TaxTMI 
TaxTMI 
2019 (12) TMI 362
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....in nature; therefore, there is no specific finding is required to be recorded. Similarly, as far as initiation of penalty is concerned, we are of the view that it is a premature ground at this stage. The assessee will get an independent opportunity for disputing of levy of any penalty under Section 271(1)(c) of the Act; hence, this ground of the assessee is also rejected. In the result, ground Nos. 2 & 3 in both the assessment years are rejected. 4. In ground no.1, the grievance of the assessee is that learned CIT(A) has erred in confirming the disallowance of Rs. 48,79,636/- and Rs. 69.12 lakhs in Assessment Years 2012-13 and 2013-14 respectively. 5. The facts on all vital points are common; therefore, for facility of reference mainly we are taking up the facts from the Assessment Year 2012- 13. The brief facts of the case are that the assessee at the relevant time was engaged in the business of manufacturing and providing solution for products like Uninterrupted Power Supply (UPS), Drives and Automation. It has filed its return of income for AY 2012-13 on 29.11.2012 declaring total income of Rs. 6,22,90,348/-. The assessee had claimed a deduction of Rs. 4,83,90,786/- ....
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....Note 21- Cost of Raw material arid components consumed), page 37 (included in Note 23 - Employee benefit expenses) and page 38 (Note 24 Other expenses) of 21st Annual report of the Company. 4. It is further certified that the expenditure claims do not include the following: i. Expenditure on outsourced R&D activities: ii. Expenditure purely related to market research, sales promotions quality control, testing, commercial production, style changes, routine data collection or activities of a like nature except testing charges amounting to Rs. 135,050/- (Refer Exhibit IV of Appendix II to Annexure 4) carried outside the approved premises. iii. Lease rent paid for research farms or research labs. iv. Expenditure on foundation seeds multiplication, demonstration crops and grow out test etc. beyond breeder seed development. v. Foreign patent filing expenditure. vi. Foreign consultancy expenditure. vii. Building maintenance, Municipal taxes and rental charges being paid. viii. Any interest component on loans for R&D. ix. Clinical trial activities carried out outside the recognized facilities. ....
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....capacity of his directorship, rather it was paid on account of professional qualification possessed by him which authorizes him to undertake the research activity and helping the research team. He took us through the qualification remarks put by the Auditor at Sr. No. xi and pointed out that Auditors have pointed out that exclusion of expenditure incurred on any payments made to members of the Board of Directors or any other part time employees working for R&D, but exemption has been carved out wherein if remuneration is being paid to any Executive Director appointed in professional capacity, then that would not be disallowed. The DSIR failed to appreciate this aspect while restricting the allowance. He further contended that this aspect has been considered by the ITAT, Ahmedabad Bench as well as ITAT, Pune Bench. He drew our attention to the order of the ITAT, Ahmedabad Bench in the case of ACIT Vs. Torrent Pharmaceuticals Ltd, reported in [2012] 137 ITD 301 as well as ITAT, Pune Bench's order in the case of Cummins India Limited Vs. DCIT in ITA No. 309/Pun/2014. He placed on record copies of both these decisions. On the strength of above, he prayed that the disallowance be delete....
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....gy was prescribed. In the absence of the same, there is no merit in the order of Assessing Officer in curtailing the expenditure and consequent weighted deduction claim under section 35(2AB) of the Act on the surmise that prescribed authority has only approved part of expenditure in form No.3CL. We find no merit in the said order of authorities below." 10. In the light of above findings, if we examine the facts of the present case, then it would reveal that the Auditors have carved out an exemption and observed that if Executive Director has been employed in his professional capacity, then the expenditure incurred on his salary will not be considered for disallowance. The DSIR, without making an analysis of this expenditure, has restricted the allowance. In other words, an expenditure of Rs. 48,79,636/- was not approved for grant of deduction in Assessment Year 2012-13 and Rs. 69.12 lakhs in Assessment Year 2013-14. According to ITAT-Pune, prior to amendment made in the details required to be compiled in Form No.3CL with effect from 1st July 2016, there was no such power with DSIR to restrict such allowance. However, we have directed the learned Counsel for the assessee to point....