TMI Blog2020 (3) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... y has been recognized by the competent authority. Hence, we direct the Ld. AO to allow weighted deductions claimed by the assessee towards R D expenditure u/s 35(2AB) - Decided in favour of assessee. - ITA Nos.866 And 5172/Mum/2017 And ITA No.1531/Mum/2017 - - - Dated:- 4-3-2020 - Shri Saktijit Dey, Judicial Member And Shri G. Manjunatha, Accountant Member For the Assessee : Shri Dinkle Hariya, AR For the Revenue : Shri Rajiv Harit, CIT-(DR) And Shri Michael Jerald, Addl. CIT-DR ORDER PER G.MANJUNATHA, ACCOUNTANT MEMBER: These cross appeals filed by the assessee, as well as the revenue are directed against the order of the Ld. Commissioner of Income tax (Appeals)-3, Nasik, dated 29/12/2016 for the AY 2011- 12. The assessee has also filed appeal against the order of the Ld. Commissioner of Income tax (Appeals)-1, Thane, dated 24/05/2017 for AY 2012-13. Since, the facts and issues involved in these appeals filed by the assesee, as well as the revenue are identical and therefore, for the sake of convenience these appeal were heard together and are disposed -off by this consolidated order. ITA No s. 866/Mum/2017 ITA No. 1531/Mum/2017, AY 2011-12:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition before the Hon ble Delhi High Court against department of Scientific and Industrial Research (DSIR) for not approving the R D facility at Wagle Research Centre, Thane. 5. For the year under consideration, the assessee has filed return of income on 05-11-2011, declaring total income at ₹ 2,56,91,612/-. 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 in its in house facility. 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 competent authority i.e The Secretary, Department of Scientific and Industrial Research, Ministry of Science and Technology, Govt. of India. Since, the R D facility has not been approved from the competent authority and necessary approval form 3CM is not available for the impugned assessment year, he opined that weighted deduction claimed u/s 35(2AB) of the Act, is not available and accordingly, denied deduction claimed u/s 35(2AB) of the Act. 6. Being, aggrieved by the assessment order, the assessee has preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished by the assessee for recognizing the facility by Scientist G, DSIR in light of provisions of Sec. 35(2AB) of the Act, and Rule 6 and 7A of the Income Tax Rules, 1962, and came to the conclusion that the initial recognition granted to the assessee is not for the purpose of availing the benefit of deduction u/s 35(2AB) of the Act, and what is necessary is approval of expenditure incurred for the purpose by the competent authority for the relevant period and necessary approval certificate in from 3CM. Since, the assessee has failed to produce the approval required for claiming the benefit of weighted deduction, he opined that there is no error in the findings recorded by the A.O for denying the benefit of deduction u/s 35(2AB) of the Act, and accordingly upheld disallowance of weighted deduction. The ld. CIT(A), however allowed alternate claim of the assessee for deduction of expenditure incurred for R D purpose u/s 35(1)(i) of the Income tax Act, 1961. Aggrieved by the CIT(A) order, the assessee as well as the revenue are in appeal before us. 8. The Ld. AR for the assessee, at the time of hearing submitted that the issue involved in appeals filed by the assessee for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained 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 DSIR has issued recognition for all units vide its communication dated 15.01.2014 and such recognition was valid up to 31.03.2016, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompetent 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 with provisions of Sec. 35(2AB) of the Act, and relevant Rule 6 and 7A of the IT rules, 1962. In order to claim the benefit of we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 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 be make the suffer. The Hon ble Madras High Court in the case of CIT Vs. TVS Electronics Ltd., (supra) had held that the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbai, 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 claimed u/s 35(2AB) of the Act. We further, noted that in the case before the Tribunal in PCP Chemicals Pvt Ltd., (supra) the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. In this view of the matter and consistent with view taken by the co-ordinate bench in assessee own case for earlier years, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were erred in denying the benefit of weighted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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