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M/s. Texmaco Rail & Engineering Ltd. Versus Pr. C.I.T. -2, Kolkata

2017 (9) TMI 958 - ITAT KOLKATA

Revision u/s 263 - AO allowing deduction to the assessee u/s 35(2AB) was erroneous and prejudicial to the interest of the revenue - time limit within which application for approval in form No.3CM has to be made - Held that:- It is undisputed that Department of Scientific and Industrial Research (DSIR) granted recognition to the Assessee for the period from April 1st, 2010 to 31st March, 2019. - Deduction Sec.35(2AB) read with rule 6 does not prescribe any time limit within which application .....

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cility has to be allowed for weighted deduction as provided by s. 35(2AB). - In the light of above it cannot be said that the order of the AO was erroneous. Even if it were to be said that the view taken by the Courts and Tribunal are not correct, the said views were a possible view. Once the view taken by the AO is either correct or a possible view then the CIT in exercise of his powers u/s.263 of the Act cannot hold the order of the AO to be erroneous just because he does not agree with t .....

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ss of manufacture of wagons for Indian railways and private parties. For A.Y.2012-13 the assessee filed return of income on 30.09.2012 which was later revised by a revised return of income on 28.03.2014. In the return so filed while computing income from business, the assessee had claimed deduction u/s 35(2AB) of the Act at a sum of ₹ 2,70,07,240/- being expenditure on scientific research and in house research and development facility. Sec.35(2AB) of the Act, in so far as it is relevant to .....

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) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to two times of the expenditure so incurred. ..... (2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act. (3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for cooperation in such research and development .....

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The relevant part of Rule 6, in so far as it relates to this appeal, reads thus: (1B) For the purposes of sub-section (2AB) of section 35, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research. (4) The application required to be furnished by a company under sub-section (2AB) of section 35 shall be in Form No. 3CK. (5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of .....

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t of Scientific Industrial Research, Govt. Of India (DSIR). The claim of the assessee for deduction as above was supported by a certificate of registration by DSIR dated 14.07.2010. The AO while completing the assessment allowed the claim of the assessee for deduction u/s 35(2AB) of the Act. 3. The CIT in exercise of his powers u/s 263 of the Act was of the view that the aforesaid order of the AO allowing deduction to the assessee u/s 35(2AB) of the Act was erroneous and prejudicial to the inter .....

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see vide its reply dated 20.03.2017 filed copies of Certificates of Recognition of In-house R & D facility issued by the prescribed authority of Govt. of India for the following periods: (a) For the period from April 1, 2010 to March 31,2013; (b) For the period from April 1, 2013 to March 31,2016; and (c) For the period from April 1,2016 to March 31, 2019. It was further explained that the Assessee had in earlier years claimed deduction on the basis of certificate granted by DSIR. For the fi .....

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Certificate of Recognition granted to the assessee by DSIR. Therefore, merely because of a technical defect that such certificate was not in Form 3CM, the assessee cannot be deprived in getting the deduction which was otherwise entitled under the law. 5. In support of the said claim, the assessee also relied on the decisions of Hon 'ble Delhi High Court in the case of CIT vs. Sadan Vikas (India) Ltd. (2011) 335 ITR 117 (Del) and Hon'ble I.T.A.T. Mumbai in the case of ACIT vs. Meco Instr .....

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ssee would be entitled to weighted deductions of the aforesaid expenditure incurred by the assessee in terms of the s. 35(2AB) of the Act and in coming to this conclusion, the Tribunal relied upon the judgment of Gujarat High Court in CIT vs. Claris Lifesciences Ltd. 326 ITR 251 (Guj). In its decision the Hon ble Gujarat High Court held that the cut-off date mentioned in the certificate issued by the DSIR would be of no relevance. What is to be seen is that the assessee was in indulging in R& .....

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more than what is provided by law. A plain and simple reading of the Act provides that on approval of the research and development facility, expenditure so incurred is eligible for weighted deduction. 8. The Tribunal has considered the submissions made on behalf of the assessee and took the view that section speaks of : (i) development of facility; (ii) incurring of expenditure by the assessee for development of such facility; (iii) approval of the facility by the prescribed authority, which is .....

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ing expenditure in this behalf, application to the prescribed authority, who after following proper procedure will approve the facility or otherwise and the assessee will be entitled to weighted deduction of any and all expenditure so incurred. The Tribunal has, therefore, come to the conclusion that on plain reading of s. itself, the assessee is entitled to weighted deduction on expenditure so incurred by the assessee for development of facility. The Tribunal has also considered r. 6(5A) and Fo .....

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opment of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted was development of facility, intention of the legislature by making above amendment is very clear that the entire expenditure incurred by the assessee on development of facility, if approved, has to be allowed for the purpose of weighted deduction. The Assessee thus submitted that there is no error in the order of the AO and jurisdiction u/s.263 of the Act cannot be invoked in the facts and .....

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incurred expenditure on scientific research. In respect of the said facility, recognition was granted by DSIR. It was also not disputed that the assessee all along proceeded on the premise that the said recognition by DSIR was sufficient for the purpose of claiming weighted deduction u/s.35(2AB) of the Act and the same was accepted in all the past assessments. It was his submission that the action of the CIT in resorting to the powers u/s.263 of the Act was purely based on the non furnishing of .....

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earlier Financial Years. The approval in Form 3CM was granted by DSIR for F.Y. 2015-16, which was filed before the Ld. Pr. C.I.T. and such approval for earlier years by DSIR has not been disposed off as yet. 8. The learned counsel submitted that weighted deduction u/s 35AB for scientific research is given on recognition from the specified authority being Department of Scientific and Industrial Research (DSIR). In this case, such recognition was granted by DSIR and copies of Certificates of Regi .....

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t. He relied on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sadan Vikas (India) Ltd. (supra), following the decision in CIT v. Claris Life Sciences Ltd. [2010] 326 ITR 251 (Guj), that the cut-off date mentioned in the certificate issued by the DSIR would be of no relevance. What is to be seen is that the assessee was in indulging in R&D activity and had incurred the expenditure thereupon. Once a certificate by DSIR is issued, that would be sufficient to hold that .....

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section [35(2AB)] talks of only approval of the prescribed authority but nowhere in the section the phrase as prescribed 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. Th .....

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mpany. Further, nowhere, any condition has been prescribed regarding cut off date from which the approval could be made effective. Therefore, once the assessee company is granted approval it will apply till it is revoked with reference to all the assessment years. which come within the ambit of that period. Therefore, mere mentioning of 1-4-2007 in the order dated 28-8-2008 was of no consequence and the approval granted in Form 3CM was also applicable for assessment year 2005-06. (Emphasis suppl .....

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-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. It was submitted by him that the view taken by the AO in allowing weighted deduction u/s.35(2AB) of the Act to the Assessee was a possible view taken in tune with the judicial pronouncements and the CIT cannot term the order of the AO as erroneous. 10. The ld. DR .....

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ted by him that the decisions cited by the ld. Counsel for the assessee are therefore distinguishable on facts. 11. We have given a very careful consideration to the rival submissions. We are of the view that in the facts and circumstances of the present case, the CIT ought not to have exercised jurisdiction u/s.263 of the Act and set aside the order of the AO. It is undisputed that Department of Scientific and Industrial Research (DSIR) granted recognition to the Assessee for the period from Ap .....

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