 2013 and resumed official work in the month of July 2013 that too for a few hours in a day. Due to sheer inadvertence the MD lapsed to notice the order of CIT(A) which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r it is put forth as part of a dilatory strategy. In the facts of the present case, we are of the view that there exists a genuine cause for not preferring the appeal in time by the assessee. As held by the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors., 167 ITR 471,when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay. Therefore, considering assessee's case in the context of the ratio laid down by the Hon'ble Supreme Court, as aforesaid, we are of the view that this is a fit case for delay to be condoned. Accordingly, we do so and admit appeal of assessee for hearing on merit. 7. The assessee raised four grounds. Ground No. 4 being a general ground is not required to be adjudicated. The learned AR at the outset expressed his intention not to press ground No. 1. Hence ground No. 1 is dismissed as not pressed. 8. In ground No. 2, assessee has raised the issue of disallowance of deduction claimed u/s. 35(2AB) of the Act. Briefly th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion till 31.3.2013. She further noted, the only reason for which weighted deduction was denied was report in Form 3CL had not been submitted. CIT(A) observed that assessee has met all requirements for claiming deduction u/s. 35(2AB) of the Act. So far as non-furnishing of report in Form 3CL, CIT(A) opined assessee cannot be said to have any control over the same as the said form is to be submitted by the Secretary, DSIR to the Director General (Exemptions). In view of the aforesaid, CIT(A) directed AO to allow weighted deduction u/s. 35(2AB) to the assessee on receipt of Form 3CL by assessee from DSIR. Being aggrieved of the aforesaid direction of learned CIT(A), assessee is in appeal before us. 10. The learned AR submitted before us that when assessee's R & D facility has been approved by DSIR and assessee has performed its part of obligation under the statute by applying in Form 3CK as provided u/s. 35(2AB) of the Act read with Rule 6 of the IT Rules, only because DSIR has not forwarded its report in Form No. 3CL, assessee's claim of deduction u/s. 35(2AB) cannot be disallowed when there is no dispute that assessee has incurred expenditure towards scientific research. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed authority has not submitted the report in Form 3CL to the Director (Exemptions), assessee's claim of deduction u/s. 35(2AB) cannot be disallowed considering the fact that incurring of expenditure by assessee has not been disputed. In these circumstances, as observed by the CIT(A), when assessee has no control over the submission of Form 3CL by the prescribed authority, it cannot be penalised for nonsubmission of the same. The ITAT Mumbai Bench in the case of ACIT vs. Meco Instruments P. Ltd. in ITA No. 4246/Mum/2009 dated 20.8.2010 had occasion to examine true import of provisions contained u/s. 35(2AB) as well as Rule 6. For better clarity, we reproduce the finding of the co-ordinate Bench hereunder: "6. We have considered the rival submissions and perused the record of the case. It is an admitted position that In-house R&D Unit had been duly approved by the Government of India, Ministry of Science and Technology, Department of Scientific & Industrial Research vide its letter dated 3.7.1997. It is also fact that as per terms and conditions of recognition, the same was not meant for tax exemption which is evident from Sl.No.9 of the terms and conditions, which reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been used. Therefore, if the approval simpliciter is available from the prescribed authority, then as per this section, no objection could be raised. However, sub-section(4) of Section 35 requires the prescribed authority to submit its report in relation to the approval of the said facility to the Director General in such form and within such time as may be prescribed. Therefore, it would be too technical to hold that merely because the term 'prescribed' has not been used in section 35(2AB)(i) it follows that there were no prescribed rules for the same. However, at the same time, absence of phrase 'prescribed' in section 35(2AB)(i) mitigates the assessee's default. Rule 6 of the I.T. Rules prescribes the authority for expenditure on scientific research and as per Rules 6(1B) for the purposes of sub-section (2AB) of section 35, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research. The sub-Rule (4) requires the company to furnish the application in Form No. 3CK. As per sub-Rule (5A), if the prescribed authority is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of a like nature. The purpose is to have research and development facilities which contribute to the technological advancement and not merely limited to earning of profits. Therefore, once the approval is there by the prescribed authority, it could be easily concluded that the same met the basic requirement and merely the same is not in prescribed form, it would not lead to the conclusion that the approval was of no purpose. As per the terms and conditions of the recognition of In-house R&D unit framed by the Ministry of Science and Technology, the assessee company is required to submit brief summary of the achievements of the R&D unit to the Department of Science and Industrial Research every year which includes paper published, patents obtained and processes developed, new products introduced, awards and prizes received and other achievements. Further, as per clause 8, commercial exploitation of the know-how/process developed by in-house R&D Unit was to be solely governed by the licensing policies in operation from time to time an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure claimed by assessee or quantifies at a lesser amount, then the deduction claimed by assessee should be modified accordingly. Assessee's ground is considered to have been allowed. 14. The next issue as raised in ground No. 3 is in respect of disallowance of deduction u/s. 80JJA of the Act. 15. Briefly, the facts are, during the assessment proceedings, AO while examining assessee's claim of deduction u/s. 80JJA of the Act noted that assessee is engaged in business of manufacturing and sale of organic manures and non-organic products. The profits and gains from collecting and processing of bio-degradable waste into organic manure and the sale of same has been claimed as deduction u/s. 80JJA of the Act. In this context the assessee also submitted separate Profit and Loss A/c. for organic manure and inorganic products. On examining the Profit and Loss A/c. submitted by assessee, AO noticed that assessee has apportioned direct expenses between both the segments on actual basis, whereas general expenditure has been apportioned between both the segments on turnover basis. AO noted that while total turnover during the year was Rs. 65,58,87,447, the turnover from organ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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