TMI Blog2020 (12) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... ali Narayan, A.R. For the Respondent : Shri Pradeep Kumar, D.R. ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the revision order dated 14.08.2019 passed by Ld Pr. CIT-5, Bangalore u/s 263 of the Income-tax Act,1961 ['the Act' for short] for the assessment year 2015-16. 2. The assessee is engaged in the business of manufacture and sale of animal feed supplements and veterinary drugs. The AO completed the assessment of the year under consideration u/s 143(3) of the Act on 27.12.2017. The Ld Pr. CIT, upon examination of assessment records, noticed that the assessee has claimed deduction of ₹ 2,65,43,330/- u/s 35(2AB) of the Act (being weighted deduction @ 200% of expenditure incurred by it) and it has been allowed by the AO. The Ld Pr. CIT noticed that the assessee has specifically stated before the AO that it has filed requisite documents for approval and certification of the expenditure by the Department of Scientific Industrial Research (DSIR) in Form 3CL and is awaiting approval and certification. The Ld Pr. CIT noticed that the assessee did not furnish approval granted by DSIR in Form 3CL before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2014- 15 in ITA No. 26 27/Bang/2018, vide its order dated 12th September, 2019 holding that furnishing of Form 3CL has become mandatory with effect from 1.4.2016 only (sic. 1.7.2016) and the authorities are not justified in insisting on production of Form 3CL for allowing deduction u/s 35(2AB) of the Act prior to that. Accordingly, he submitted that the AO has taken a possible view in this matter and hence the Ld Pr. CIT is not justified in revising the assessment order. 6. On the contrary, the Ld D.R supported the order passed by Ld Pr. CIT. 7. We heard the parties and perused the record. Before proceeding further, we may refer to the celebrated decision of Hon ble Supreme Court rendered in the case of Malabar Industrial Co. Ltd vs. CIT (2000) (109 Taxman 66)(SC), wherein the scope of revision proceedings u/s 263 has been explained succinctly by Hon ble Supreme Court as under:- 5. To consider the first contention, it will be apt to quote Section 263(1) which is relevant for our purpose:- 263. Revision of orders prejudicial to revenue - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue. Rampyari Devi Saraogi Vs. Commissioner of Income-tax [67 ITR 84] and in Smt. Tara Devi Aggarwal Vs. Commissioner of Income-tax, West Bengal [88 ITR 323]. 8. The Hon ble Supreme Court has held that both the conditions, viz., the assessment order is erroneous and further it is prejudicial to the interests of revenue are required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore 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 sub- section (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 should be maintained. Also, the statutory auditors should sign the auditors certificate in the details required to be submitted as per annexure- IV of the guidelines to facilitate submission of Report in Form 3CL). (ii) As per guideline 5(vi) of the guidelines, the audited accounts for each year maintained separately for each approved centre shall be furnished to the Secretary, Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ITA No. 641/Bang/2017 Page 12 of 17 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 Form No.3CL. The Pune ITAT held as follows:- 45. The issue which is raised in the present appeal is that whether where the facility has been recognized and necessary certification is issued by the prescribed authority, the assessee can avail the deduction in respect of expenditure incurred on in-house R D facility, for which the adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered 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 ITA No. 641/Bang/2017 Page 14 of 17 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 be of no relevance. What is to be seen is that the assessee was in indulging in R D activity and had incurred the expenditure thereupon. Once a certificate by DSIR is issued, that would be sufficient to hold that the assessee fulfils the conditions laid down in the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 expenditure while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) of the Act and under Sec.35(2AB) of the Act are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) of the Act should be engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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