TMI Blog2020 (2) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 35(2AB) of the Act, should be given to the assessee as long as the recognition is in force. A.O as well as Ld. CIT(A) were incorrect in denying the benefit of weighted deduction claimed u/s 35(2AB) of the. Hence, we direct the A.O to allow weighted deduction claimed u/s 35(2AB) Penalty u/s 271(1)(c) - once addition on which penalty levied u/s 271(1)(c) of the Act, has been finally deleted by the appellate authorities, then there is nothing survives to levy penalty u/s 271(1)(c) of the Act. Hence, we are of the considered view that the penalty levied by the A.O u/s 271(1)(c) of the Act, cannot survive in the eyes of law. CIT(A) although confirmed additions made by the A.O towards disallowance of weighted deduction claimed u/s 35(2AB) of the Act, but deleted the penalty levied u/s 271(1)(c) on the ground that mere making a claim which was not accepted by the A.O cannot leads to a conclusion that the assessee has furnished inaccurate particulars of income which warrants levy of penalty U/s 271(1)(c) - Decided in favour of assessee. - ITA/CO No. 3026/Mum/2015, 3353/Mum/2017 - - - Dated:- 7-2-2020 - Shri G. Manjunatha, Accountant Member And Shri Ramlal Negi, Judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, Thane, which was started functioning from 01.03.2011. The assessee has filed an application for approval of R D facility to the DSIR, Ministry of Science and Technology, Govt. of India on 11.03.2011 and dispatched on 24.03.2011 and same was delivered to DSIR on 25.03.2011. The R D facility at Dhanalaxmi Industrial Estate, Thane (TRC) and MIDC Sinnar (SRC) were renewed up to 31.03.2016. However, in respect of Wagle research centre necessary approval from DSIR was not received for the impugned assessment year. The assessee has filed a writ petition before the Hon ble Delhi High Court against department of Scientific Industrial Research (DSIR) for not approving the R D facility at Wagle Research Centre, Thane. 4. For the year under consideration, the assessee has filed return of income on 24.09.2010, declaring total income at ₹ 9,44,65,631/-. The assessee has claimed weighted deduction for R D expenditure u/s 35(2AB) of the Act, in respect of amount incurred for R D. The A.O has denied deduction claimed u/s 35(2AB) of the Act, on the ground that, although, the R D facilities were recognized by the DSIR, but for the purpose of tax exemption it has to be approved by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee R D facility has been approved by the Scientist G, but such approval is not sufficient to claim weighted deduction, because as per the provisions of said section and Rule 6 and 7A of Income Tax Rules, 1962, it is necessary to obtain approval from Secretary, DSIR, Govt. of India. The Ld. CIT(A) further observed that, if you go through the provisions of Sec. 35(2AB) of the Act and related Rule 6 and 7A of the Income Tax Rules, 1962, the assessee shall file an application in form No. 3CK along with an agreement and if the prescribed authority is satisfied that the conditions provided therein are fulfilled, then it shall pass an order in writing in form 3CM approving the facility for claiming the benefit of weighted deduction. Since, the R D facility of the assessee are not approved by the competent authority and relevant form 3CM is not on record to establish that the approval has been accorded for the purpose of Sec. 35(2AB) of the Act, for the year under consideration, claim of the assessee that initial recognition granted by the DSIR is sufficient enough to claim for weighted deduction cannot be accepted. The Ld. CIT(A) has discussed the issue in light of certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in light of certain judicial precedents and submitted that, it is clear from the provisions of Sec. 35(2AB) and relevant Rules that, once R D facility has been recognized by the competent authority, then neither Sec. 35(2AB) of the Act, nor Rule 6 nor even form 3CK or 3CM provides for any necessity to have renewal / periodic approval or recognition much less for every three years period. He further submitted, if we go through the prescribed form, there is no reference about fresh or initial application vis-a-vis renewal application. He further submitted that neither Sec. 35(2AB) of the Act nor Rule 6 of Income Tax Rules, 1962, prescribed for year wise approval nor do they seek to restrict the period the amount of the benefit which the assessee otherwise is entitled to. He further submitted, as for as form 3CM is concerned Sec. 35(2AB) of the Act, does not provide for issuance of form 3CM by the prescribed authority. In other words, the right of the assessee to claim deduction u/s 35(2AB) of the Act, is not at all dependent upon issuance of form 3CM by the prescribed authority. 8. The Ld. AR, furhter submitted that, what the assessee required to do is to apply for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2012 12. Minilec India (P) Ltd., Vs. ACIT, [2018] 171 ITD 124 (Pune Trip). 9. The Ld. DR, on the other hand, strongly supporting the order of the CIT(A) submitted that the A.O as well as the Ld. CIT(A) has rightly denied the benefit of weighted deduction claimed u/s 35(2AB) of the Act, because necessary approval from the competent authority i.e the Secretary, DSIR, Ministry of Science and Technology, Govt., of India, is not accorded in prescribed form No. 3CM for the relevant period. The DR further submitted that the provisions of Sec. 35(2AB) of the Act, and relevant Rule 6 and 7A of Income Tax Rules, 1962, are very clear as per which in order to claim the benefit of weighted deduction, the assessee R D facility must be recognized from competent authority and the expenditure incurred by the assessee for such purpose should be approved by the competent authority in prescribed form No. 3CM by an application by the assessee in form No. 3CK along with necessary agreement and details of expenditure. The DR further submitted that, no doubt, the assessee facilities have been granted initial recognition by the competent authority, but such initial recognition is not suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree