Tribunal grants 200% deduction for research expenses in animal feed & drugs for 2013-14, 2014-15.

The Tribunal allowed the weighted deduction at 200% of scientific research expenses for the assessee, engaged in animal feed and veterinary drugs, for assessment years 2013-14 and 2014-15. The rejection of the deduction by the AO and CIT(A) was overturned as the absence of Form No.3CL was deemed irrelevant prior to the amendment on 1/7/2016. The Tribunal emphasized that DSIR approval sufficed for the claim, directing the AO to allow the deduction without requiring Form No.3CL verification from the assessee's books of accounts.

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Issues Involved:
1. Rejection of weighted deduction claimed by the assessee under Section 35(2AB) of the Income Tax Act for the assessment years 2013-14 and 2014-15.
2. Mandatory requirement of Form No.3CL for allowing deduction under Section 35(2AB) of the Act.
3. Allowance of revenue and capital expenditure under Section 35(2AB) of the Act.

Detailed Analysis:

Issue 1: Rejection of Weighted Deduction under Section 35(2AB)
The assessee, engaged in the manufacture and sale of animal feed, supplements, and veterinary drugs, claimed a weighted deduction under Section 35(2AB) of the Income Tax Act for scientific research expenses at 200% of the incurred expenses. The Assessing Officer (AO) restricted the claim of revenue expenditure to 100% and disallowed capital expenditure, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal examined whether the rejection of the weighted deduction was justified.

Issue 2: Mandatory Requirement of Form No.3CL
The AO's rejection was based on the non-furnishing of Form No.3CL, a certificate issued by the Department of Scientific and Industrial Research (DSIR) certifying the expenses incurred on scientific research. The Tribunal referred to several judicial precedents, including the case of Mahindra Electric Mobility Ltd. vs. ACIT, which established that Form No.3CL had no legal sanctity prior to 1/7/2016. The amendment to Rule 6(7A)(b) of the Income Tax Rules, effective from 1/7/2016, made Form No.3CL significant for quantifying the weighted deduction under Section 35(2AB).

Issue 3: Allowance of Revenue and Capital Expenditure
The Tribunal noted that the assessee's in-house R&D facilities were approved by the DSIR, and the approval was valid for the relevant assessment years. The Tribunal emphasized that prior to the amendment on 1/7/2016, the absence of Form No.3CL could not be a ground to deny the weighted deduction. The Tribunal cited various cases, including Cummins India Ltd. vs. DCIT and CIT vs. Sadan Vikas (India) Ltd., which supported the view that the approval of the R&D facility by DSIR was sufficient for claiming the deduction, and the absence of Form No.3CL was not a valid reason for denial.

The Tribunal concluded that the deduction under Section 35(2AB) should be allowed at 200% of the expenditure incurred by the assessee, as the assessment years in question (2013-14 and 2014-15) fell prior to the amendment date of 1/7/2016. The Tribunal directed the AO to allow the deduction after verifying the expenses from the books of accounts.

Conclusion:
The Tribunal set aside the orders of the CIT(A) and directed the AO to allow the weighted deduction at 200% of the scientific research expenses incurred by the assessee for the assessment years 2013-14 and 2014-15, without insisting on the production of Form No.3CL. The appeals of the assessee were allowed.

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