TaxTMI 
TaxTMI 
2020 (3) TMI 540
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1.1 The Learned Commissioner of Income - tax (Appeals) - 3, Nasik ["Ld. CIT A)"], erred in confirming the action of the A.O. in denying the exemption of Rs. 17,54, 48.750/- claimed by the Appellant u/s. 35 (2AB) of the Income-tax Act, 1961. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, no such denial of exemption was called for. 3. The revenue has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing the deductions u/s 35(1)(i) and 35(1)(iv) Of the I.T. Act aggregating to Rs. 8.77.24,375/- despite the fact that the same were not claimed by the assessee company in its return of income for the A.Y. 201-12. 4. The brief facts of the case are that, the assessee is engaged in the business of manufacturing enzymes (biotechnology products). The company has set up in house Research & Development (R & D) labs, in Thane and Sinnar for R& D activity, which is also, integrated part of business activities of the assessee. During the year under consideration, the assessee has incurred R&D expenditure of Rs. 8,77,24,375/-, (including capital expenditure of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s on this issue, which has been reproduced at para 5.2 on pages 6 to 9 of Ld. CIT(A) order. The sum and substance argument of the assessee before the CIT(A) are that, R&D facility set up by the assessee at various centers are recognized by the DSIR from A.Y 2001-02 onwards and the assessee has continuously claimed deduction from A.Y 2002-03 to 2008-09 and the department has accepted the claim. Therefore, for this year without there being any change in facts and circumstances, deduction claimed u/s 35(2AB) of the Act, cannot be rejected, merely for the reason that approval was not granted in form 3CM by the Secretary, DSIR, Ministry of Science and Technology, Govt. of India. 7. The CIT(A) after considering the submissions of the assessee and also taken note of provisions of Sec. 35(2AB) of the Act, and Rule 6 and 7A of Income Tax Rules, 1962, held that as per the provisions of Sec. 35(2AB) of the Act, it is mandatory to obtain/sanction of the Secretary, DSIR, Ministry of Science and Technology, Govt. of India, for availing weighted deduction for R&D expenditure. No doubt, the assessee R&D facility has been approved by the Scientist -G, but such approval is not sufficient to claim w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee own case for AY 2010-11 in ITA No.3026/Mum/2015 & ITA No.3353/Mum/2017, where under identical set of facts, the Tribunal held that the assessee is entitled for weighted deductions u/s 35(2AB) of the I.T.Act, 1961, in respect of expenditure incurred for research and development activities in its in house R&D centers. 9. The Ld. DR, on the other hand, fairly accepted that the issue is squarely covered in favour of the assessee by the decision of ITAT for AY 2010-11, where the appeal of the revenue has been dismissed. He, further submitted for the year under consideration, the revenue has filed identical grounds and challenged the order of the Ld.CIT(A) in allowing deductions u/s 35(1)(i) & 35(1)(iv) of the I.T.Act, 1961, in respect of expenditure incurred for research and development facilities. The Ld. AR, further submitted that when, the assessee is claiming deductions u/s 35(2AB) and such claim has been allowed by the Tribunal, then it cannot make alternative claim u/s 35(1)(i) of the I.T.Act, 1961 and hence, the same needs to be withdrawn. 10. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 35(2AB) of the Act, from A.Y 2002-03 to 2008-09 and such claim has been accepted by the department for those years. In fact, there is no dispute with regard to claim for A.Y 2014-15 onwards. The only dispute is with regard to the intervening period of A.Y 2009-10 to A.Y 2013-14, where the department has denied weighted deduction claimed u/s 35(2AB) of the Act, for the reason that necessary approval from the competent authority in form 3CM was not produced before the A.O. 12. In light of above factual background, if you examine the claim of the assessee in light of provisions of Sec. 35(2AB) of the Act, one has to see whether periodical approval / renewal from the competent authority is required to claim the benefit of weighted deduction u/s 35(2AB) of the Act, when the initial recognition from the competent authority was valid for the period under cover. The provisions of Sec. 35(2AB) of the Act, deals with a cases where a company engaged in the business of manufacture or production of any article or thing incurs any expenditure on scientific research on in-house research and development facility as approved by the prescribed authority, then there shall be allowed a deduction o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esearch and development facility and such facility should be recognized / approved by the competent authority. The competent authority for this purpose has been defined as the secretary, DSIR, Ministry of Science and Technology, Govt. of India, there is a prescribed procedure for approval of R&D facility. Rules 6 and 7A of the Income Tax Rules, 1962, provides for mechanism of filing an application and related approval by the competent authority. At the cost of repetition, we note that the assessee has filed its application in form 3CK for the relevant period which is pending before the competent authority. The competent authority neither rejected the application filed by the assessee nor sent any communication in this regard. The assessee has challenged the action of the competent authority by way of writ petition before the Hon'ble Delhi High Court and such writ petition filed by the assessee is pending for adjudication. Be that as it may, fact remains that its facility has been initially recognized from the A.Y 2001-02 onwards, and the assessee has continuously claimed deduction u/s 35(2AB) of the Act, up to A.Y 2008-09 and such claim has been accepted by the department. It is al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncerned of the Central Govt itself. On the very fact that for the period anterior and posterior to the year in question such approval was very well on the record of the Revenue, weighted deduction for the expenditure incurred on the scientific research could not have been disallowed by authorities below. The sum and substance of ratios laid down by the Hon'ble High Courts are that once the facility set up by the assessee has been approved / recognized by the competent authority, then subsequent renewal / communication of such approval in prescribed form is not relevant and what is relevant to decide the entitlement of deduction is existence of such facility. 15. In this case, on perusal of facts available on record, we find that the assessee facility was approved from assessment year 2001-02 and such recognition was continued up to 31.07.2012. Thereafter, the assessee has filed an application for recognition on 09.06.2012 and such recognition has been granted by the competent authority vide its communication dated 15.01.2014, which is valid up to 31.03.2016, subsequently, the renewal has been granted up to 31.03.2019. Further, the A.O neither disputed existence of R&D facility no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition / approval from the competent authority. The assessee has filed an application on 12.08.2011 on that basis the competent authority has given approval with retrospective effect from 01.04.2011. From the above, it is clear that although the Tribunal has taken a different view in the matter, but it has followed the ratio laid down by the Hon'ble Gujarat High Court in the case of Claris lifescience Ltd vs CIT (supra) and the Hon'ble Delhi High Court in the case of Maruthi Suzuki India Ltd., vs. Union of India (supra), which is evident from the fact that approval cannot be taken back from the financial year form which date the assessee has filed its application in form No. 3CK. In fact, the case law relied upon by the DR in PCP Chemicals Pvt Ltd., (supra) supports the case of the assessee in as such the Tribunal has accepted the decision Gujarat High Court to the effect that the approval should be granted from the first day of the financial year in which the application is filed, irrespective of the date of the order granting such approval. Coming back to another case relied upon by the Ld. DR in the case of Nivo Controls Ltd. Vs. CIT. We find that the Tribunal has rejected the cl....