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2016 (4) TMI 747 - ITAT CHENNAI

2016 (4) TMI 747 - ITAT CHENNAI - TMI - MAT - computation of income under section 115JB - Held that:- Respectfully following the decision of the Tribunal in the case of ITO v. Vintage Distillers Ltd. (2010 (1) TMI 56 - ITAT DELHI-H ) as well as the decision of CIT v. Bhushan Steel Ltd. (2012 (8) TMI 1024 - DELHI HIGH COURT), we, set aside the order of the ld. CIT(A) and direct the Assessing Officer to exclude the fringe benefit tax for arriving the net profit for the purpose of computation of in .....

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in-house R&D based on the mandate of the company/institutions. The R&D activities carried out by the company/ institutions by incurring various expenditures are required to be assessed separately by the Secretary, DSIR, which is entirely different from the recognition given by the DSIR. Under these facts and circumstances, we are of the considered opinion that in the absence of filing approval in Form 3CL by the assessee, the Assessing Officer is rightly disallowed the expenses claimed under sec .....

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Both the appeals filed by the same assessee are directed against different orders of the ld. Commissioner of Income Tax (Appeals) VI, Chennai, both dated 28.10.2014 relevant to the assessment years 2009-10 and 2011-12. The only effective ground raised in the appeal of the assessee for the assessment year 2009-10 is with regard to confirmation of addition made towards book profits at ₹.17,73,408/- computed under section 115JB of the Income Tax Act, 1961 [ Act in short]. I.T.A. No. 152/Mds/ .....

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e from books under section 115JB of the Act at ₹.26,94,762/- as against ₹.17,73,408/- admitted by the assessee. 3. The assessee carried the matter in appeal before the ld. CIT(A). After considering various details and submissions, the ld. CIT(A) partly allowed the ground raised by the assessee by reducing the correct amount of book profit under section 115JB of the Act from ₹.26,94,762/- to ₹.21,41,110/-. 4. Still aggrieved, the assessee is in appeal before the Tribunal a .....

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ofit, he has wrongly included the provision of FBT of ₹.3,40,702/-. He also relied on the decision in the case of CIT v. Bhushan Steel Ltd. in ITA 324/2012 (Delhi) and the decision of the ITAT, Delhi in the case of ITO v. Vintage Distillers Ltd. 130 TTJ Del 79. 5. On the other hand, the ld. DR strongly supported the order passed by the ld. CIT(A). 6. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The assessee has computed book pr .....

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the claim for provision of FBT for the purpose of computation of book profit under Explanation [I] to section 115JB of the Act. The provision for FBT is covered under clause (a) of Explanation [I] to section 115JB, being the amount of income tax paid or payable and provision therefor. The provision for fringe benefit tax is the provision for income tax under Chapter XII-H of the Income Tax Act. Therefore, since the assessee has not included the provision for FBT in the net profit for the purpose .....

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income under section 115JB of the Act as under: Net profit for the year 11,92,756 Add: provision for the current tax 1,82,661 Provision for deferred tax 3,97,991 Provision for FBT 3,40,702 Book Profit 21,14,110 7. Before us, the ld. Counsel for the assessee has submitted that FBT is an allowable deduction in the computation of book profit under section 115JB of the Act as per CBDT circular 8 of 2005 dated 29.08.2005 and perused the same. In the case of ITO v. Vintage Distillers Ltd. (2010) 130 .....

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esent case because we have seen that in the present case, the provisions of Expln. 1 to s. 115JB are clear and as per these provisions, payment or provision for "FBT" is not required to be added back for the purpose of computing book profit under s. 115JB of the Act because we have seen that the term used in this clause of Explanation is "income-tax", which does not include "FBT" and in spite of this fact that there is a term "tax" already on the statute b .....

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ny help from the Board's circular or Explanatory Note. We, therefore, decide this issue in favour of the assessee and decline to interfere in the order of the learned CIT(A) on this issue. 8. By agreeing with the above findings of the Delhi Benches of ITAT, the Hon ble Delhi High Court in the case of CIT v. Bhushan Steel Ltd. in ITA No. 324/2012 order dated 24.08.2012 has held as under: 8. This Court agrees with the reasoning employed and the conclusion reached in Vintage Distillers' cas .....

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book profit. Crucially Section 115 WA enacts that FBT is a tax "in addition" to income tax. 9. In Vintage Distillers's case (supra), the AO had, to compute book profit for the purposes of section 115JB, added an amount (provision for taxes) which included the provision for FBT. The assessee claimed this as a deduction on the ground that FBT was not included in "income tax" for the purposes of Explanation 1(a) to section 115JB. Learned CIT(A), and the Tribunal, both had ac .....

