TMI Blog2019 (7) TMI 1214X X X X Extracts X X X X X X X X Extracts X X X X ..... a (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. In these facts and circumstances and in the light of the judicial precedents on the issue, we are of the view that the deduction u/s.35(2AB) of the Act ought to have been allowed as weighted deduction at 200% of the expenditure as claimed by the Assessee and ought not to have been restricted to 100% of the expenditure incurred on scientific research. We hold and direct accordingly and allow the appeal of the Assessee - See M/S. MAHINDRA ELECTRIC MOBILITY LTD. VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4 (1) (2) , BANGALORE. [ 2019 (1) TMI 20 - ITAT BANGALORE] As decided in M/S. SUN PHARMACEUTICAL INDUSTRIES LTD. [ 2019 (4) TMI 1727 - ITAT AHMEDABAD] merely because the prescribed authority failed to send intimation In Form No. 3CL, would not be reason enough to deprive the assessee`s claim of deduction under section 35(2AB) of the Act. Disallowance u/s 14A - assessee submitted that the assessee has earned exempt agricultural income but has no exempt income by way of dividend from shares and investments - HELD THAT:- As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred on these activities. Hence, in the absence of an agreement being entered into with DSIR for co-operation in such research and development facility and for audit of the accounts maintained for that facility and in the absence of the approval in form No 3CL from the DSIR as to the extent to which the expenditure is incurred on these activities, the claim of weighted deduction u/s 35(2AB) is rejected. Reliance is placed on the decision of the Hyderabad ITAT 'B' Bench in the case of M/s Electronic Corporation of India Ltd Vs ACIT (in ITA No. 1106/Hyd/2011) reproduced above. However, the in-house R D expenditure of ₹ 30,88,007 is allowed as a revenue expenditure. Further disallowance was made u/s 14A of the Act. Aggrieved, assessee carried the matter in appeal. The first appellate authority confirmed both the disallowances. On the issue of deduction u/s 35(2AB) he held as follows: 6.2 have considered the above grounds of appeal, statement of facts and written submission filed by the appellant and also perused the assessment order. All the case laws relied on by the assessee have no here categorically said that Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of Form CL, the amount that is eligible is not known. Hence, allowing deduction u/s. 35(2AB) becomes ambiguous - as what is to be allowed is not certain. Hence, I agree with the view of the AO, and this ground of appeal is dismissed. (emphasis own) Aggrieved, the assessee is in appeal before us. 4. The learned counsel for assessee submitted that the issue of grant of deduction u/s 35(2AB) of the Act and the issue of disallowance u/s 14A of the Act are common for all the appeals, except the appeal for the assessment year 2010-11 where the ground on disallowance u/s 14A has not been taken. 5. On the other grounds challenging the validity of reopening, the learned counsel for assessee submitted that he is not pressing the same. On the issue of disallowance u/s 35(2AB) of the Act, the learned counsel for assessee submitted that the issue is covered in favour of the assessee by the order of the ITAT, Bengaluru Bench in the case of M/s.Mahindra Electric Mobility Ltd. vs. Asst.CIT in ITA No.641/Bang/2017, order dated 14/09/2018, which in turn had followed the decision of Pune Bench of Tribunal in the case of Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para.27 of the order, the Hon ble High Court held that the Assessing Officer is bound by the certificate issued by the prescribed authority in Form No.3CL and that the Assessing Officer cannot grant deduction in the absence of such certificate. She further relied on the decision of the constitutional Bench of the Hon ble Supreme Court in the case of Commissioner of Customs vs. Dilip Kumar, judgment dated 30/07/2018 for the proposition that strict interpretation has to be given where assessee claims an exemption under the Act. With regard to disallowance u/s 14A, the learned CIT(DR) submitted that the Assessing Officer has recorded that the assessee had exempt income and under those circumstances, it would be appropriate to set aside the matter to the file of the Assessing Officer for fresh adjudication after verification of the facts. 