TaxTMI 
TaxTMI 
2021 (1) TMI 830
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....ty the existence of recognition is required? 3. That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing. 3. Brief facts of the case as noted by the AO is that the assessee company is engaged in the business of manufacturing and trading of waterproofing felts, bitumals coal tar products and construction additives etc. The AO observes from a perusal of ITR of the assessee and the computation of income of the assessee for the year under consideration that the assessee had claimed deduction of Rs. 2,79,56,896/- u/s 35(2AB) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"). The AO notes that the assessee had filed the details of expenses incurred on Research & Development (R&D) during the relevant year under consideration. However, according to AO the assessee has not filed the copy of Form No. 3CL which according to him, has to be submitted by the Secretary of Department of Scientific and Industrial Technology Bhawan, New Delhi (hereinafter referred to as DSIR) to DGIT(Exemption) of Income Tax Department u/s 35(2AB) of the Act. According to AO, he gave notice to the assessee to explain why the deducti....
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....4 10579961 200% 6796974 21159922 Further we have received form 3CL from DSIR wherein they have allowed Rs. 22.90 lacs which is for our Goa R&D only. Accordingly to DSIR the deduction for our Sipaigachi R&D unit could not be allowed due to its recognition date which is 26.03.2013. (Copy of Form 3CL is enclosed for your perusal) But as per I.T. Act the deduction is allowed for full year in which the recognition of R&D unit is provided by the DSIR (Refer section 35). The matter was upheld by various Hon'ble High Courts and Tribunals, a few are submitted in earlier hearing." 5. The AO thereafter rejects the assessee's claim u/s 35(2AB) by holding as under: "3.5. The submission filed by the assessee has been duly considered. The Department of Scientific & Industrial Research has granted Registration to the Sipaigachi unit only on 26.03.2013. This fact has been accepted by the assessee in its submission also. The assessee can claim deduction u/s 35(2AB) only on those expenses which are approved by the Department of Scientific & Industrial Research and the said expenses are duly reflected in Form 3CL issued by Secretary, DSIR, which is a statutory....
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.... Section 35(2AB) of the Act and the relevant Rules applicable need to be understood are reproduced as under: Expenditure on scientific research. 35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed- (2AB)(1) Where a company 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, then, there shall be allowed a deduction of a sum equal to one and one-half times of the expenditure so incurred: ................................................. (2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act. (3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility a....
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.... allowing deduction under section 35(l)(i) of the Act and under section 35(2AB) of the Act are identical with the only difference being that the assessee claiming deduction under section 35(2AB) of the Act should be engaged in manufacture of certain articles or things. 10. It is not in dispute that the assessee is engaged in business to which section 35(2AB) of the Act applied. The other condition required to be fulfilled for claiming deduction under section 35(2AB) of the Act is that the research and development facility situated at Sipaigachi should be approved by the prescribed authority. The prescribed authority is the Secretary, Department of Scientific Industrial Research, Govt, of India (DSIR). It is not in dispute that the assessee in the present case obtained approval on 26.03.2013 in respect of R&D unit at Sipaigachi (refer page 73 of paper book) . As per the procedure for claiming deduction under section 35(2AB) of the Act as per Department of Scientific and Industrial Research (DSIR) subsequent to the approval by the DSIR, the assessee should submit audited accounts for each year for each approved scientific research centre by 31st October of the succeeding year alon....
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....essee 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 or imply that research and development facility is to be approved from a particular date and, in other words, it is nowhere suggested that date of approval only will be cut-off date for eligibility of weighted deduction on the expenses incurred from that date onwards. A plain reading clearly manifests that the assessee has to develop facility, 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 rule 6(5A) and Form No. 3CM and come to the conclusion that a plain and harmonio....
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....pital expenditure of Rs. 1,04,39,567/-) was thus disallowed by the AO on the grounds that the assessee's R&D unit at Sipaigachi unit was granted recognition by Secretary DSIR only on 26.03.2013 and in the Form 3CL issued for the year under consideration, the DSIR has not approved the expenses claimed to have been incurred by the assessee in respect of its R&D Unit at Sipaigachi therefore, an amount of Rs. 2,55,25,677/- was disallowed. On appeal, the Ld. CIT(A) has allowed the claim of the assessee by relying on the decision of Hon'ble Gujrat High Court in the case of Banco Products (India) Ltd. (supra). And we note that similar issue came up before the Hon'ble Gujrat High Court in the case of CIT vs. Sun Pharmaceutical Industries Ltd. reported in (2017) 250 TAXMAN 0270 wherein the Hon'ble high held as under: "5. Having heard learned counsel for the parties and having perused the orders on record, we are broadly in agreement with the view of the Tribunal. Undisputedly, the research and development facility set up by the assessee was approved by the prescribed authority and necessary approval was granted in the prescribed format. The communication in Form 3CM was thereafter, betwe....