TMI Blog2021 (9) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to AY 2014-15 and therefore, facts and circumstances are absolutely identical in assessee‟s case also. Therefore, respectfully, following the order of the Tribunal (supra.) on the same parity of reasoning and under same set of facts and circumstances, we find no reason to interfere with the findings of the Ld. CIT(Appeal) and relief provided to the assessee is hereby sustained. Thus, grounds raised by the Revenue are dismissed. - ITA No. 305/PUN/2021 - - - Dated:- 3-9-2021 - Shri Inturi Rama Rao, Accountant Member And Shri Partha Sarathi Chaudhury, Judicial Member For the Revenue : Shri A M Mahadevan Krishnan For the Assessee : Shri Kishor B Phadke ORDER PER PARTHA SARATHI CHAUDHURY, JM: This appeal preferred by the Revenue emanates from the order of the Ld. CIT(Appeal), Pune-13 dated 25.03.2021 for the assessment year 2014-15 as per the following grounds of appeal on record: 1.The Ld. CIT(A) erred both on facts and in law in passing the order. 2. The Ld. CIT(A) erred in deleting the disallowance made by the AO on account of excess deduction claimed by the assessee over and above the amount approved by the DSIR by holding that before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il and claiming current year loss amounting to ₹ 135,29,85,317/-. The assessee has shown book profit of ₹ 62,96,19,121/- u/s.115JB of the Income Tax Act, 1961 (hereinafter referred to as the Act‟). The case of the assessee was selected for scrutiny under CASS. Assessment u/s.143(3) of the Act was completed on 20.12.2017 determining total loss at ₹ 131,29,58,520/- after making various additions/disallowances. The Assessing Officer held that as prescribed Authority i.e. DSIR is the final authority for approving the claim u/s.35(2AB), the deduction cannot exceed the claims approved by DSIR and accordingly, the excess deduction claimed by the assessee amounting to ₹ 2,22,90,095/- was disallowed and added back to the total income of the assessee. 5. Aggrieved with the assessment order, the assessee preferred an appeal before the Ld. CIT(Appeals). The Ld. CIT(Appeals) deleted the disallowance made by the Assessing Officer on account of excess deduction claimed by the assessee amounting to ₹ 2,22,90,095/- u/s.35(2AB) of the Act. While deciding the appeal, the Ld. CIT(Appeal) relied upon the decision of the Pune Bench of the Tribunal in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection, then the same has to be read and applied for. Where the law wanted the expenditure to be approved by prescribed authority, then the same was expressly provided as in section 35(1)(i) of the Act and in section 35(2B) of the Act. However, for the purpose of section 35(2AB) of the Act, it is provided that facility is to be approved and not the expenditure. Our attention was also drawn to the Memorandum explaining the Finance Bill, 1997 and Notes on clauses when section 35(2AB) of the Act was inserted, where it was stated that deduction was available to companies having in-house R D facility, approved for the purpose of section by the prescribed authority. The learned Authorized Representative for the assessee thereafter, took us to provisions of IT (Tenth Amendment) Rules, 2016 w.e.f. 01.07.2016 with special reference to Rule 6 (7A) of the Income Tax Rules (in short 'the Rules'), wherein under clause (b), specific provision stipulating the prescribed authority to submit its report in relation to approval of in-house R D facility in form No.3CL to the DG, Income Tax (Exemption) within sixty days of granting approval, was provided. In other words, it was merely an intima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 35(2AB) of the Act. 36. The learned Departmental Representative for the Revenue relying on the orders of authorities below, placed reliance on the ratio laid down by the Hon'ble High Court of Karnataka in Tejas Networks Ltd. Vs. DCIT (supra). He further pointed out that the decision in Sun Pharmaceutical Industries Ltd. Vs. Pr.CIT (supra) was vis- -vis power of the Commissioner under section 263 of the Act and hence, was not applicable. He stressed that under Rule 6 of the Rules, the prescribed authority had to look into expenditure on scientific research. He further pointed out that though improvement in rules has come later but earlier when it was prescribed to submit the details to prescribed authority, then it was incumbent upon the prescribed authority to go through it. The Assessing Officer cannot sit in judgment over form No.3CL, even if sent through CBDT, it has to go back to the prescribed authority. 37. The learned Authorized Representative for the assessee in rejoinder referring to the decision of the Hon'ble Supreme Court in the case of K.P. Varghese v. ITO (1981) 131 ITR 597 (SC) pointed out that marginal notes of section cannot be read to understa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that no deduction shall be allowed in respect of expenditure mentioned in clause (1) under any provisions of the Act. Clause (3) further lays down that no company shall be entitled for deduction under clause (1) unless it enters into agreement with prescribed authority for co-operation in such R D facility. The Finance Act, 2015 w.e.f. 01.04.2016 has substituted and provided that facility has to fulfill such condition with regard to maintenance of accounts and audit thereof and for audit of accounts maintained for that facility. 40. Under Rule 6 of Income Tax Rules, 1962 (in short 'the Rules), the prescribed authority for expenditure on scientific research under various sub- clauses has been identified. As per Rule 6(1B) of the Rules for the purpose of sub-section 2AB of section 35 of the Act, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research i.e. DSIR. Under sub-rule (4), application for obtaining approval under section 35(2AB) of the Act is to be made in form No.3CK. Under sub-rule (5A) of rule 6 of the Rules, the prescribed authority shall, if satisfied that the conditions provided in the rule and in sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the power is with the Assessing Officer to look into the nature of expenditure to be allowed as weighted deduction under section 35(2AB) of the Act. The first issue which arises is the recognition of facility by the prescribed authority as provided in section 35(2AB) of the Act. 43. The Hon'ble High Court of Gujarat in CIT Vs. Claris Lifesciences Ltd. (2010) 326 ITR 251 (Guj) have held that weighted deduction is to be allowed under section 35(2AB) of the Act after the establishment of facility. However, section does not mention any cutoff date or particular date for eligibility to claim deduction. The Hon'ble High Court held as under:- 8. The Tribunal has considered the submissions made on behalf of the assessee and took the view that section speaks of: (i) development of facility; (ii) incurring of expenditure by the assessee for development of such facility; (iii) approval of the facility by the prescribed authority, which is DSIR; and (iv) allowance of weighted deduction on the expenditure so incurred by the assessee. 9. The provisions nowhere suggest or imply that R D facility is to be approved from a particular date and, in other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India. In the facts before the Hon'ble High Court of Delhi, the assessee had approached DSIR vide application dated 10.01.2015. The DSIR vide letter dated 23.02.2006 granted recognition to in-house research and development facility of assessee. Further, vide letter dated 18.09.2006, DSIR granted approval for the expenses incurred by the company on in-house research and development facility in the prescribed form No.3CM. The Assessing Officer in that case refused to accord the benefit of aforesaid provision on the ground that recognition and approval was given by DSIR in the next assessment year. The Tribunal allowed the claim of assessee relying on the decision of the Hon'ble High Court of Gujarat in CIT Vs. Claris Lifesciences Ltd. (supra). The Hon'ble High Court of Delhi taking note of the decision of the Hon'ble High Court of Gujarat observed that it has been held that cutoff date mentioned in the certificate issued by DSIR would be of no relevance where once the certificate was issued by DSIR, then that would be sufficient to hold that the assessee had fulfilled the conditions laid down in the aforesaid provisions. 45. The issue which is raised in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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