TaxTMI 
TaxTMI 
2022 (3) TMI 26
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....in disallowing the deduction claimed to the extent of Rs. 11,44,376/- as Research & Development Expenses u/s.35(2AB) of the Act and also in alternatively disallowing the same u/s. 37 of the Act. 3. The appellant craves liberty to add, amend, alter or delete any of the grounds of appeal, if need be arise." The first ground of appeal is in respect of disallowance of commission of Rs. 4,12,500/- to persons specified u/s 40A(2)(b) of the Act. 3. The brief facts of the case are that the assessee company carries on the business of manufacturing of polymer resins and chemicals. During the year, the assessee paid commission to four parties- Prakash Udeshi HUF (Rs. 3,24,000/-), Ami Udeshi (Rs. 3,24,000/-), Ranajit Sen HUF (Rs. 2,64,000/-) and Sushanta Kumar Pramanik HUF (Rs. 1,48,500/-). The Ld. AO during the course of assessment proceedings asked the assessee to justify such commission payment along-with details of services rendered in view of section 40A(2)(b) of the Act. In response thereto, the assessee vide letter dated 22.11.2016 furnished details of services rendered, which were towards commission for collection of old and doubtful debts, sales promotion, commission for loan synd....
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....the Act. 5. We have heard rival contentions and perused the order of ITAT in assessee's own case for immediately preceding year i.e. A.Y. 2013-14. We note that in the immediately preceding year ITAT Ahmedabad deleted the disallowance of commission u/s.40A(2)(b) of Act the with the following observations. "10. Heard both the sides and perused the material on record. During the course of assessment, the Assessing Officer has disallowed the expenditure incurred on payment of commission to persons specified u/s. 40A(2)(b) stating that assessee has failed to establish the genuineness of the expenditure. On perusal of the material on record, it is observed that during the course of assessment, the assessee has explained the specific services rendered by the parties to whom the commission was paid along with the detail of their expenses and TDS on the transaction of commission payment. We have also gone through the different pages of the paper book pertaining to the details of commission expenditure furnished by the assessee. In the paper book submitted, the assessee placed copies of invoices raised by the commission agent, along with ledger account, acknowledgement of income tax retur....
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....ses of business of the assessee. The Ld. AO however disallowed the excess claim over and above the amount approved by DSIR and added a sum of Rs. 11,44,376/- to the income of the assessee. The Ld. AO further held that claim of the assessee that these expenses may be considered under other sections is also not tenable since finding of DSIR is limited to certification of the allowable deduction under the respective section and does not certify the eligibility of the claim of the assessee under any other section of the Act. On appeal, the Ld. CIT(A) upheld the order of the Ld. AO by observing that DSIR has approved the expenses after due procedure of verification and the action of AO in disallowing the excess expenditure seems proper. 8. Before us, the Ld. AR of the assessee argued that this issue has been decided in favour of the assessee by ITAT Ahmedabad in the assessee's own case for the immediately preceding assessment year, AY 2013-14, where on identical sets of facts, the Tribunal has decided the issue in favour of the assessee. The assessee submitted that the law as it stood for the captioned assessment year provided that the deduction would be available if the inhouse 'facil....
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....this principle has been reiterated in various judgments passed by Tribunal on several occassions. The Pune ITAT in the case of Cummins India Ltd. v. DCIT [2018] 96 taxmann.com 576 (Pune - Trib.) made the following relevant observations, while deciding the issue on identical facts in favour of the assessee: "Clause (b) to sub-rule (7A) has been substituted by IT (Tenth Amendment) Rules, 2016 w.e.f. 01.07.2016, under which the prescribed authority has to furnish electronically its report (i) in relation to approval of in-house R & D facility in part A of form No.3CL and (ii) quantifying the expenditure incurred on in-house R & D facility by the company during the previous year and eligible for weighted deduction under sub-section 2AB of section 35 of the Act in part B of form No.3CL. In other words the quantification of expenditure has been prescribed vide IT (Tenth Amendment) Rules, 2016 w.e.f. 01.07.2016. Prior to this amendment, no such power was with DSIR i.e. after approval of facility. Under the amended provisions, beside maintaining separate accounts of R & D facility, copy of audited accounts have to be submitted to the prescribed authority. These amendments to rules 6 an....
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....r 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 expenditure and consequent weighted deduction claim under section 35(2AB) of the Act. The case before us pertains to FY 2013-14 relevant to AY 2014-15 and therefore, facts and circumstances are absolutely identical in assessee's case also. Therefore, respectfully, following the order of the Tribunal (supra.) on the same parity of reasoning and under same set of facts and circumstances, we find no reason to interfere with the findings of the Ld. CIT(Appeal) and relief provided to the assessee is hereby sustained. Thus, grounds raised by the Revenue are dismissed." 10.3 The Kolkota Tribunal in recent case of DCIT v. STP Ltd.[2021] 125 taxmann.com 97 (Kolkata - Trib.) held that prior to 1-6-2016, only requirement to claim deduction under section 35(2AB) was to receive recognition from prescribed authority since said recognition was obtained by assessee on 26-3-2013, deduction could not be denied me....