TMI Blog2019 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Rules, that the quantification of the weighted deduction u/s.35(2AB) of the Act has significance. In the present case there is no difficulty about the quantum of deduction u/s.35(2AB) of the Act, because the AO allowed 100% of the expenditure as deduction u/s.35(2AB)(1)(i) as expenditure on scientific research. Deduction u/s.35(1)(i) and Sec.35(2AB) are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) and under Sec.35(2AB) are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) should be engaged in manufacture of certain articles or things. It is not in dispute that the Assessee is engaged in business to which Sec.35(2AB) applied. The other condition required to be fulfilled for claiming deduction u/s.35(2AB) is that the research and development facility should be approved by the prescribed authority. The prescribed authority is the Secretary, Department of Scientific Industrial Research, Govt. Of India (DSIR). It is not in dispute that the Assessee in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and telephonic conferences took place between the Appellant, M M and BKK. After a great deal of deliberation, it was decided that there was great deal of merit in the claim of the Assessee for deduction u/s 35(2AB) for the reason that the R D Center was duly approved by DSIR and, more importantly, the Assessee's claim under section 35(2AB) was approved by DSIR for all subsequent years and had also been allowed by the Assessing Officer. It was therefore, felt that the rejection of the claim was on mere technical grounds and not on merits of the matter. The Assessee was advised by BKK that the Income tax Act did not lay down any time period for submitting the audited accounts of the approved R D Center; it was only the Guidelines issued by DSIR which laid down the timeline. There was also no provision for furnishing of approval in Form 3CL by DSIR to the Assessing Officer. The Assessee was advised that these Guidelines thus travelled beyond the Act and the Rules framed thereunder. The Assessee was also informed by BKK that in the case of M M, Hon'ble Tribunal of Mumbai had allowed the claim even in the absence of certificate in Form 3CL. BKK also advised the Assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Commissioner of Income-tax Vs. West Bengal Infrastructure Development Finance Corporation limited (2011) 334 ITR 269 (SC). Reliance was also placed on the unreported decision of the Hon'ble Jurisdictional Karnataka High Court in the case of CIT Another Vs. ISRO Satellite Center, in ITA No. 532 of 2008 and other batch of appeal order dated 28/10/2011 has condoned the delay of 5 years in filing the appeal before the CIT[A]. Reliance was also placed on the decision of the Hon'ble Jurisdictional Tribunal in the case of Smt. Shakuntala Hegde, Legal Heir of Mr. Ramakrishna Hegde Vs. ACIT, in ITA No. 2785/Bang/2004 order dated 25/04/2006 wherein the Hon'ble Jurisdictional Tribunal has condoned the delay of 1,331 days i.e., 3 Years, 8 Months and 22 days in filing the appeal by the assessee. 5. The learned DR submitted that since the addition was an agreed addition, the plea of wrong advice by professional cannot be pleaded by the Assessee. 6. We have given a careful consideration to the rival submissions. At the outset, we observe that the Hon ble Supreme Court, in the case of Mst. Katiji (supra) , has explained the principles that need to be kept in mind while co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities. The Assessee is a company engaged in the business of manufacture of automobiles and auto parts. For A.Y.2012-13 the assessee filed return of income on 27.09.2012 declaring loss of ₹ 60,91,71,433/-. In the return so filed while computing income from business, the assessee had claimed weighted deduction u/s 35(2AB) of the Income Tax Act, 1961 (Act) at a sum of ₹ 35,82,45,470/- being expenditure on scientific research and inhouse research and development facility which is 200% of actual expenditure of ₹ 17,91,22,735/-. Section 35(2AB) of the Act, in so far as it is relevant to the present appeal, reads thus:- Sec.35 Expenditure on scientific research . In respect of expenditure on scientific research, the following deductions shall be allowed- (2AB)(1) Where a company engaged in the business of biotechnology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the prescribed authority. Deduction u/s.35(1)(i) and Sec.35(2AB) of the Act are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure, while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) of the Act and under Sec.35(2AB) of the Act are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) of the Act should be engaged in manufacture of certain articles or things. It is not in dispute that the Assessee is engaged in business to which