TMI Blog2022 (3) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 (8) TMI 933 - GUJARAT HIGH COURT] We also note that the ITAT Pune Tribunal in the recent case of DCIT v. Force Motors [ 2021 (9) TMI 244 - ITAT PUNE] while dealing with identical issue held that prior to amendment in 2016, section 35(2AB) of the Act does not provide any methodology of approval to be granted by prescribed authority vis-a-vis expenditure from year to year and therefore, order of Assessing Officer in curtailing expenditure and consequent weighted deduction claimed under section 35(2AB) on ground that deduction cannot exceed claims approved by prescribed authority, had rightly been set aside. The position is clear that prior to amendment introduced w.e.f. 01/07/2016, the deduction u/s 35(2AB) of the Act would be available to an assessee having an approved in-house R D facility by the prescribed Authority Act and there is no mention of approval of the quantum of expenditure in the law as it stood prior to that date. The mandate of quantification of expenditure has been put in place only w.e.f. 01.07.2016. In view of the above observations and also the decision of the Ahmedabad Tribunal in assessee s own case for immediately preceding year, where on identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough SIDBI. The Ld. AO however rejected the assessee s claim by holding that no documentary evidence was furnished in support of recovery of outstanding debt, no details of sales promotion actually materializing has been furnished etc. Accordingly, the Ld. AO disallowed assessee s claim of commission of ₹ 7,36,500/-. The assessee preferred appeal before CIT(A), in which the assessee obtained part relief in respect of two parties. However, in respect of payment made to Ranajit Sen HUF (₹ 2,64,000/-sales promotion) and Sushanta Pramanik HUF (₹ 1,48,500/- Sales promotion), the Ld. CIT(A) held that the assessee has not been able to demonstrate how family members of both these HUF are technically qualified to promote the techno-commercial activities of the family business. Secondly, CIT(A) held that the assessee has failed to furnish documentary evidences in respect of its claim of sales affected by receipt of the commission and thirdly, since the HUF s are not assessed at the maximum marginal rates for tax purposes, this is a ploy by the assessee to reduce incidence of tax. Accordingly, Ld. CIT(A) allowed part relief to the assessee and confirmed the addition in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome tax return for A.Y. 2013-14. The assessee has also enclosed the copies of I.T. returns filed by these parties showing the amount of commission earned in their return of income. It is noticed that Assessing Officer has not made any further verification, investigation and examination from the parties to whom the sales were made through the commission agents to disprove the facts reported by the assessee in its submission. The Assessing Officer has not demonstrated any material or information gathered to disprove the genuineness of the expenditure incurred on commission payment of ₹ 6 lacs, therefore, we consider the decision of the ld. CIT(A) to sustain the disallowance is not justified. Therefore, we do not find any merit in the decision of ld. CIT(A) and the appeal of the assessee is allowed. In our view, since the facts in the immediately preceding year both in respect of the nature of payments i.e. commission paid as well as the parties to whom the payments were made are identical, we accordingly allow the assessee s appeal and the disallowance on account of commission u/s. 40A(2)(b) is hereby deleted. 6. In the result, appeal of the assessee is allowed in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the deduction would be available if the inhouse facility has been approved by the prescribed authority (being DISR) and there is no mention of approval of quantum of expenditure by the authority u/s 35(2AB) of the Act. It is only with effect from 01/07/2016 that the prescribed authority is required to quantify the approved amount of expenditure. Therefore, the weighted deduction on the expenditure incurred on in-house research is allowable u/s 35(2AB) of the Act. 9. The Ld. Departmental Representative relied upon the observations of Ld. CIT(Appeals) and submitted that once the prescribed authority has quantified the approved amount of expenditure, there is no scope of allowability of any expenditure over and above such amount approved amount. 10. We have heard the rival contentions and perused the judgment on which reliance has been placed by the AR of the assessee. We note that the ITAT, Ahmedabad for the immediately preceding year on identical set of facts has adjudicated the issue in favour of the assessee. The ITAT in the above Ruling held that this issue has been dealt with by the ITAT Ahmedabad in the case of Sun Pharmaceuticals v Pr. CIT 164 ITD 484 which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to be submitted to the prescribed authority. These amendments to rules 6 and 7a are w.e.f. 01.07.2016 i.e. under the amended rules, the prescribed authority as in part A give approval of the facility and in part B quantify the expenditure eligible for deduction under section 35(2AB) of the Act. The issue which is raised before us relates to pre-amended provisions and question is where the facility has been approved by the prescribed authority, can the deduction be denied to the assessee under section 35(2AB) of the Act for non issue of form No.3CL by the said prescribed authority or 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. ..The amendment brought in by the IT (Tenth Amendment) Rules w.e.f. 01.07.2016, wherein 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. Prior to the aforesaid amendment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since said recognition was obtained by assessee on 26-3-2013, deduction could not be denied merely because prescribed authority failed to send intimation in Form 3CL in respect of expenditure incurred by R D unit for relevant assessment year. 10.4 In the case of ACIT v. Crompton Greaves Ltd.[2019] 111 taxmann.com 338 (Mumbai - Trib.) , the Mumbai Tribunal held that since the mandate of approval of quantum of expenditure had been put in place only with effect from 1-7-2016, hence, non-approval of quantum of expenditure for assessment year 2009-10 did not entitle Assessing Officer to make disallowance under section 35(2AB) of the Act. The Mumbai ITAT in the above case made the following observations: 9. The operative phrase here is on in-house research and development facility as approved by the prescribed authority . , the word facility has been hereby show us to emphasis the point that it is the unit which requires approval of the prescribed authority under this provision. Further, in the memorandum, explaining the provision of section and the notes on the clauses issued at the time of insertion of section 35(2AB) in the Act, copies of both of which have been filed o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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