TMI Blog2019 (9) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... d direct the AO to allow the deduction @ 200% of the expenditure incurred by the assessee, after examining the claim from the books of accounts - Decided in favour of assessee - ITA No.17/Bang/2018 - - - Dated:- 12-9-2019 - Shri B.R Baskaran, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Shri V Chandrashekhar, Advocate For the Respondent : Shri R.N Siddappaji, Addl. CIT (DR) ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER The appeal filed by the assessee is directed against the order dated 29/8/2017 passed by ld CIT(A)-5, Bengaluru and it relates to asst. year 2013-14. 2. The assessee is aggrieved by the decision of ld CIT(A) in rejecting the claim of weighted deduction @ 200% made us/ 35(2AB) of the Act. 3. We heard the parties and perused the record. The assessee is engaged in the production sale of telemetry interface cards and Data Acquisition Cards, design and development of hardware and software and maintenance services. The assessee has set up an inhouse research and development facility and the same has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue 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 period from 1.4.2011 to 31.3.2012. The facts on record go to show that the Assessee s in-house R D facilities was approved by the DSIR, Govt. of India, Ministry of Science and Technology for AY 2012-13 vide their letter dated 20.5.2009, a copy of which is placed at Page-30 of the Assessee s paper book. The approval is for the period 1.4.2009 upto to 31.3.2012. Therefore, the condition for allowing deduction u/s.35(2AB) of the Act has been fulfilled by the Assessee. The claim of the revenue, however, is that the approval by the prescribed authority in form No.3CM is not final and conclusive and the quantum of expenditure on which deduction is to be allowed is to be certified by DSIR in form No.3CL. There is no statutory provision in the Act which lays down such a condition. We shall therefore examine 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority 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 Form No.3CL dated 5.4.2018 for AY 2014 15 2015-16 but no Form No.3CL was issued for AY 2012-13. Though there has been no communication to the Assessee in this regard, the learned counsel for the Assessee submitted that since the audited accounts were not submitted by 31stOctober of the succeeding AY, as is required under Guideline 5 (vi), the Assessee s application would not have been considered by the DSIR. 17. Rule-6(7A)(b) of the Rules specifying the prescribed authority and conditions for claiming deduction u/s.35(2AB) of the Act has been amended by the Income Tax (10th Amendment) Rules, 2016 w.e.f. 1.7.2016, whereby it has been laid down that the prescribed authority, i.e., DSIR shall quantify the quantum of deduction to be allowed to an Assessee u/s.35(2AB) of the Act. Prior to such substitution, the above provisions merely provided that the prescribed authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and allow the expenditure incurred on inhouse R D facility as weighted deduction under section 35(2AB) of the Act. Accordingly, we hold so. Thus, we reverse the order of Assessing Officer in curtailing the deduction claimed under section 35(2AB) of the Act by ₹ 6,75,000/-. Thus, grounds of appeal No.10.1, 10.2 and 10.3 are allowed. (ii) The Hyderabad ITAT in the case of M/S. Sri Biotech Laboratories India Ltd. Vs. ACIT ITA No.385/Hyd/2014 for AY 2009-10 order dated 24.9.2014 took the view (vide Paragraph- 13 of the order) that when the Assessee s R D facility is approved the deduction u/s.35(2AB) of the Act cannot be denied merely on the ground that prescribed authority has not submitted report in Form 3CL. 19. The question of allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 theprescribed 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 Form No. 3CM and come to the conclusion that a plain and harmonious reading of rule and Form clearly suggests that once facility is approved, the entire expenditure so incurred on development of R D facility has to be allowed for weighted deduction as provided by s. 35(2AB). The Tribunal has also considered the legislative intention behind above enactment and observed that to boost up research and development facility in India, the legislature has pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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