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2020 (2) TMI 654

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..... due process of verification by the concerned authorities. Therefore, the Hon’ble High Court directed the AO to verify the actual expenditure incurred by the assessee in that case. Neither the AO nor Pr.CIT gave finding of fact on the R&D nature of expenditure under consideration. There, we cannot examine them and give a finding of fact. Ld. AR also requested for remand for verification. Considering the above settled nature of the issue, we are of the opinion that the deduction u/s 35(2AB) of the Act cannot be denied merely for the procedural lapses. Therefore, the order of the PCIT needs modification. Modification include (1) the judgment of Hon’ble High Court of Gujarat in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. (supra) and other judgments, if any, on the subject, are required to be following by the PCIT; and (2) Due verification of the expenditure and the allowability of expenditure u/s 35(2AB) of the Act has to be examined by the PCIT too. We modify the orders of Pr.CIT accordingly, for both assessment years. PCIT is directed to pass consequential order after hearing the assessee. The assessee is directed to demonstrate the allowability of the said .....

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..... e Scale Trials (LST) and Multi Location Trials (MLT) expenses, Field Day and Crop Seminars, Farmer Advisory expenses, Salaries and other expenses of the R&D staff, etc. These expenses are duly debited to the R&D expenditure after proper identification. Hence company has claimed 200% of its expenditure incurred on Research & Development activities during the year under assessment. Copies of the relevant supporting enclosed herewith. 4. After considering the reply of assessee, the AO allowed the claim of deduction u/s 35(2AB) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). There is no evidence on record to decipher that the AO examined the contents of page 51 i.e. expenditure incurred on R&D as claimed u/s 35(2AB) of the Act. Subsequently, Pr.CIT invoked the provisions of section 263 of the Act and examined the above issue of allowability of deduction claimed u/s 35(2AB) of the Act when Form No.3CL is absent on record and issued show cause notice proposing to revise the said order of AO. It is case of Pr.CIT that although the assessee had obtained the requisite approvals from the Secretary, DSIR for the purpose of in-house R&D facility, the asse .....

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..... g to the current year under consideration, ld. Counsel brought our attention to page 1 of the Paper Book and submitted that Form No.3CM is very much available on record and Form No.3CL could not be furnished as the assessee failed to furnish the financial statements to DSIR. Notwithstanding the same, ld. Counsel mentioned the said statements are now furnished (on 12.02.2020) to DSIR and the assessee tried to rectify the same defect for A.Y. 2014-15 also. It is argued by the ld. Counsel that the Tribunal and the Hon ble High Courts are consistently granting deduction u/s 35(2AB) of the Act to the assessee despite absence of Form No.3CL. In this regard, ld. Counsel brought our attention to the Co-ordinate Bench decisions in the cases of (i) Cummins India Ltd. Vs. DCIT in ITA No.309/PUN/2014 for A.Y. 2009-10, order dated 15.05.2018 (ii) Minilec India (P) Ltd. Vs. ACIT (2018) 171 ITD 124 (Pune) and assessee s own case in ITA No.367/PN/2012 & 417/PN/2012, for A.Y. 2008-09, order dated 27.01.2014. Further, ld. Counsel brought our attention to the decision of Hon ble High Court of Gujarat at Ahmedabad in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. in Tax Appeal No.541 of 20 .....

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..... he passed an order dated 28.3.2016 under section 263 of the Act and held that the order of assessment was passed without proper verifications, investigation and examination. The same was therefore, erroneous and prejudicial to the interest of the Revenue. He therefore, directed the Assessing Officer to examine the issues discussed in the order and pass a fresh order of assessment in view of such discussion. In the process the Assessing Officer would also "consider correct amount of disallowable expenditure after considering the financial documents and other relevant details/submissions filed by the assessee and as available on record with a view to ensure that there is no discrepancy in the facts and figures on record." One of the main grounds which appealed to the Commissioner was that the prescribed authority had not sent the intimation in Form 3CL to the Revenue, in absence of which, according to the Commissioner, claim could not have been accepted. 4. The assessee approached the Tribunal. The Tribunal by the impugned judgment allowed the appeal interalia holding HC-NIC Page 2 of 4 Created On Tue Aug 22 03:39:27 IST 2017 O/TAXAP/541/2017 ORDER that the prescribed auth .....

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..... want of Form No.3CL subject to fulfilment of other conditions under Rule 7 of IT Rules. It is merely a procedural lapse. Further, it is also a decided issue that the expenditure which is claimed under the said section is allowable after due process of verification by the concerned authorities. Therefore, the Hon ble High Court directed the AO to verify the actual expenditure incurred by the assessee in that case. Neither the AO nor Pr.CIT gave finding of fact on the R&D nature of expenditure under consideration. The contents are available in page 51 of the Paper Book. There, we cannot examine them and give a finding of fact. Ld. AR also requested for remand for verification. 10. Considering the above settled nature of the issue, we are of the opinion that the deduction u/s 35(2AB) of the Act cannot be denied merely for the procedural lapses. Therefore, the order of the PCIT needs modification. Modification include (1) the judgment of Hon ble High Court of Gujarat in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. (supra) and other judgments, if any, on the subject, are required to be following by the PCIT; and (2) Due verification of the expenditure and the allowability .....

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