TMI Blog2019 (9) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... - Shri B.R Baskaran, Accountant Member And Smt. Beena Pillai, Judicial Member Appellant by : Shri K.P Kumar, Sr. Advocate Respondent by : Shri R.N Siddappaji, Addl. CIT (DR) ORDER B.R. Baskaran, Both the appeals filed by the assessee are directed against the orders passed by ld CIT(A)-5, Bengaluru and they relate to the asst. years 2013-14 and 2014-15. Since identical issue is being contested in both the appeals, they were heard together and are being disposed of by this common order, for the sake of convenience. 2. The assessee is aggrieved by the decision of ld CIT(A) in confirming the rejecting of the weighted deduction claimed by the assessee u/s 35(2AB) of the Act in both the years. 3. We heard the parties and perused the record. The assessee is engaged in the business of manufacture and sale of animal feed, supplements and veterinary drugs. It claimed deduction u/s 35(2AB) of the Act in respect of scientific research expenses incurred by it @ 200% of the expenses in terms of the above said section. The AO noticed that the assessee has not furnished Form No.3CL issued by DSIR, New Delhi. Form No.3CL is a certificate issued by the prescri ..... 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 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 AY 2012-13, in so far as it is relevant for the present appeal, was as given below. (i) As per guideline 5 (iv) of the guidelines so framed, every company which has obtained an approval from the prescribed authority should also submit an undertaking as per Part C of Form No. 3CK to maintain separate accounts for each R D centre approved under Section 35(2AB) by the Prescribed Authority, and to get the accounts duly audited every year by an Auditor as defined in subsection (2) of section 288 of the IT Act 1961. (The statutory auditors of the Company should audit the R D accounts. To facilitate this audit separate books of accounts for R D shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed 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 authority shall submit its report in relation to the approval of in-house R D facility in Form No.3CL to the DGIT (Exemption) within 60 days of granting approval. Therefore prior to 1.7.2016 there was legal sanctity for Form No.3CL in the context of allowing deduction u/s.35(2AB) of the Act 18. The issue as to whether deduction u/s.35(2AB) of the Act can be denied for absence of Form No.3CL by the DSIR was subject matter of several judicial decisions rendered by various Benches of ITAT. (i) The Pune ITAT in the case of Cummins India Ltd. Vs. DCIT in ITA No.309/Pun/2014 for AY 2009-10 order dated 15.5.2018 had an occasion to consider a case where part of the claim for deduction u/s.35(2AB) of the Act was claimed supported by Form No.3CL but part of it was not supported by For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took the view (vide Paragraph13 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 deduction u/s.35(2AB) of the Act was considered by the Hon'ble Delhi High Court in the case of CIT vs. Sadan Vikas (India) Ltd. (2011) 335 ITR 117 (Del) where AO refused to accord the benefit of the weighted deduction to the assessee under s. 35(2AB) on the ground that recognition and approval was given by the DSIR in February/September, 2006, i.e., in the next assessment year and, therefore, the weighted deduction cannot be allowed. The CIT(A) confirmed the order of the AO. The Tribunal held that the assessee would be entitled to weighted deductions of the aforesaid expenditure incurred by the assessee in terms of the s. 35(2AB) of the Act and in coming to this conclusion, the Tribunal relied upon the judgment of Gujarat High Court in CIT vs. Claris Lifesciences Ltd. 326 ITR 251 (Guj). In its decision the Hon ble Gujarat High Court held that the cut-off date mentioned in the certificate issued by the DSIR would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered the legislative intention behind above enactment and observed that to boost up research and development facility in India, the legislature has provided this provision to encourage the development of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted was development of facility, intention of the legislature by making above amendment is very clear that the entire expenditure incurred by the assessee on development of facility, if approved, has to be allowed for the purpose of weighted deduction. 20. From the above discussion it is clear that prior to 1.7.2016 Form 3CL had no legal sanctity and it is only w.e.f 1.7.2016 with the amendment to Rule 6(7A)(b) of the Rules, that the quantification of the weighted deduction u/s.35(2AB) of the Act has significance. In the present case there is no difficulty about the quantum of deduction u/s.35(2AB) of the Act, because the AO allowed 100% of the expenditure as deduction u/s.35(2AB)(1)(i) of the Act, as expenditure on scientific research. Deduction u/s.35(1)(i) and Sec.35(2AB) of the Act are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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