years which was valid up to 31.03.2012. The undisputed position emerges from the fact before us is that the assessee has obtained initial recognition from competent authority DSIR, and such recognition was valid up to 31.07.2012 in respect of R D facilities at Thane. In so far as, R D facility at Wagle Industrial Estate, Thane, it has commenced activities from 01.02.2011 and application for registration has been filed on 11.03.2011. In case of another R D Unit at 135/A Wagle Industrial Estate, Thane (NTRC) the assessee has commenced its activities from 01.08.2012. Thereafter, the assessee has filed an application for recognition of NTRC vide letter dated 12.10.2012. The DSIR neither rejected the claim of application filed by the assessee nor communicated the position of application filed by the assessee at any time during the relevant period. The assessee has filed a writ petition before the Hon ble Delhi High Court and challenged the action of the competent authority i.e the Secretary, DSIR, Ministry of Science and Technology, Govt of India and the writ application filed by the assessee pending for adjudication. Be that as it may, but the undisputed facts are that the DSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitially recognized by the competent authority. In fact, the R D facility of the assessee has been initially recognized by the competent authority from A.Y 2001-02 onwards. The only dispute is with regard to approval of prescribed authority in form No. 3CM. The A.O as well as the Ld. CIT(A) was on the opinion that although the initial recognition was granted to the assessee by the competent authority, but the approval of the facility for the impugned period in form 3CM, was not on record. Therefore, they opined that in absence of approval in prescribed form 3CM the assessee is not entitled for weighted deduction u/s 35(2AB) of the IT act. Except this, existence of R D facility at three places and consequent expenditure incurred for relevant purpose are not disputed by the authorities. In fact, the A.O as well as Ld. CIT(A) have categorically accepted that the assessee has set up R D centres and incurred various expenditure for in house research and development purpose. 13. In this legal and factual background, if you go through the claim of the assessee towards dedication claimed u/s 35(2AB) of the Act, we need to examine such claim made by the assessee is in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 35(2AB) of the Act, what is relevant is not the date of recognition or the cut off date mentioned in the certificate of the DSIR or even the date of approval, but the existence of recognition. The Hon bel Gujarat High Court in the case of Banko Product India Ltd., Vs. DCIT (supra) had once again reiterated its earlier position in the case of claris lifescience ltd. (supra) and held that once an application is filed by the assessee to the prescribed authority, the assessee would have no control over when such application is processed and decided. The Hon ble court further held that period during which the approval is granted is not relevant as long as such approval is granted and expenditure has been incurred for this specified purpose. The Hon ble Gujarat High court in the Case of CIT Vs. Sun Phara India Ltd., (supra) had once again considered on identical issue and held that once R D facility set up by the assessee has been approved by the prescribed authority and necessary approval was granted in the prescribed format, then the communication in form 3CM was thereafter between the prescribed authority and the department. If the same was not so, surely the assessee cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are entirely similar to facts considered by the Tribunal and hence the assessee case is covered squarely by the decision of ITAT Mumbai, in the case of PCP Chemicals Pvt Ltd., Vs. ITO. We find that although the Tribunal has distinguished the decision of Hon ble Gujarat High Court in the case of Claris LifeScience Ltd., Vs. CIT and Hon ble Delhi High Court in the case of Maruthi Suzuki India Ltd. vs. Union of India, but fact remains that in the case of PCP Chemical Pvt Ltd., Vs. ITO (supra) the assessee has filed an application for recognition / approval on 12.08.2011 and in form No. 3CK and the competent authority has approved the facility for the period from 01.04.2011 to 31.03.2013. The assessee has claimed deduction for the A.Y 2011-12 for which neither recognition nor approval from the competent authority was received by the assessee. Under those facts, the Tribunal came to the conclusion that when the initial approval / recognition was granted with effect from 01.04.2011 on the basis of application filed by the assessee on 12.08.2011 then the deduction for expenditure incurred for the previous period i.e before the facility was approved by the competent authority cannot be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up to 31.03.2019. From the above, it is very clear that the assessee facility was approved by the competent authority i.e the Secretary DSIR, but there was no approval in form No. 3CM for the impugned Assessment year. Therefore, we are of the considered view that from the settled legal position of the law by the various cases of High Courts as discussed here in above in preceding paragraphs what is relevant to decide eligibility for weighted deduction u/s 35(2AB) of the Act, is existence of R D facility and recognition of such facility by the competent authority. Once the facility has been approved by the competent authority, then there is no cut off date is prescribed for approval of such facility and the benefit of deduction u/s 35(2AB) of the Act, should be given to the assessee as long as the recognition is in force. Hence, we are of the considered view that the A.O as well as Ld. CIT(A) were in correct in denied the benefit of weighted deduction claimed u/s 35(2AB) of the. Hence, we direct the A.O to allow weighted deduction claimed u/s 35(2AB) of the Act. 18. In the result, appeal filed by the assessee is allowed. 3353/Mum/2017, A.Y 2010-11: 19. ..... 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