Tribunal allows Revenue's appeal delay due to pandemic, dismisses disallowance, citing legal precedents.

The Tribunal condoned the delay in filing the appeal by the Revenue due to the pandemic, citing a Supreme Court order. Regarding the deletion of disallowance made by the Assessing Officer on excess deduction claimed, the Tribunal held that the amendment requiring DSIR to quantify expenditure did not apply for the relevant assessment year. Relying on legal precedents, the Tribunal upheld the CIT(A)'s decision to delete the disallowance and dismissed the Revenue's appeal.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Deletion of disallowance made by the Assessing Officer on account of excess deduction claimed by the assessee over and above the amount approved by DSIR.

Issue-Wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal by the Revenue was delayed by 21 days. The Revenue filed a letter requesting the condonation of the delay citing the Supreme Court's order in Suo Moto Writ Petition (Civil) No.3 of 2020, which extended the period of limitation due to the pandemic. The assessee did not object to this request. Considering the pandemic situation and the Supreme Court's order, the Tribunal condoned the delay and proceeded to hear the appeal on its merits.

2. Deletion of Disallowance Made by the Assessing Officer:
The core issue was the deletion of the disallowance made by the Assessing Officer (AO) regarding the excess deduction claimed by the assessee under section 35(2AB) of the Income Tax Act. The AO disallowed Rs. 2,22,90,095/- as it exceeded the amount approved by the Department of Scientific and Industrial Research (DSIR) in Form No.3CL.

Facts and Arguments:
- The assessee is engaged in manufacturing commercial vehicles and filed a return declaring a loss. The AO disallowed the excess deduction claimed over the amount approved by DSIR.
- The CIT(A) deleted the disallowance, relying on the Pune Tribunal's decision in Cummins India Ltd. for AY 2009-10, which held that before the IT (Tenth Amendment) Rules, 2016, DSIR did not have the power to quantify the expenditure for in-house R&D facilities.

Tribunal's Observations:
- The Tribunal noted that the issue was covered by its earlier decision in Cummins India Ltd., where it was held that DSIR's role was to approve the R&D facility, not the expenditure incurred.
- The Tribunal reviewed the legislative history and relevant rules, emphasizing that the requirement for DSIR to quantify expenditure in Form No.3CL was introduced only with the IT (Tenth Amendment) Rules, 2016, effective from 01.07.2016.
- Prior to this amendment, DSIR's approval was limited to the R&D facility, and there was no mandate for DSIR to approve the expenditure year after year.

Legal Precedents:
- The Tribunal referred to the Gujarat High Court's decision in Claris Lifesciences Ltd. and the Delhi High Court's decision in Sandan Vikas (India) Ltd., both supporting the view that once the R&D facility is approved, the entire expenditure incurred is eligible for weighted deduction under section 35(2AB).
- The Tribunal also noted that the amendment requiring DSIR to quantify expenditure was prospective and did not apply to the assessment year in question (AY 2014-15).

Conclusion:
The Tribunal concluded that the AO's disallowance was not justified as the amendment requiring DSIR to quantify the expenditure was not applicable for the assessment year under consideration. Thus, the Tribunal upheld the CIT(A)'s decision to delete the disallowance and dismissed the Revenue's appeal.

Order:
The appeal of the Revenue was dismissed, and the order was pronounced on 03rd September 2021.

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