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2020 (2) TMI 654

..... T no evidence on record to decipher that the AO examined the contents i.e. expenditure incurred on R&D as claimed u/s 35(2AB) - HELD THAT:- We find the failure to file Form No.3CL to the authority does not make orders erroneous. The claim is very much allowable provided the expenditure portion is examined and found allowable under the said provisions. In any case, such expenditure can also be allowable u/s 37 of the Act, provided the conditions are met. Further, we also examined the judgment in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. [2017 (8) TMI 933 - GUJARAT HIGH COURT] Claim of deduction u/s 35(2AB) of the Act cannot be denied merely for 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 .....

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..... ls of deductions claimed u/s 35, 35(2AA) and 35(2AB) along with the relevant documents of ministry of scientific and research. In response to the same, the assessee communicated the reply informing about the details of R&D facilities, details of expenditure incurred at page 53 in para 16. The same is extracted as under:- 16. Our company is an In-house Research and Development Company duly approved by the Department of Science & Industrial Research (DSIR), Govt. of India, New Delhi. Copy of the approval issued by the Department of Scientific & Industrial Research (DSIR), Govt. of India, New Delhi is enclosed herewith for your kind perusal. Hence, various types of R&D activities had conducted by the Company during the previous year. The R&D activities are basically targeting creation of new hybrid seeds for the farming community, at large. The activities include, Large 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 exp .....

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..... interest of revenue. Ground No.2 The learned Pr.CIT erred in disallowing weighted deduction u/s 35(2AB). Proceedings before the Tribunal: 6. Before us, ld. Counsel Shri N.R. Agrawal accompanied by Shri Vijay Saboo submitted the background facts relating to Form Nos.3CM and 3CL tracing the evolution and the developments over the period from A.Y. 2008-09 to 2010-11. The ld. Counsel mentioned the assessee never filed requisite Form Nos.3CM and 3CL to the Department. However, the assessee got the relief from the Tribunal despite absence of Form No.3CM. Referring to the developments in A.Y. 2011-12, ld. Counsel submitted there is no dispute about non furnishing of these both forms to the Department. Therefore, there is no litigation and when it comes to A.Y. 2012-13, Form No.3CM is available and Form No.3CL is not available. The assessee did not submit the audit accounts to the DSIR. Coming 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, .....

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..... fore us (supra), judgment of Hon ble High Court of Gujarat in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. (supra). On perusal of the said orders of the Tribunal not only in assessee s own case and others, we find the failure to file Form No.3CL to the authority does not make orders erroneous. The claim is very much allowable provided the expenditure portion is examined and found allowable under the said provisions. In any case, such expenditure can also be allowable u/s 37 of the Act, provided the conditions are met. Further, we also examined the judgment of Hon ble High Court of Gujarat in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. (supra). We find it relevant to extract the same as under:- 3. The Commissioner of Income tax was of the opinion that the Assessing Officer had not made proper inquiries before accepting the claim. After giving notice to the assessee, 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 .....

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..... the expenditure, be it revenue or or capital in nature, actually incurred in developing the inhouse research and HC-NIC Page 3 of 4 Created On Tue Aug 22 03:39:27 IST 2017 O/TAXAP/541/2017 ORDER development facility. To the limited extent, the Commissioner desired the Assessing Officer to verify such figures, we would allow the Assessing Officer to do so. In other words, in principle, we accept the Tribunal's reasons and conclusions. Merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee's claim of deduction under section 35(2AB) of the Act. However, in facts of the present case, it would be open for the Assessing Officer to verify the actual expenditure incurred by the assessee. 9. From the above, it is inescapable conclusion that the claim of deduction u/s 35(2AB) of the Act cannot be denied merely for 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. Theref .....

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