TMI Blog2022 (1) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... licable from 01.04.2016. In view of the above facts and perusal of the order of the ld CIT(A) we do not find any infirmity in the claim of the assessee for deduction u/s 35 (2AB) of scientific research and development expenditure amounting to ₹ 468.98 lakhs. - Decided in favour of assessee. Addition u/s 37(1) - Expenditure not eligible for weighted deduction u/s 35(2AB) - HELD THAT:- We find that such R D expenditure though not eligible for weighted deduction u/s 35(2AB) but is allowable as deduction u/s 37(1) of the Act to the extent of amount of expenditure incurred by the assessee. The assessee should have been allowed deduction of above sum as normal allowable expenditure u/s 37 (1) of the act . The ld CIT(A) did not deal with this aspect. In view of this, we direct the ld AO to allow the assessee deduction u/s 37(1) of the Act at a sum of ₹ 8.41 lakhs. Accordingly, appeal of the assessee is allowed. - ITA No. 3248/Del/2017 & 4554/Del/2017 (Assessment Year: 2014-15) - - - Dated:- 11-8-2021 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER Assessee by : Shri A. K. Malhotra, CA Revenue by: Ms. Rinku Singh, Sr. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the business of manufacturing of auto electrical parts for automobile companies. The appellant has set up an in-house Research and Development Centre for improvement in the technology and the parts made. This Research and Development Centre has been approved by Department of Scientific and Industrial Research from 2004-05 which has been subsequently renewed by the said Department. The renewal has been granted upto 31.03.2014 vide letter dated 19.05.2010 which has been filed before the AO and placed in the paper book at page 105. The appellant has submitted that it has made investment in Research and Development Centre which is separate from its manufacturing activity and quality control which has separate manpower, equipment and separate defined dedicated area. The appellant has taken up various research program for development of new products and improvement in the existing products, in new processes and improvement in existing processes. The appellant has claimed expenses relating to research and development of revenue nature of ₹ 363.66 lakhs debited to Profit Loss A/c and ₹ 113.73 lakhs on account of capital expenditure. The total expenditure under the Rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report Union Govt. Deptt. Of Revenue, Direct Taxes, rEport no. 5 of 2015 which had examined the scope and provisions of section 35(2AB) had examined the same and held that Form 3CL should precede the filling of return of income and thus claim made by the assessee. But the assessee failed to provide the date of Annexure IV or the documents on the basis of which the Form 3CL is issued to the assessee company. (iv) IN the list of the employees the name of Sh. R.K Sarine is also mentioned who is also Member of Board of Directors. He is vice president R D and getting the emoluments of ₹ 5.8 lakh. Accordingly, to the guidelines the remuneration paid to the members of the board of Directors, should not be included in the R D expenditure of the purpose of Section 35(2AB). In view of these lacunaes, the AO held that the appellant is not entitled for deduction u/s 35(2AB) of the Act and disallowed the entire claim of weighted deduction of ₹ 9,54,80,025/- i.e. @ 200%. During the course of appellate proceedings, the appellant vide its submission dated 24.04.2017 submitted that appellant company is engaged in the manufacturing of auto components since 1971- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is seen that the appellant has entered into an agreement with Department of Scientific and industrial Research and has also agreed for audit of such accounts maintained for such facility which has been specified by the DSIR in form 3CL vide point no. 10 wherein they have stated as under: Point No. (10) Whether agreement for co-operation and Research Development facility and for audit of the accounts maintained for that facility entered into - YES The above statement by DSIR vides point no. 10 of Form 3CL confirms that appellant has entered into an agreement with the Department of Scientific and Industrial Research and has agreed for the audit of the accounts maintained for such facility. The observation of the AO that appellant has not furnished Annexure IV i.e. on what date it had made claim for the amount of deduction for the year under consideration and on what basis the claim had been made u/s 35(2AB) when form 3CL has been issued to the appellant vide letter dated 08.05.2013 whereas the return has been filed on 29.11.2014. The appellant has submitted that it has made claim on the basis of the recognition given to it vide letter dated 19.05.2010 by Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity duly approved by DSIR. The appellant has further submitted that documents of Annexure IV could not be filed before the AO as the same were not traceable at the time of assessment and appellant had asked some time for filing the same. The AO verbally agreed for the same. However, without giving any further opportunity, AO passed order denying the claim of deduction u/s 35(2AB) of the I.T. Act. The appellant has submitted that these documents were submitted to the DSIR and on the basis of such documents, Form 3CL has been issued to the DG (Exemption) and copy thereof has been marked to the appellant. The copy of the Annexure IV documents filed before DSIR have been filed by the appellant from page 41 to 101 of the paper book. The appellant submitted that Annexure IV documents are relevant for DSIR and not for the Department and these things are to be examined by the DSIR and not the Department as inspection of research and development facility is the sole domain of the Department of Research and Industrial Research. Since, the appellant has been issued Form 3CL by DSIR granting the approval for claim of 35(2AB) weighted deduction, it is imperative that all Annexure IV docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for deduction as it stood for the impugned assessment order only provides that a prescribed authority shall submit its report within 60 days of granting of the approval. It was further stated that amendment in Rule 6(7A) has been brought in w.e.f 01.07.2016 wherein, the prescribed authority is required to furnish the report in Form No. 3CL electronically. Therefore, there is no error in the order of the ld CIT(A) in granting deduction to the assessee u/s 35(2AB) of the Act. 7. The ld DR supported the orders of the ld AO. 8. We have carefully considered the rival contentions and perused the order of the lower authorities. The fact shows that the assessee has a in house research and development Center which has been recognized and approved for deduction u/s 35(2AB) since FY 2004-05 as per CBDT letter dated 29.09.2004. The assessee has been continuously granted deduction up to Assessment Year 2013-14. For this year Form No. 3CL has also been submitted by the Approving authority [DSIR] wherein, the amount of expenditure has been approved to the extent of ₹ 468.98 lakhs out of the total expenditure incurred by the assessee of ₹ 477.39 lakhs. Thereby, the approving a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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