8. The learned counsel for assessee, on the other hand, pointed out that the agreement in question has been placed before the CIT(A) and this is at pages 34 to 41 of th paper book and the CIT(A) has considered this agreement and recorded that the only ground of disallowance is the absence of Form No.3CL. On the issue of grant of 100% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n R D expenditure on fixed asset, the quantum of expenditure, i.e. the cost of acquisition is not doubted by the Assessing Officer, as depreciation has been granted on the cost of acquisition. We also find that the decision of the jurisdictional High Court in the case of Tejas Networks Ltd. (supra) is not on the issue that arises in this appeal. It deals with a situation where the prescribed authority has allowed certain expenditure in Form 3CL and the Assessing Officer sought to tinker with it. The Court held that it is beyond the jurisdiction of the Assessing Officer change the figure of given by the prescribed authority in Form No.3CL. 10. The jurisdictional Tribunal in the case of M/s.Mahindra Electric Mobility Ltd. (supra) held as follows: 13. We have heard the rival submissions. The learned DR relied on the order of the AO/CIT(A). The learned counsel for the Assessee reiterated submissions as were made before the revenue authorities and placed reliance on some judicial precedents on identical issue rendered by various benches of ITAT and Hon ble High Courts. 14. For AY 2012-13, the previous year is FY 2011-12 i.e., the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilities which are supplied from a common source which also services areas of the plant other than R D may be admissible, provided they are metered/measured and subject to certification by a Chartered Accountant. (v) departments, other than R D centre, such as manufacturing, quality control, tool room etc. incurred on such functions as attending meetings providing advice / directions, ascertaining customer choice/response to new products under development and other liaison work shall not qualify for deduction under section 35(2AB) of I.T. Act 1961. (vi) As per guideline 10 Documents required to be submitted by 31st October of each succeeding year of approved period to facilitate submission of Report in Form 3CL (2 sets) are Complete details as per annexure-IV of DSIR guidelines. 16. The Assessee applied for issue of Form No.3CL to the appropriate authority on 24.3.2017, after the order of the CIT(A). The application so made by the Assessee is at page 43 to 65 of the Assessee s paper book. According to the Assessee, it has complied with all the requirements of the guidelines for issue of Form No.3CL, but the DSIR has issued Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act do not prescribe any methodology of approval to be granted by the prescribed authority vis- -vis expenditure from year to year. The amendment brought in by the IT (Tenth Amendment) Rules w.e.f. 01.07.2016, wherein separate part has been inserted for certifying the amount of expenditure from year to year and the amended form No.3CL thus, lays down the procedure to be followed by the prescribed authority. Prior to the aforesaid amendment in 2016, no such procedure / methodology was prescribed. In the absence of the same, there is no merit in the order of Assessing Officer in curtailing the expenditure and consequent weighted deduction prescribed authority has only approved part of expenditure in form No.3CL. We find no merit in the said order of authorities below. 46. The Courts have held that for deduction under section 35(2AB) of the Act, first step was the recognition of facility by the prescribed authority and entering an agreement between the facility and the prescribed authority. Once such an agreement has been executed, under which recognition has been given to the facility, then thereafter the role of Assessing Officer is to look into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading 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 DSIR; and (iv) allowance of weighted deduction on the expenditure so incurred by the assessee. 9. The provisions nowhere suggest or imply that research and development facility is to be approved from a particular date and, in other words, it is nowhere suggested that date of approval only will be cut-off date for eligibility of weighted deduction on the expenses incurred from that date onwards. A plain reading clearly manifests that the assessee has to develop facility, which presupposes incurring expenditure in this behalf, application to the prescribed authority, who after following proper procedure will approve the facility or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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. In these facts and circumstances and in the light of the judicial precedents on the issue, we are of the view that the deduction u/s.35(2AB) of the Act ought to have been allowed as weighted deduction at 200% of the expenditure as claimed by the Assessee and ought not to have been restricted to 100% of the expenditure incurred on scientific research. We hold and direct accordingly and allow the appeal of the Assessee. 10. We find that the proposition of law laid down in this order of the ITAT applies on all fours to the facts of the case on hand. Hence, we respectfully follow the order of the co-ordinate bench of the ITAT on this issue. 11. The Ahmedabad A bench of Tribunal in the case of DCIT vs. M/s. Sun Pharmaceutical Industries Ltd. (order dated 10/4/2019 in ITA No.2504/AHD/2017) at para 7 held as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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