TaxTMI 
TaxTMI 
2018 (3) TMI 582
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....09 to 2010-11): 2. The assessee is engaged in the business of manufacturing of electronics, moving display boards, data loggers, electronic systems, etc. Since the facts are common in these appeals the same are extracted from the A.Y.2008-09. The assessee filed return of income declaring total income of Rs. 43,09,030/-. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the Income Tax Act (hereinafter called as 'The Act') on total income of Rs. 79,84,858/- by an order dated 24/12/2010. In the return of income filed by the assessee, the assessee had claimed the deduction of Rs. 3,36,70,436/- u/s 35(1)(2AB) of the Act, which was allowed by the A.O. in the original scrutiny assessment after verifying the details. Subsequently, the A.O. collected the information from the Indian Railways according to which the assessee is primarily engaged in contract works in manufacturing, installation and commissioning of data loggers as well as manufacturing and installation of LED equipment, display boards that are installed in the railway stations. The Ld.AO further observed that the deduction is available to the assesses who manufactures articles that are not inc....
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....as well as manufacturing and installation of LED display boards in the Railway Station, which was certified by the Department of Indian Railways and thus, the assessee is ineligible to make any claim u/s.35(2AB) and that the assessee could not substantiate its claim with any material evidence that its scientific research works involves other products such as weather monitoring system, urban bus displays, battery monitoring unit, LED lighting equipment etc. 4. The Ld. CIT(A) erred in holding that reopening of assessment proceedings u/s.147 are bad in law. 5. The Ld. CIT(A) erred ignoring the fact that the deduction which is not allowable was allowed in the assessment and the initiation of proceedings u/s.147 of the Act is well within the purview of the provisions of the Income Tax Act. 6. Any other ground that may be urged at the time of hearing. 5. The facts in this case for the assessment years 2008-09 to 2010- 11 are identical. Ground Nos.4 & 5 are related to the reopening of assessment and the remaining grounds are related to the merits of the case with regard to the allowability of deduction u/s 35(2AB) of the Act. In this case, the assessments wer....
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....ssessment." Similar reasoning was given for re-opening of assessment for Asst. Year 2008-09 also. 6.3.2. An amendment in Sec.35(2AB) of the Act was brought by the Finance (No.2) Act, 2009. we.f 01.04.2010. Relevant explanatory note is reproduced below: "15. Weighted deduction for in-house research and development. 15.1. Under the ex/sting provisions of the Income-tax Act, under subsection (2AB) of Sec. 35, weighted deduction of 150 per cent is allowed to a company engaged in the business of biotechnology or in the business of manufacture or production of drugs, pharmaceuticals, electronic equipments, computers. telecommunication equipments, chemicals or any other article or thing notified by the Board and which has incurred expenditure (excepting on land and building) on in-house scientific research and development facility approved by the prescribed authority. 15.2. With a view to promoting research and development in all sectors of the economy, the Act has been amended to extend the benefit of weighted deduction to companies engaged in the business of manufacture or production of an article or thing except those specified in the Eleventh Schedu....
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....of a proceeding under section 147 - ITO Vs. Nawab Mir Barkat Ali Khan Bahadur (1974) 97 ITR 239 (SC)." In view of the above, reopening of assessment is, in my view, bad in law. Hence, on legal issue also, the re-opened assessment orders cannot be sustained." 6. During the appeal hearing, the Ld. D.R. did not bring any material to controvert the fact that there was evidence available to the A.O. leading to escapement of income. In this case as discussed earlier, the A.O. considered this issue of allowability of deduction u/s 35(2AB) of the Act and allowed the same after due verification. The assessee also furnished the necessary details such as certificate from the scientific research and Industrial development authority and the A.O. allowed the deduction accepting that the assessee is engaged in the in house research and development. The assessee demonstrated that the assessee has satisfied the conditions for allowing the deduction u/s 35(2AB) of the Act and the project was approved by the Government of India for in house research. The prescribed authority, Department of Scientific and Industrial Research granted the recognition of in house R&D facilities in the prescri....
