TMI Blog2022 (8) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... Pharmaceuticals [ 2009 (11) TMI 819 - ITAT AHMEDABAD ], Coromandel International Ltd. [ 2014 (9) TMI 510 - ITAT HYDERABAD ], Cummins India Ltd. vs DCIT [ 2018 (5) TMI 1314 - ITAT PUNE ] Deduction under section 35(2AB) cannot be denied merely on the ground that prescribed authority has not submitted report in Form 3CL - See Sun Pharmaceutical Industries Ltd. [ 2016 (12) TMI 1539 - ITAT AHMEDABAD ] Sri Biotech Laboratories India Ltd. and STP Ltd. [ 2014 (10) TMI 171 - ITAT HYDERABAD ] Amendment in Rule 6(7A) of IT Rules, 1962 regarding quantification of weighted deduction under section 35(2AB) in Form 3CL applies prospectively w.e.f. 01.07.2016 - See Provimi Animal Nutrition India Pvt. Ltd. [ 2020 (12) TMI 177 - ITAT BANGALORE ] Crompton Greaves Ltd. and Force Motors [ 2019 (10) TMI 134 - ITAT MUMBAI ] Learned Departmental Representative could not controvert that the issue stands covered in favour of the assessee by aforesaid decision of the Hon ble High Courts. It is settled law that decisions of High Court prevails over lower courts and Tribunals. Hence, we hold that as per extant provision, the claim is allowable. Accordingly, we set-aside the orders of authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and Development facility is to be approved by DSIR and not for approval of expenses. 3. In this case, the Assessing Officer restricted the assessee s claim of weighted deduction u/s 35(2AB) of the Act to the amount of Rs.14.03 Crores certified by DSIR and rejected the other amount of Rs.52,69,000/- as against the claim of the assessee for an amount of Rs.14.55 Crores. 4. Upon assessee s appeal Ld. CIT(A) confirmed the same by concluding as under:- 5.10 In the case of Electronic Corporation India Ltd. Vs ACIT (ITA No.1106/Hyd./2011, Hon'ble ITAT held that the expenditure approved by DSIR in the certificate given by them in Form 3CL alone was to be granted as a weighted deduction. Therefore neither the tax officer nor the appellate authority can decide on the expenditure which will be entitled to weighted deduction u/s 35(2AB) of the Act. 5.11 In the case of Coromandel International Ltd vs. ADIT: ITA No.101/Hyd/2012, wherein the ITAT held that unapproved expenses could not be allowed for weighted deduction u/s 35(2AB) and further held as under: 7. We have considered the arguments of the parties and perused the materials on record as well as the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue expenses in Form 3CL. Hence, difference of Rs. 52.69 lacs (Rs.14.55 Crore - Rs. 14.03 Crore) is not allowable to appellant for weighted deduction u/s 35(2AB) and AO is justified in disallowing the excess claim. The addition made by the Assessing Officer is hereby confirmed. 5. Against the above order, the assessee is in appeal before us. 6. We have heard both the parties and perused the records. Ld. Sr. Counsel for the assessee submitted that issues covered in favour of the assessee via series of Hon ble High Court s order including that of jurisdictional High Court. The list of orders submitted by the Ld. Counsel reads as under:- a) Scientific research expenses incurred at approved in-house R D facility are eligible for weighted deduction under section 35(2AB) of the Act, whether incurred prior to or post the date of such approval by DSIR mentioned in Form 3CM i. CIT vs Claris Lifesciences Ltd. 326 ITR 251 (Guj.) ii. CIT vs Sandan Vikas India Ltd. 335 ITR 117 (Del.) iii. Maruti Suzuki India Ltd. vs Union of India Anr. 397 ITR 728 (Del.) b) Deduction under section 35(2AB) cannot be denied in respect of recognized in-house R D centre even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure so incurred. Meaning of these words is plain and clear that the facility is to be established first and on approval of the facility all the expenditure so incurred by the assessee for development of in-house facility is to be held as eligible for weighted deduction. Form No. 3CM, which is order of approval as provided by the rules in this behalf also does not have any mention of date of approval rather it speaks of only approval. The lower authorities are reading more than what is provided by law. A plain and simple reading of the Act provides that on approval of the R D facility, expenditure so incurred is eligible for weighted deduction. 7. 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. The provisions nowhere suggest or imply that R D facility is to be approved from a particular date and in other words, it is nowhere sugg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in this behalf. In the assessment year, i.e., assessment year 2005-2006, the assessee claimed a deduction of Rs.3,83,62,003/- under Section 35 (2AB) of the Income Tax Act (hereinafter referred to as the Act ). The business expenses incurred are naturally allowed as deductions, however, the aforesaid provisions gives weighted deduction to the assessees, who are engaged into research and development activity. The objective is to encourage research and development by the business enterprises in India. 2. The provision further states that in order to claim this weighted deduction, it is to be certified by the Competent Authority that the assessee had undertaken research and development activity. The competent authority in this behalf is Department of Scientific Industrial Research (DSIR). The assessee had approached DSIR vide application dated 10th January, 2005. The DSIR vide its letter dated 23rd February, 2006 granted recognition of the in-house R D facilities of the assessee company and also granted approval for the expenses incurred by the company on in-house R D facility in prescribed form 3CM by letter dated 18th September, 2006. The Assessing Officer, however, refus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s incurred from that date onwards. A plain reading clearly manifests that the assessee has to develop facility, which presupposes incurring expenditure in this behalf, application to the prescribed authority, who after following proper procedure will approve the facility or otherwise and the assessee will be entitled to weighted deduction of any and all expenditure so incurred. The Tribunal has, therefore, come to the conclusion that on plain reading of section itself, the assessee is entitled to weighted deduction on expenditure so incurred by the assessee for development of facility. The Tribunal has also considered Rule 6(5A) and Form No. 3CM and come to the conclusion that a plain and harmonious reading of Rule and Form clearly suggests that once facility is approved, the entire expenditure so incurred on development of R D facility has to be allowed for weighted deduction as provided by Section 35(2AB). The Tribunal has also considered the legislative intention behind above enactment and observed that to boost up research and development facility in India, the legislature has provided this provision to encourage the development of the facility by providing deduction of weighte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as deduction under section 37(1) of the Act. 13. For the admission of this, he prayed as under:- The aforesaid additional ground of appeal calls for being admitted and adjudicated on merits in view of the discretion vested in your Honour under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, the decision of the Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT: 229 ITR 383 and Jute Corporation of India vs CIT: 187 ITR 688 (SC). 14. Upon careful consideration, we admit this additional ground. In this, the Ld. Counsel for the assessee submitted that he shall be relying on ITAT Special Bench decisions in case of Biocon Limited vs DCIT 155 TTJ 649 (Bang.)(SB) which was affirmed by the Hon ble Karnataka High Court in 430 ITR 151 (Karn.). However, he fairly agreed that these decisions were not there when the matter was considered by revenue authorities. Hence, he prayed that this issue may be remitted to the file of the AO to decide as per the ratio arising in these case laws. 15. Ld. Sr. DR did not have any objection in this regard. 16. Hence, this issue is remitted to the file of the AO. 17. Accordingly, this appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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