TaxTMI 
TaxTMI 
2020 (12) TMI 177
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....e AO that it has filed requisite documents for approval and certification of the expenditure by the Department of Scientific & Industrial Research (DSIR) in Form 3CL and is awaiting approval and certification. The Ld Pr. CIT noticed that the assessee did not furnish approval granted by DSIR in Form 3CL before the AO in support of its claim made u/s 35(2AB) of the Act till the date of completion of assessment. The Ld Pr. CIT noticed that the AO has allowed the deduction without ascertaining factual aspects relating to approval of expenditure. Accordingly, the Ld Pr. CIT took the view that the assessment order is erroneous in so far as it is prejudicial to the interests of revenue. Accordingly, he initiated revision proceedings u/s 263 of the Act. 3. The assessee contended before the Ld Pr. CIT that the DSIR is required to submit Form 3CL to the Director General of Income tax within 120 days of granting approval. It was contended that the is merely in the form of intimation to be sent by DSIR to the Income tax department. Accordingly, it was submitted that the furnishing of Form 3CL is not the obligation of the company. The assessee also made certain alternative prayers before Ld Pr....
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....:- "5. To consider the first contention, it will be apt to quote Section 263(1) which is relevant for our purpose:- 263. Revision of orders prejudicial to revenue - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 6. A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and(ii) it is prejudicial to the interests of the revenue. If o....
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....] and in Smt. Tara Devi Aggarwal Vs. Commissioner of Income-tax, West Bengal [88 ITR 323]." 8. The Hon'ble Supreme Court has held that both the conditions, viz., the assessment order is erroneous and further it is prejudicial to the interests of revenue are required to be satisfied. It was further held that "Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law." 9. Now adverting to the facts of the present case, we notice that the co-ordinate bench of Tribunal in the case of M/s Mahindra Electric Mobility Ltd vs. ACIT (ITA No.641/Bang/2017 dated 14-09-2018) has expressed the view that prior to 1.7.2016, Form 3CL had no legal sanctity and it is only w.e.f. 1.7.2016 with the amendment to Rule 6(7A)(....
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....s per annexure- IV of the guidelines to facilitate submission of Report in Form 3CL). (ii) As per guideline 5(vi) of the guidelines, the audited accounts for each year maintained separately for each approved centre shall be furnished to the Secretary, Department of Scientific & Industrial Research by 31st day of October of the succeeding year, along with information as per Annexure-IV of the Guidelines. (iii) As per guideline 5(ix) Expenditures, which are directly identifiable with approved R&D facility only, shall be eligible for the weighted tax deduction. However, expenditure in R&D on utilities which are supplied from a common source which also services areas of the plant other than R&D may be admissible, provided they are metered/measured and subject to certification by a Chartered Accountant. (iv) As per guideline 5 (x) Expenditure on manpower from departments, other than R&D centre, such as manufacturing, quality control, tool room etc. incurred on such functions as attending meetings providing advice / directions, ascertaining customer choice/response to new products under development and other liaison work shall not qualify for deduction under section 35(2AB) of I.T.....
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.... appeal is that whether where the facility has been recognized and necessary certification is issued by the prescribed authority, the assessee can avail the deduction in respect of expenditure incurred on in-house R&D facility, for which the adjudicating authority is the Assessing Officer and whether the prescribed authority is to approve expenditure in form No.3CL from year to year. Looking into the provisions of rules, it stipulates the filing of audit report before the prescribed authority by the persons availing the deduction under section 35(2AB) of the Act but the provisions of the Act do not prescribe any methodology of approval to be granted by the prescribed authority vis-à-vis expenditure from year to year. The amendment brought in by the IT (Tenth Amendment) Rules w.e.f. 01.07.2016, wherein separate part has been inserted for certifying the amount of expenditure from year to year and the amended form No.3CL thus, lays down the procedure to be followed by the prescribed authority. Prior to the aforesaid amendment in 2016, no such procedure / methodology was prescribed. In the absence of the same, there is no merit in the order of Assessing Officer in curtailing the....
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.... What is to be seen is that the assessee was in indulging in R&D activity and had incurred the expenditure thereupon. Once a certificate by DSIR is issued, that would be sufficient to hold that the assessee fulfils the conditions laid down in the aforesaid provisions. The Hon'ble Delhi High Court followed the decision of the Hon'ble Gujarat High Court and upheld the decision of the Tribunal. The Hon'ble Delhi High Court quoted the following observations of the Hon'ble Gujarat High Court and agreed with the said view: "7. ... The lower authorities are reading more than what is provided by law. A plain and simple reading of the Act provides that on approval of the research and development facility, expenditure so incurred is eligible for weighted deduction. 8. The Tribunal has considered the submissions made on behalf of the assessee and took the view that section speaks of : (i) development of facility; (ii) incurring of expenditure by the assessee for development of such facility; (iii) approval of the facility by the prescribed authority, which is DSIR; and (iv) allowance of weighted deduction on the expenditure so incurred by the assessee. 9. The provisions nowhere suggest ....