Sec.35(2AB) of the Act applied. The other condition required to be fulfilled for claiming deduction u/s.35(2AB) of the Act is that the research and development facility should be approved by the prescribed authority. The prescribed authority is the Secretary, Department of Scientific Industrial Research, Govt. Of India (DSIR). It is not in dispute that the Assessee in the present case obtained approval in Form No.3CM as required by Rule 6 (5A) of the Rules. As per the procedure for claiming deduction u/s35(2AB) of the Act as per Department of Scientific and Industrial Research (DSIR) subsequent to the appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine what is Form No.3CL. 15. DSIR has framed guidelines for approval u/s.35(2AB) of the Act. The guidelines as on May, 2010 which is relevant for AY 2012-13, in so far as it is relevant for the present appeal, was as given below. (i) As per guideline 5 (iv) of the guidelines so framed, every company which has obtained an approval from the prescribed authority should also submit an undertaking as per Part C of Form No. 3CK to maintain separate accounts for each R D centre approved under Section 35(2AB) by the Prescribed Authority, and to get the accounts duly audited every year by an Auditor as defined in sub-section (2) of section 288 of the IT Act 1961. (The statutory auditors of the Company should audit the R D accounts. To facilitate this audit separate books of accounts for R D should be maintained. Also, the statutory auditors should sign the auditors certificate in the details required to be submitted as per annexure- IV of the guidelines to facilitate submission of Report in Form 3CL). (ii) As per guideline 5(vi) of the guidelines, the audited accounts for each year maintained separately for each approved centre shall be furnished to the Secretary, Department of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the prescribed authority shall submit its report in relation to the approval of in-house R D facility in Form No.3CL to the DGIT (Exemption) within 60 days of granting approval. Therefore prior to 1.7.2016 there was legal sanctity for Form No.3CL in the context of allowing deduction u/s.35(2AB) of the Act. 18. The issue as to whether deduction u/s.35(2AB) of the Act can be denied for absence of Form No.3CL by the DSIR was subject matter of several judicial decisions rendered by various Benches of ITAT. (i) The Pune ITAT in the case of Cummins India Ltd. Vs. DCIT in ITA No.309/Pun/2014 for AY 2009-10 order dated 15.5.2018 had an occasion to consider a case where part of the claim for deduction u/s.35(2AB) of the Act was claimed supported by Form No.3CL but part of it was not supported by Form No.3CL. The Pune ITAT held as follows:- 45. The issue which is raised in the present appeal is that whether where the facility has been recognized and necessary certification is issued by the prescribed authority, the assessee can avail the deduction in respect of expenditure incurred on in-house R D facility, for which the adjudicating authority is the Assessing Officer and whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vikas (India) Ltd. (2011) 335 ITR 117 (Del) where AO refused to accord the benefit of the weighted deduction to the assessee under s. 35(2AB) on the ground that recognition and approval was given by the DSIR in February/September, 2006, i.e., in the next assessment year and, therefore, the weighted deduction cannot be allowed. The CIT(A) confirmed the order of the AO. The Tribunal held that the assessee 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 D activity and had incurred the expenditure thereupon. Once a certificate by DSIR is issued, that would be sufficient to hold that the assessee fulfils the conditions laid down in the aforesaid provisions. The Hon ble Delhi High Court followed the decision of the Hon ble Gujarat High Court and up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 20. From the above discussion it is clear that prior to 1.7.2016 Form 3CL had no legal sanctity and it is only w.e.f 1.7.2016 with the amendment to Rule 6(7A)(b) of the Rules, that the quantification of the weighted deduction u/s.35(2AB) of the Act has significance. In the present case there is no difficulty about the quantum of deduction u/s.35(2AB) of the Act, because the AO allowed 100% of the expenditure as deduction u/s.35(2AB)(1)(i) of the Act, as expenditure on scientific research. Deduction u/s.35(1)(i) and Sec.35(2AB) of the Act are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) of the Act and under Sec.35(2AB) of the Act are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) of the Act should be engaged in manufacture of certain articles or things. It is not in dispute that the Assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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