2016 (1) TMI 38 - AT - Income Tax

Tribunal denies deduction under section 35(2AB) of Income Tax Act

The Tribunal upheld the Commissioner of Income-tax (Appeals) decision, ruling that the assessee was not entitled to the deduction under section 35(2AB) of ... Deduction u/s 35(2AB) denied - Held that:- Since the approval as required u/s 35(2AB) of the Act r.w.rule 6 was not obtained from the prescribed authority, this Tribunal is of the considered opinion that the assessee is not entitled for any deduction u/s 35(2AB) of the Act. Therefore, this Tribunal do not find any infirmity in the order of the CIT(A) and accordingly the same is confirmed. - Decided against assessee. Issues:Claim of deduction u/s 35(2AB) of the Income Tax Act - Approval of prescribed authority - Eligibility for deduction.Analysis:The appeal pertains to the assessment year 2005-06 and involves the claim of deduction under section 35(2AB) of the Income Tax Act. The assessee, engaged in biotechnology business, claimed a deduction of a specified amount for expenditure on in-house research and development facility. The Assessing Officer rejected the claim citing non-approval by the prescribed authority, Department of Scientific & Industrial Research (DSIR), as required under section 35(2AB) of the Act.The representative for the assessee argued that although the approval in Form 3CM was not obtained from the Secretary to the Government of India, Department of Scientific & Industrial Research, the assessee should still be eligible for the deduction. Reference was made to a decision of the Hyderabad Bench of the Tribunal where a similar situation was considered, and the deduction was allowed despite the absence of Form 3CL certification.On the contrary, the Departmental Representative emphasized the mandatory requirement of obtaining approval from the prescribed authority for claiming deduction under section 35(2AB) of the Act. It was pointed out that the approval in Form 3CM was a prerequisite, and in the absence of such approval, the assessee could not be considered eligible for the deduction.The Tribunal analyzed the provisions of section 35(2AB) of the Act and the relevant rules, highlighting the importance of approval by the Secretary to the Government of India, Department of Scientific & Industrial Research, in Form 3CM for claiming the deduction. The Tribunal noted that the approval available in the case did not meet the specified requirements, as it was not signed by the designated authority. The Tribunal also distinguished the decisions cited by the assessee, stating that they were not directly applicable to the present case due to differences in the issues considered.Ultimately, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals), confirming that the assessee was not entitled to the deduction under section 35(2AB) of the Act due to the failure to obtain the requisite approval from the prescribed authority. Consequently, the appeal of the assessee was dismissed, and the decision was pronounced in open court on 13th November 2015 in Chennai.