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TMI Blog2021 (9) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of section 40A(2)(b) which in clear terms state that only excessive or unreasonable claim with regard to fair market value requires 2 disallowance and not the whole expenditure." 3. The fact in brief is that return of income declaring income of Rs. 73,45,680/- was filed on 30th Sep, 2013. The case was subject to scrutiny assessment and notice u/s. 143(2) of the Act was issued on 4th Sep, 2014. The assessment u/s. 143(3) of the Act was finalized on 21st December, 2015 after making disallowance u/s. 35(2AB) of Rs. 21,84,842/- and disallowance u/s. 40A(2)(b) of Rs. 7,50,000/- which are contested in the instant appeal. Further relevant facts of the case are discussed while adjudicating the aforesaid two grounds of appeal of the assessee as follows:- Ground No. 1 (Deduction of research and development expenses u/s. 35(2AB) 4. During the course of assessment, the Assessing Officer noticed that assessee has claimed deduction u/s. 35(2AB) of Rs. 66,66,790/-. The Assessing Officer asked the assessee to explain the claim of deduction of Rs. 79,43,842/- as against allowable deduction of Rs. 56,84,000/- in view of R & D expenditure of Rs. 28,42,000 has been approved for deduction u/s. 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Pharmaceutical Ltd (2009) 28 CCH 781 (Ahmedabad). The ld. counsel submitted that the requirement for quantification of expenditure for claiming deduction was made w.e.f. 1.7.2016 as per the sub-rule (7A) of Rule 6 of Income Tax Rule, 1961. On the other hand, the ld. Departmental Representative has supported the order of lower authorities. 7. Heard both the sides and perused the material on record. Without reiterating the facts as elaborated supra in this order, during the course of appellate proceedings before us, the ld. counsel has referred the aforesaid judicial pronouncement including the decision of ITAT Ahmedabad adjudicated in favour of the assessee. With the assistance of ld. representatives we have gone through the judicial pronouncement in the case of Sun Pharmaceuticals Industries vs. Pr. CIT dated 17.05.2019 of the ITAT Ahmedabad vide ITA No. 1417/Ahd/2016 dated 17-05-2019 wherein identical issue on similar facts has been adjudicated. We have also gone through the decision of the ITAT Mumbai in the case of M/s. Crompton Greaves Ltd. vs. ACIT vide ITA No. 5295/Mum/2017 dated 27.09.2019. The relevant part of the decision is reproduced as under:- "6. Here it is seen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to one and one-half times of the expenditure so incurred: Provided that where such expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility is incurred in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the expenditure so incurred. Explanation.-For the purposes of this clause, "expenditure on scientific research", in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970). (2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act. (3) No company shall be entitled for deduction under claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been made for approval of quantum of expenditure, for the first time. 11. Further still, in Pune ITAT decision in the case of Cummins India Ltd. v. Dy. CIT (2018) 96 Taxmann.com 576 (Pune-Trib.), which is a decision directly on the issue at hand, it has been held, inter alia, to the fact that though the Rules stipulate the filing of audit report before the prescribed authority by availing the deduction u/s. 35(2AB) of the Act. The provision of the Act prescribed or approved to be granted by the prescribed authority vis-à-vis the expenditure from year to year; that the amendment was brought in by the Income Tax amendment Rules w.e.f. 01.04.2016, wherein, a separate part has been inserted for certifying the amount of expenditure from year to year and the amended Form No. 3CL, thus, lays down the procedure to be followed by the prescribed authority; that prior to the said amendment, no such procedure; methodology was prescribed; and that therefore, in the absence of any such procedure or methodology, the A.O. had erred in curtailing the expenditure and consequent weighted deduction claimed u/s. 35(2AB) of the Act on the summon that the prescribed authority had approved the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the disallowance was the non approval of the expenditure claimed by the DSIR. 16. On behalf of the assessee, another contention has been raised, that the ld. CIT(A) is wrong in observing that during the remand proceedings, the assessee has not objected to the action of the A.O. in making the disallowance u/s. 35(2AB). This, it has been emphasized, that the assessee had always objected to the disallowance before the A.O. as well as the ld. CIT(A). The attention in this regard has been drawn to the grounds taken by the assessee and the submissions raised by the assessee before the ld. CIT(A). It has further been submitted that in the remand proceedings, qua this issue, no enquiry whatsoever had been made by the A.O., notwithstanding the fact that the remand proceedings were proceedings where the assessee was required to press his claim afresh, which could have only be done by way of objecting to the action of the A.O. 17. Be that as it may, the disallowance stands objected to by the assessee before us, which issue we have answered in the preceding paragraphs. In view of the above, finding merit in ground no. 1 raised by the assessee, the same is hereby accepted to the reversing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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