TMI Blog2018 (3) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... d in favour of assessee. Allowability of capital expenditure incurred as research development - Held that:- As per Form No.3CL, the expenditure was R&D only. The evidence brought on record shows that the expenditure was capital expenditure other than land and building. A.O. disallowed the same without examining the nature of expenditure. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld. - I.T.A.Nos.61, 62 & 63/Vizag/2017, C.O. Nos.31, 32 & 33/Vizag/2017, I.T.A.No.551/Vizag/2017 And C.O. No.6/Vizag/2018 - - - Dated:- 9-3-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri Deba Kumar Sonowal, DR For The Respondent : Shri C. Subrahmanyam, AR ORDER PER Bench: These appeals filed by the revenue are directed against orders of the Commissioner of Income Tax (Appeals) {CIT(A)}, Vijayawada vide ITA Nos.134 133/CIT(A)/VJA/15-16 dated 23.9.2016 for the assessment years 2008-09, 2009-10 2010-11 and vide order ITA No.56/CIT(A)/VJA/16-17 dated 15.9.2017 for the assessment year 2013-14. The cross objections filed by the assessee are in support of the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim with any material evidence. Therefore, the A.O. was of the view that the assessee is not entitled for deduction u/s 35(2AB), accordingly completed the reassessment by disallowing the claim made by the assessee u/s 35(2AB) of I.T. Act. 3. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and the Ld. CIT(A) held that reopening of assessment is bad in law and accordingly allowed the appeal of the assessee. 4. Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal before this Tribunal raising the following grounds: 1. The Ld. CIT(A) ought to have upheld the disallowance of claim of deduction u/s.35(2AB) of ₹ 3,36,70,436/-, since the deduction is allowable for manufacture of certain electronic items only and not to the articles manufactured by the assessee which are machines used in Railway Stations that cannot be categorized as electronic items; 2. The Ld. CIT(A) is not justified in allowing the weighted deduction claimed by the assessee u/s.35(2AB) in spite of the fact that the assessee failed to provide any convincing material facts on record to claim that the instruments/articles do not fall under the Eleventh Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decisions of Hon ble Supreme Court in the case of CIT Vs. Bhanji Lavji (1971) 79 ITR 582 and ITO Vs. Nawab Mir Bharkat Ali Khan Bahadur (1974) 97 ITR 239 (SC) and held that the reopening of assessment is bad in law. For ready reference, we extract relevant paragraph of the CIT(A) from 6.3 to 6.3.2 as follows: 6.3 As regards the legal issue of validity of re-opening of assessment for Asst. Years 2008-09 2009-10, it is noted that scrutiny assessment u/s 143(3) of the Act was completed after due verification by Assessing Officer for both assessment years. 6.3.1 Assessing Officer quoted the following reason for issue of notice u/s 148 of the Act. As seen from the facts of the case and as per the computation of income, the assessee had claimed deduction u/s 35(1)(2AB) of IT Act to the extent of ₹ 2,92,45,167/- which was allowed as deduction, while completing the assessment. The deduction is allowable to the assessee, as per the provisions of Sec.35(1)(2AB) of the IT Act, only if the manufactured articles are not the articles which form part of the Eleventh Schedule. but, as the articles manufactured by the assessee are the articles mentioned in the Eleventh S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is approved by competent authority and appellant's scientific research related to electronic equipments. Hence appellant's case is clearly covered under the provisions of relevant Act. Assessing Officer cannot make use of an amendment made in the Act which is effective for subsequent assessment years (i.e.) A.Y. 2010-11 and onwards (and not applicable for AYs 2008-09 2009-10 in appeal) to deny a claim of deduction u/s.35(2AB) of the Act which appellant is otherwise entitled to by the extant provisions of law by way of reopening of those assessments. - Prima facie, no fresh material/evidence has been brought on record by Assessing Officer necessitating reopening of assessments for AYs 2008-09 2009-10. - In my view, this is only change of opinion of Assessing Officer. When the primary facts necessary for assessment are fully and truly disclosed, the ITO will not be entitled on change of opinion to commence proceedings for reassessment. Similarly, if he has raised a wrong legal inference from the facts disclosed, he will not, on that account, be competent to commence reassessment proceedings - Commissioner of Income-tax Vs. Bhanji Lavji (1971) 79 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed by the CIT(A) with respect to the deductions claimed by the assessee u/s 35(2AB) of the Act. Since we have dismissed the appeal of the revenue, the cross objections have become infructuous and the same are dismissed. ITA No.551/Vizag/2017: 10. Ground No.1 is related to the disallowance made u/s 35(2AB) of the Act towards scientific research expenditure. The assessee filed return of income admitting total income of ₹ 1,31,44,960/- on 25.9.2013. Assessment was completed u/s 143(3) of the Act on total income of ₹ 2,69,82,110/-. In the assessment the A.O. made addition of ₹ 1,34,30,935/- in respect of the deduction u/s 35(2AB) of the Act. During the assessment proceedings, the A.O. found from the stock registers maintained for production for the purpose of Central Excise that the assessee is engaged in the electronic moving display boards for information text installed in Railway stations with traffic code 85414020 and data loggers (based on data acquisition and control systems) with tariff code 8471 and the A.O. was of the view that the above items are included in eleventh schedule in Item No.22, hence ineligible for deduction u/s 35(2AB) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r audit of the accounts maintained for that facility as per form given in para-B of Form 3CK. The Secretary, DSIR after satisfied with the details furnished by the assessee and also after complied with the conditions prescribed under the provisions of section 35(2AB) of the Act and rules there under pass an order of approval inform no. 3CM by duly intimating such approval to the Director General of Income Tax (Exemption) in form no. 3C'L within 60 days of granting approval. Once, the R D facility is approved by the competent authority and assessee has complied with the prescribed rules, the A. 0. is bound to allow the deductions claimed u/s. 35(2AB) of the Act, if he is satisfied that the assessee facility is approved by the competent authority. In case the A. 0. is having any doubt with regard to the goods manufactured by the assessee or expenditure claimed, the A.0. is bound to refer the matter back to the competent authority through appropriate authority i.e. the Central Board of Direct Taxes ('C'BDT) and seek clarifications. Thus, it would emerge from above analysis that neither the A.0. nor the board was competent to take any decision of any such controversy relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f approval in Form No. 3CM is reproduced below: 7.3 In view of the above ITAT decision and the fact that appellant s R D facility was approved by the competent authority for the purpose of section 35(2AB) for the period 1.4.2012 to 31.3.2016, I direct the Assessing Officer to delete addition of ₹ 1,34,30,935/- made in the assessment order as the issue involved for this Asst. Year 2013-14 is identical to the issue decided by Hon ble ITAT for Asst. Year 2011-12. Grounds of appeal numbers 2 3 are allowed. 14. During the appeal hearing, the Ld. D.R. did not furnish any evidence or the case law of any higher judicial authority to controvert the finding of the Ld. CIT(A).The Ld.CIT(A) has given a categorical finding that the R D facility was approved for the period 1.4.2012 to 31.3.2016. Therefore, respectfully following the view taken by this Tribunal in the assessee s own case for the earlier assessment year, we hold that the assessee is eligible for deduction u/s 35(2AB) of the Act and the appeal of the revenue is dismissed on this ground. 15. Ground No.2 is related to the allowability of capital expenditure incurred as research development amounting to &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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