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is dismissed. 9. Respectfully following the decision of the Tribunal in the case of ITO v. Vintage Distillers Ltd. (supra) as well as the decision of the Hon ble Delhi High Court in the case of CIT v. Bhushan Steel Ltd. (supra), we, set aside the order of the ld. CIT(A) and direct the Assessing Officer to exclude the fringe benefit tax of ₹.3,40,702/- for arriving the net profit for the purpose of computation of income under section 115JB of the Act. Thus, the ground raised by the assessee .....

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duction under section 35(2AB) of the Act. Therefore, by following the decision of Mumbai Benches of ITAT in the case of USV Ltd. v. DCIT, the Assessing Officer disallowed the claim of deduction made by the assessee. 12. On appeal, the AR of the assessee, though conceded that the assessee did not get approval from DSIR as prescribed under the Income Tax Act, he has submitted that the assessee has got recognition of R&D Unit from the DSIR vide its letter dated 29.03.2011. Mere recognition of u .....

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f the Act by filing ledger accounts, etc. before the Assessing Officer. The Assessing Officer rejected the claim of the assessee on the ground that the assessee has not filed Form 3CL from DSIR to claim deduction under section 35(2AB) of the Act. Mere recognition of unit of R&D purpose is not sufficient for allowing deduction and in the absence of approval from the prescribed authority, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. 15. In order to encourage R&D .....

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ty'. To claim deduction under section 35(2AB) of the Act, the company having in-house R&D, duly recognized by the DSIR, should submit the reports in prescribed format to the Secretary, DSIR, who is designated as Prescribed Authority . After assessment of the in-house R&D activities carried out by the companies, the Secretary, DSIR gives a certificate in Form 3CL stating the allowability of expenditure of capital and revenue nature for the financial years under consideration to the Di .....

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cognition from DSIR and not approval under Form 3CL from the Prescribed Authority to the DGIT[E] for allowing the claim of deduction under section 35(2AB) of the Act. Accordingly, the Assessing Officer disallowed the claim of the assessee and confirmed by the ld. CIT(A). 16. Before us, the ld. Counsel for the assessee has relied on the decision in the case of ACIT v. Meco Instruments P. Ltd. in I.T.A.No. 4246/Mum/2009 dated 20.08.2010. In the above case, the Assessing Officer denied the deductio .....

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hority before the date prescribed u/s.35(2AB) r.w. Rule 6. v) In the terms and conditions of recognition of in-house R&D unit, which were attached with the renewal of recognition as well as with the original approval given by the assessee for its R&D unit it is dearly written on sr.No.9 that this recognition of in-house R&D unit is not meant for tax exemption and quantum of tax exemption, development rebate will be governed by the Tax Law in operation from time to time. vi) Legislatu .....

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filed Form 3CK before DSIR on 28.4.2008, which, though filed much after the close of the previous year under consideration but no time limit has been prescribed under law for filing this application. He also took note of the contents of the note sheet of DSIR obtained by the assessee under Right to Information Act. He noted from the same that the application for the year under consideration had been processed by the lower authorities but remained unattended by the concerned officer of DSIR inas .....

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ble opportunity of being heard was to be granted before rejecting the application. He noted that no opportunity has been afforded to the assessee company till date. Therefore, the assessee was deprived of benefit of section 35(2AB) for no fault of it. He relied on various authorities, which deals with the manner in which a statutory authority bestowed with powers has to conduct itself. He observed that since no order of rejection has been passed by the competent authority in accordance with the .....

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of the Prescribed Authority to DGIT[E] in Form 3CL, either before the Assessing Officer or before the ld. CIT(A) or even before the Tribunal for admitting the claim of deduction under section 35(2AB) of the Act. Therefore, the case law relied on by the ld. Counsel for the assessee in the case of ACIT v. Meco Instruments P. Ltd. has no application to the facts of the present case. 18. In the case of Aarti Industries Ltd. v. Addl.CIT in I.T.A. No. 8387/Mum/2004 & Others dated 30.03.2012, where .....

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elhi), the point at issue before the Hon ble Delhi High Court was that the Assessing Officer refused to accord the benefit of the provisions of weighted deduction to the assessee on the ground that recognition and approval was given by the Department of Scientific and Industrial Research in February/September, 2006 i.e., in the next assessment year, against which, the Hon ble Court, by following the decision of the Hon ble Gujarat High Court in the case of CIT v. Claris Lifesciences Ltd. [2010] .....

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