2018 (10) TMI 580

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e as under. "1. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) ought to have allowed the claim of deduction on the expenditure on Research and Development. 2. On the facts the learned Commissioner (A) ought to have appreciated the sum of Rs. 1,04,60,447/- incurred and claimed towards Research and Development expenses for the Research and Development carried out by the subsidiaries for the purpose of appellant's business and accordingly the expenditure as claimed was liable to be allowed u/s.35(1) of the Act. 3. The learned Commissioner (A) erred in holding that the appellant did not file any material to justify the claim when the appellant had submitted a no....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....l, we examine the applicability of the judgment of Hon'ble Karnataka High Court cited by ld. DR of revenue having been rendered in the case of Tejas Networks Ltd. vs. DCIT (supra). For this, we reproduce the relevant paras of the order of CIT (A) which are paras 6, 6.1 and 6.2. These paras are reproduced hereinbelow. "Disallowance of R & D Expenditure 6. The AO in the assessment order stated that in the Profit & Loss account, it is observed that the assessee company has debited a sum of Rs. 1,04,60,447/- towards Research & Development Expenses with reference to the Hosur unit of the appellant. "The AO also pointed out that the company has not produced necessary approvals taken from the prescribed authority nam....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....the assessee did not file any material to justify his claim on R & D nor has he produced any evidence as pointed out by the AO in his order. Therefore, I have no hesitation in agreeing with the findings of the AO and this ground is dismissed." 5. From the above paras reproduced from the order of CIT (A), it is seen that in the present case, it is admitted position of fact that the assessee has not carried out the research and development activity itself and instead, the assessee has admittedly paid the R&D expenses to its 100% subsidiary company for carrying out research and development on behalf of the assessee company and the payment was made to subsidiary against the quarterly debit notes raised by the subsidiary. This is also noted b....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....shed by assessee, Order of approval came to be granted in favour of assessee on 18.11.2009 in Form No.3CM. In spite of this, the AO went on to examine the correctness of certificate issued by the prescribed authority and when the writ was filed before Hon'ble Karnataka High Court, it was held that the AO has no jurisdiction to examine the correctness of the certificate issued by the prescribed authority. In the present case, a categorical finding is given by AO which remains uncontroverted that the assessee has not produced necessary approval taken from the prescribed authority namely, Secretary, Department of Scientific and Industrial Research, Govt. of India. In our considered opinion, Para 18 of this judgement is very much relevant i....