2017 (9) TMI 958

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....ads thus: "Sec.35 Expenditure on scientific research. In respect of expenditure on scientific research, the following deductions shall be allowed- (2AB)(1) Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to "two times" of the expenditure so incurred. ..... (2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act. (3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for cooperation in such research and development facility and for audit of the accounts maintained for that facility. (4) The prescribed authority shall submit its report in relation to the approval of the....

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....sessee vide its reply dated 20.03.2017 filed copies of Certificates of Recognition of In-house R & D facility issued by the prescribed authority of Govt. of India for the following periods: (a) For the period from April 1, 2010 to March 31,2013; (b) For the period from April 1, 2013 to March 31,2016; and (c) For the period from April 1,2016 to March 31, 2019. It was further explained that the Assessee had in earlier years claimed deduction on the basis of certificate granted by DSIR. For the first time in F.Y. 2015-16, the Revenue insisted upon production of Form 3CM which was then applied for F.Y. 2015-16 and earlier Financial Years. The approval in Form 3CM was granted by DSIR for F.Y. 2015-16, which was filed before the C.I.T. and the applications for obtaining Form 3CM of earlier years (including the AY 2012-13) are pending with DSIR. It was further explained that whatever information was required by Form 3CM as stipulated in Rule 6(5A) of I.T. Rules was otherwise available in the Certificate of Recognition granted to the assessee by DSIR. Therefore, merely because of a technical defect that such certificate was not in Form 3CM, the assessee cannot....

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....llowance of weighted deduction on the expenditure so incurred by the assessee. 9. The provisions nowhere suggest or imply that research and development facility is to be approved from a particular date and, in other words, it is nowhere suggested that date of approval only will be cut-off date for eligibility of weighted deduction on the expenses incurred from that date onwards. A plain reading clearly manifests that the assessee has to develop facility, which presupposes incurring expenditure in this behalf, application to the prescribed authority, who after following proper procedure will approve the facility or otherwise and the assessee will be entitled to weighted deduction of any and all expenditure so incurred. The Tribunal has, therefore, come to the conclusion that on plain reading of s. itself, the assessee is entitled to weighted deduction on expenditure so incurred by the assessee for development of facility. The Tribunal has also considered r. 6(5A) and Form No. 3CM and come to the conclusion that a plain and harmonious reading of rule and Form clearly suggests that once facility is approved, the entire expenditure so incurred on development of R&D facility ha....

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....efore the Ld. Pr. C.I.T. and such approval for earlier years by DSIR has not been disposed off as yet. 8. The learned counsel submitted that weighted deduction u/s 35AB for scientific research is given on recognition from the specified authority being Department of Scientific and Industrial Research (DSIR). In this case, such recognition was granted by DSIR and copies of Certificates of Registration from April 1, 2010 to March 31, 2019 issued by DSIR were filed before the C.I.T. The assessee also filed copy of order of approval in prescribed Form 3CM for subsequent F.Y. 2015-16 issued by DSIR. The only ground on the basis of which the CIT proceeded to invoke powers u/s.263 of the Act was the absence of approval in Form 3CM for F.Y. 2011-12 relevant to A.Y. 2012-13 under appeal. It was his submission that this cannot be a valid ground for rejection of deduction u/s.35(2AB) of the Act. He relied on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sadan Vikas (India) Ltd. (supra), following the decision in CIT v. Claris Life Sciences Ltd. [2010] 326 ITR 251 (Guj), that the cut-off date mentioned in the certificate issued by the DSIR would be of no relevance. ....

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.... "Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. " It was submitted by him that the view taken by the AO in allowing weighted deduction u/s.35(2AB) of the Act to the Assessee was a possible view taken in tune with the judicial pronouncements and the CIT cannot term the order of the AO as erroneous. 10. The ld. DR relied on the order of CIT. In particular it was pointed out by him that in the case decided by the Hon'ble High Court and the Tribunal referred to by the ld. Counsel for the assessee, the assessee had submitted the required application for grant of approval in Form No.3CM whereas the assessee in the present case had not filed any such application. It was pointed out t....