Assessing Officer must refer s.35(2AB) and s.43(4) eligibility questions to Board; cannot override Form No.3CL certificate

HC held for the assessee that where eligibility for deduction under s.35(2AB) and the scope of s.43(4) arise, the Assessing Officer must refer questions to the Board to obtain certification from the prescribed authority and cannot re-examine or set aside the prescribed authority's Form No.3CL certificate. The prescribed authority's determination on whether expenditure or acquisition of rights constitutes scientific research is final and outside the AO's domain; consequently the AO cannot sit in judgment over that expert certificate.

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Issues Involved:
1. Maintainability of the writ petition due to the availability of an alternate remedy.
2. Jurisdiction of the Assessing Officer to disallow deductions certified by the prescribed authority under Section 35(2AB) of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The Revenue argued that the writ petition should be dismissed because the petitioner did not exhaust the alternate remedy of appealing to the Income Tax Appellate Tribunal (ITAT). The Court acknowledged that while the availability of an alternate remedy is generally a good ground to refuse relief under Article 226 of the Constitution, it is not an inviolable rule. Exceptions include enforcement of fundamental rights, violation of principles of natural justice, lack of jurisdiction, and challenges to the constitutional validity of a statute.

The Court referenced the Supreme Court's decision in Whirlpool Corpn. v. Registrar of Trade Marks, which held that the High Court could entertain a writ petition despite the availability of an alternate remedy if the authority acted without jurisdiction. The Court concluded that since the issue involved the jurisdiction of the Assessing Officer to disallow deductions certified by the prescribed authority, the writ petition was maintainable.

2. Jurisdiction of the Assessing Officer:
The petitioner contended that the Assessing Officer had no jurisdiction to disallow deductions certified by the Department of Scientific and Industrial Research (DSIR) under Section 35(2AB) of the Income Tax Act. The Court examined the relevant statutory provisions, including Sections 35(2AB), 35(3), and 43(4) of the Income Tax Act, and Rule 6(1B) of the Income Tax Rules.

Section 35(2AB) allows a company engaged in specified businesses to claim a weighted deduction for expenditure on in-house research and development, provided the expenditure is approved by the prescribed authority (DSIR). Section 35(3) stipulates that if any question arises regarding the extent of such expenditure, it should be referred to the Board, which will then refer it to the prescribed authority for a final decision.

The Court held that the Assessing Officer could not sit in judgment over the certificate issued by the prescribed authority. If there were any doubts about the certificate, the Assessing Officer should refer the matter to the Central Board of Direct Taxes (CBDT), which would then refer it to the prescribed authority for a final decision. The Court cited the Gujarat High Court's decision in Mastek Ltd., which supported this view.

The Court concluded that the Assessing Officer had overstepped his jurisdiction by disallowing the deductions certified by the DSIR. Consequently, the assessment order dated 31.01.2013 and the consequential demand notice dated 31.01.2014 were quashed to the extent of the disallowed deductions under Section 35(2AB).

Order:
1. The writ petition was allowed.
2. The assessment order dated 31.01.2013 and the consequential demand notice dated 31.01.2014 were quashed to the extent of the disallowed deductions under Section 35(2AB).
3. The assessment order stands on all other issues, and no opinion was expressed in that regard.
4. The Assessing Officer may seek a reference to the prescribed authority through the CBDT if there are disputes regarding the DSIR's report.
5. No costs were awarded.

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