TaxTMI 
TaxTMI 
2019 (1) TMI 20
X X X X Extracts X X X X
X X X X Extracts X X X X
.... view emerged that since the claim under section 35(2AB) of the Act was disallowed for non-receipt of order of DSIR in Form 3CL and since that in turn was on account of non-submission of audited accounts of the aforesaid R&D Center to DSIR, there would be no hope of any relief before Appellate Authorities and hence there was no point in contesting the issue any further. Thus, appeal was not preferred before the Hon'ble Tribunal against the order passed by the Commissioner of Income Tax (Appeals). Thereafter, on 22nd February 2017, the Assessee was served with a notice u/s 276C(2) of the Act in respect of AY 2012-13. At this point the Assessee contacted the Tax Cell of its parent company Mahindra & Mahindra Limited (M & M) in Mumbai for guidance. In turn the matter was also referred to M/s. B. K. Khare and Company, Chartered Accountants, Mumbai, (BKK) who have been the tax consultants of Mahindra & Mahindra Limited (M&M) for the last several decades. All relevant orders and other facts were made available to BKK and several rounds of emails and telephonic conferences took place between the Appellant, M&M and BKK. After a great deal of deliberation, it was decided that there was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld result in an otherwise meritorious matter being thrown out on a mere technicality. No prejudice would be caused to the Revenue by allowing the appeal to be admitted and proceeded with on merits more so when the claim has been allowed by the Department in subsequent years. 4. The learned counsel for the Assessee submitted that if this application for condonation of delay in filing the appeal is not allowed, the appellant would be put to great hardship and irreparable injury and on the other hand no hardship or injury would be caused to the Respondent if this application of Condonation of delay is allowed. Reliance was placed on the decision of the Hon'ble Apex Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 167 ITR 471 and also in the case of Concord of India Insurance Co. Ltd., Vs Smt. Nirmala Devi and Others 118 ITR 507. Further reliance was also placed on another decision of the Hon'ble Apex Court in the case of Radha Krishna Rai Vs. Allahabad Bank & Others [2000] 9 Supreme Court Cases 733 and Commissioner of Income-tax Vs. West Bengal Infrastructure Development Finance Corporation limited (2011) 334 ITR 269 (SC). Reliance was a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly, the delay was due to advice given by the counsel who appeared on behalf of the Assessee before the AO and CIT(A) not to file appeal and on advice from a professional from Mumbai to file an appeal, the appeal was filed. We find that there has been no willful neglect on the part of the Assessee. In such matters the advice of the professional would be the point of time at which the Assessee would begin to explore the option of exhausting all legal remedies. We are also of the view that by condonation of delay there is no loss to the revenue as legitimate taxes payable in accordance with law alone would be collected. We therefore accept the reason given for condonation of delay in filing the appeal. The delay in filing the appeal is accordingly condoned. 8. The only issue that arises for consideration in this appeal by the Assessee is with regard to the correctness of the action of the revenue authorities in disallowing deduction u/s.35(2AB) of the Income Tax Act, 1961 (Act) to the extent of Rs. 17,91,22,735/- by the revenue authorities. The Assessee is a company engaged in the business of manufacture of automobiles and auto parts. For A.Y.2012-13 the assessee filed return of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o. 3CK. (5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, pass an order in writing in Form No. 3CM : Provided that a reasonable opportunity of being heard shall be granted to the company before rejecting an application :" 10. Under Section 35(1)(i) an Assessee is entitled to deduction in respect of expenditure on scientific research not being in the nature of capital expenditure laid out or expended on scientific research related to the business. Under Section 35(2AB) of the Act deduction is allowed at a sum equal to two times of the expenditure incurred on scientific research if the Assessee is 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. Deduction u/s.35(1)(i) and Sec.35(2AB) of the Act are similar except....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rned counsel for the Assessee reiterated submissions as were made before the revenue authorities and placed reliance on some judicial precedents on identical issue rendered by various benches of ITAT and Hon'ble High Courts. 14. For AY 2012-13, the previous year is FY 2011-12 i.e., the period from 1.4.2011 to 31.3.2012. The facts on record go to show that the Assessee's in-house R & D facilities was approved by the DSIR, Govt. of India, Ministry of Science and Technology for AY 2012-13 vide their letter dated 20.5.2009, a copy of which is placed at Page-30 of the Assessee's paper book. The approval is for the period 1.4.2009 upto to 31.3.2012. Therefore, the condition for allowing deduction u/s.35(2AB) of the Act has been fulfilled by the Assessee. The claim of the revenue, however, is that the approval by the prescribed authority in form No.3CM is not final and conclusive and the quantum of expenditure on which deduction is to be allowed is to be certified by DSIR in form No.3CL. There is no statutory provision in the Act which lays down such a condition. We shall therefore examine what is Form No.3CL. 15. DSIR has framed guidelines for approval u/s.35(2AB) of the Act. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3.2017, after the order of the CIT(A). The application so made by the Assessee is at page 43 to 65 of the Assessee's paper book. According to the Assessee, it has complied with all the requirements of the guidelines for issue of Form No.3CL, but the DSIR has issued Form No.3CL dated 5.4.2018 for AY 2014 & 15 & 2015-16 but no Form No.3CL was issued for AY 2012-13. Though there has been no communication to the Assessee in this regard, the learned counsel for the Assessee submitted that since the audited accounts were not submitted by 31st October of the succeeding AY, as is required under Guideline 5 (vi), the Assessee's application would not have been considered by the DSIR. 17. Rule-6(7A)(b) of the Rules specifying the prescribed authority and conditions for claiming deduction u/s.35(2AB) of the Act has been amended by the Income Tax (10th Amendment) Rules, 2016 w.e.f. 1.7.2016, whereby it has been laid down that the prescribed authority, i.e., DSIR shall quantify the quantum of deduction to be allowed to an Assessee u/s.35(2AB) of the Act. Prior to such substitution, the above provisions merely provided that the prescribed authority shall submit its report in relation to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ognition of facility by the prescribed authority and entering an agreement between the facility and the prescribed authority. Once such an agreement has been executed, under which recognition has been given to the facility, then thereafter the role of Assessing Officer is to look into and allow the expenditure incurred on in-house R&D facility as weighted deduction under section 35(2AB) of the Act. Accordingly, we hold so. Thus, we reverse the order of Assessing Officer in curtailing the deduction claimed under section 35(2AB) of the Act by Rs. 6,75,000/-. Thus, grounds of appeal No.10.1, 10.2 and 10.3 are allowed." (ii) The Hyderabad ITAT in the case of M/S. Sri Biotech Laboratories India Ltd. Vs. ACIT ITA No.385/Hyd/2014 for AY 2009-10 order dated 24.9.2014 took the view (vide Paragraph-13 of the order) that when the Assessee's R & D facility is approved the deduction u/s.35(2AB) of the Act cannot be denied merely on the ground that prescribed authority has not submitted report in Form 3CL. 19. The question of allowing deduction u/s.35(2AB) of the Act was considered by the Hon'ble Delhi High Court in the case of CIT vs. Sadan Vikas (India) Ltd. (2011) 335 ITR 117 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty, 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 has to be allowed for weighted deduction as provided by s. 35(2AB). The Tribunal has also considered the legislative intention behind above enactment and observed that to boost up research and development facility in India, the legislature has provided this provision to encourage the development of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted was development of facility, intention of the legislature by making a....