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....D and the company, hence was of the view that no weighted deduction is allowable. accordingly, disallowed the deduction claimed by the assessee u/s 35(2AB)and added back to the income. 11. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and the Ld. CIT(A) allowed the appeal of the assessee following the order of this Tribunal in assessee's own case for the assessment year 2011-12 in ITA No.188 & 216/Vizag/2015 dated 21.10.2016. 12. Aggrieved by the order of the CIT(A), the assessee is in appeal before this Tribunal. During the appeal hearing, the Ld. D.R. relied on the order of the A.O. against reliance placed by the assessee on the order of the Ld. CIT(A). 13. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The issue with regard to the allowability of deduction u/s 35(2AB) of the Act in the case of the assessee was examined by the Tribunal in the assesee's own case for the assessment year 2011-12, which is cited (supra). For ready reference, we extract relevant paragraph of the order of the Ld. CIT(A) in para Nos.7.1 to 7.3, which reads as under; 7.1 ....
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....gard to the correctness or otherwise and its order of approval granted in form No. 3CL as prescribed u/s. 35('2AB) of the Act read with rule 7A of the Income Tax Rules, 1962. In the present case on hand, on perusal of the facts available on record, we find that the A.0. Without following the procedure laid down under rules, simply disallowed the expenditure claimed by the assessee by holding that the goods manufactured by the assessee are mere office machines and apparatus listed in Eleventh Schedule. Therefore, we are of the view that the A.0. is not correct in disallowing the claim made by the assessee u/s. 35(2AB) of the Act. Para. 20: Considering the facts and circumstances of this case and also respectfully following the ratios of decisions discussed above, we are of the view that the A.0. erred in disallowing the weighted deduction claimed by the assessee under the provisions of section 35(2AB) of the Act, despite the assessee's R&D facility was approved by the competent authority. We further were of the view that the goods manufactured by the assessee are not a mere office machines or apparatus as listed in Eleventh Schedule, but they are specially designed elec....
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....xpenditure as a capital expenditure and disallowed the same. 16. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and the Ld. CIT(A) allowed the appeal of the assessee holding that the expenditure was incurred for the purpose of R&D only. For ready reference, we reproduce para No.7.4 of the Ld. CIT(A) which reads as under: "7.4 A sum of Rs. 3,92,636/- was wholly incurred for the purpose of R&D only is evident from Form No.3CL. In view of the certificate issued by competent authority in Form No.3CL, I direct the Assessing Officer to delete addition made of Rs. 3,92,636/- towards capital expenditure (other than land & building). Assessing Officer without examining the nature of expenditure cannot make disallowance holding that the expenditure was not wholly incurred for the purpose of R&D. Hence grounds of appeal number 4 is allowed." 17. As per Form No.3CL, the expenditure was R&D only. The evidence brought on record shows that the expenditure was capital expenditure other than land and building. The A.O. disallowed the same without examining the nature of expenditure. Therefore, we do not find any infirmity in the order of th....
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....Order No. 119) 330AB3CM/15/201 Copy to Msomier Systems Pvt Ltd 40-15-9 Gote Towers Hetavan Colon. Visayawada 320 01BIA P (21 The Director Geural of Incons Tas (scription, Done Care, 2H, Pat Ne B laksh Nagar, Delhi 110092 Document 2 ESONER 10. FORM NXE Exemptions) ww25 the lesume ISLA, ESL Ms Effironics Systems Pvt L Vijayawada-520019 (AP) Tel. No. 0866-2406475, 2493375 Fax No. 66-2474 097 PAN No. AAACE490 Name and designation of the Principal Officer of the company Mr. D. Rama Krishan, Managing Director Nature of Business/activity of the company Design, development and manufacturing of electronic equipment, LED display systems, etc. for Indian Railways & other industries. Annual production of the eligible products of the company during the past three years SL Product No. 1. Electronic moving display unit for information text 2. Microprocessor based Hems (dataloggers. RTU, SSI dan leggers ete 3366 2012-13 3,585 4.340 1318 2,936 Proposed objectives of scientific research contemplated by the company To develop, realise prefacts and provide solutions on turkey basis in areas of Da....