Tribunal grants appeal, allows weighted deduction for scientific research expenditure.

The Tribunal allowed the appeal, condoning the delay in filing the appeal and directing the revenue authorities to allow the weighted deduction under Section 35(2AB) at 200% of the expenditure incurred on scientific research.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of deduction under Section 35(2AB) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The Assessee filed an appeal with a delay of 90 days. The delay was attributed to the initial advice from the Assessee's tax consultants, who suggested that there was no point in contesting the disallowance of the claim under Section 35(2AB) due to non-receipt of Form 3CL from the DSIR. Upon receiving a notice under Section 276C(2), the Assessee sought further advice from the tax cell of its parent company and another firm of Chartered Accountants. They concluded that the rejection of the claim was on technical grounds and not on merit, and advised the Assessee to file an appeal. The Assessee argued that the delay was due to a bona fide belief and not due to gross negligence or inaction. The Tribunal considered the principles laid down by the Hon'ble Supreme Court in the case of Mst. Katiji, which emphasized that substantial justice should prevail over technical considerations. The Tribunal found that the delay was due to the professional advice given to the Assessee and there was no willful neglect. The Tribunal condoned the delay, emphasizing that there was no loss to the revenue as only legitimate taxes would be collected.

2. Disallowance of Deduction under Section 35(2AB):

The Assessee, engaged in the manufacture of automobiles and auto parts, claimed a weighted deduction under Section 35(2AB) for expenditure on scientific research. The Assessing Officer (AO) disallowed the deduction to the extent of Rs. 17,91,22,735/- due to the non-receipt of Form 3CL from the DSIR, although the AO allowed a deduction under Section 35(1)(i) at 100% of the expenditure. The CIT(A) upheld the AO's decision.

The Tribunal noted that the Assessee's R&D facility was approved by the DSIR and that the Assessee had complied with all other conditions for claiming the deduction under Section 35(2AB). The Tribunal observed that there was no statutory provision in the Act requiring Form 3CL for the deduction. It referred to various judicial precedents, including the decisions of the Pune ITAT in Cummins India Ltd. and the Hyderabad ITAT in Sri Biotech Laboratories India Ltd., which held that the deduction could not be denied merely due to the absence of Form 3CL. The Tribunal also referred to the Delhi High Court's decision in CIT vs. Sadan Vikas (India) Ltd., which held that once the R&D facility is approved, the entire expenditure incurred should be allowed for weighted deduction.

The Tribunal concluded that prior to the amendment in Rule 6(7A)(b) effective from 1.7.2016, Form 3CL had no legal sanctity. Since the AO had allowed 100% of the expenditure as deduction under Section 35(1)(i), the Tribunal held that the Assessee was entitled to a weighted deduction at 200% under Section 35(2AB). The Tribunal directed that the deduction should be allowed as claimed by the Assessee.

Conclusion:

The Tribunal allowed the appeal, condoning the delay in filing the appeal and directing the revenue authorities to allow the weighted deduction under Section 35(2AB) at 200% of the expenditure incurred on scientific research.

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