AI Drafter 
TaxTMI 
TaxTMI 
2023 (8) TMI 1468
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....nce as under: 1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT (A) has erred in confirming the disallowance u/s. 35 (2AB) to the extent of Rs.27,93,980/-. 2. In law and in the facts and circumstances of the Appellant's case, the Ld. CIT ought to have appreciated that the total R&D expenditure incurred by the appellant was of Rs.42,42,490/- and accordingly, the deduction available to the appellant u/s.35 (2AB) was of Rs.84,84,980/- . He has failed to appreciate that as held by the different decisions of ITAT, Ahmedabad and decision of Gujarat High Court cited before him, once the R&D facility is approved by DSIR, the entire expenditure incurred on such facility is eligible for deduction u/s. 35 (2AB). The department has not disputed the incurring of expenditure as shown by the appellant on R&D facility and therefore, there is no question of restricting the amount eligible for deduction. 3. The Hon'ble ITAT may please direct for allowing the entire deduction as claimed by the appellant. 4. The appellant craves leave to add to amend or to raise any further grounds of appeal as case may arise 3. The ld.....
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....o 1.4.2016, and therefore quantum approved by DSIR of expenditure incurred by the assessee on in-house research and development as mentioned in Form No.3CL was of no relevance, and Form No.3CL was to be read only to the extent of DSIR approving the fact that the assesseehad facility for carrying on in-house research and development. In support of his contention, he placed before us the following decisions: i) ACIT Vs. M/s.Crompton Greaves Ltd., 5295 & 5390/Mum/2017 dated 27.9.2019; ii) Crest Composites & Plastics P. Ltd. Vs. DCIT, 28/Ahd/2017 dated 31.8.2021; iii) Sun Pharmaceutical Industries Vs. Pr.CIT, 1417/Ahd/2016 dated 17.5.2019; 6. The ld.DR, on the other hand, pointed out that the interpretation by the various decisions of the ITAT that the purpose of Form No.3CL prior to 1.4.2016 was only to certify that the assessee was approved as having an in-house research and development facility,was misplaced, because, certification of approval of facility was required tobe given by DSIR in a separate Form i.e. Form No.3CM; that there cannot be requirement of furnishing two forms by the prescribed authority, i.e. DSIR, for the same purpose i.e. both Form....
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.... 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 [two] times of the expenditure so incurred. ..... ..... ...... .... .... .... (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 and [fulfils such conditions with regard to maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed]. (4) The prescribed authority shall submit its report in relation to the approval of the said facility to the [Principal Chief Commissioner or Chief Commissioner or] [Principal Director General or] Director General in such form and within such time as may be prescribed." 10. As is evident from a bare perusal of the above the assessee is entitled to weighted deduction on capital an....
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....tion or activities of a like nature; (b) The prescribed authority shall submit its report in relation to approval of in-house Research and Development facility in Form N 3CL to the Director General (Incometax Exemptions) within sixty d- ; of its granting approval; (c) The company shall maintain a separate account for each approved facility; which shall be audited annually and a copy thereof shall be furnished to the Secretary, Department of Scientific and Industry Research by 31st day of October of each succeeding year. Explanation: For the purposes of this sub-rule the expression "audited" means the audit of accounts by an accountant, as defined in : Explanation below sub-section (2) of section 288 of the Income-tax Act, 1961; (d) Assets acquired in respect of development of scientific research and development facility shall not be disposed of without the approval of;: Secretary, Department of Scientific and Industrial Research.] 12. As is evident from Rule 6(7A), the prescribed authority is required to submit its report in relation to the approval granted in Form 3CL. And this report is to be submitted within 60 days of granting approval. Fo....
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.... the earlier requirement of entering into an agreement with the DSIR of audit of accounts was substituted with the assessee "fulfilling" such conditions with regard to the maintains of accounts and audit thereto, and furnish a report in such manner as may be prescribed. The amended sub-section (3) to section 35(2AB) reads as under: ..... ..... ...... .... .... .... (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 and fulfils such conditions with regard to maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed. 15. As a consequence to this amendment, Rule 6(7A) was also amended specifically requiring the prescribed authority to quantify expenditure incurred on in-house research and development eligible for weighted deduction in terms of section 35(2AB) of the Act in Form 3CL, the report of which is required to be submitted within 120 days of receipt of audit report of the accounts relating to the facility. The amended Rule 6(7A) reads as under: "6[(7A) Approval of expe....
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....orm 3CK being the agreement entered by assesses with DSIR for cooperation in research activity and audit of accounts also underwent change requiring assesses to report quantum of expenditure incurred every year on research and development activity as per audit accounts. 17. It is amply evident from the above, that w.e.f. 1-4-2016, the requirement of law underwent a change to the effect that on entering into agreement with DSIR in Form no.3CK, the assessee was required to submit information of its expenditure incurred inhouse research and development facility on land, building, capital and revenue expenditure, every year to the prescribed authority in Annexure-2 of Form no.3CK and prescribed authority was required to quantify the expenditure eligible for weighted deduction in Part-B of the Form No.3CL. 18. What derives from the above, therefore, is that consequent to amendment to section35(2AB) by the Finance Act, 2015 w.e.f. 1.4.2016, requirement of law was that the prescribed authority had to quantify the quantum of eligible expenditure incurred on in-house research and development facility by the assessee. But prior to that there was no such requirement inlaw and the prescr....
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....search contemplated by the company. 9. 6. Whether the nature of the business is related to the proposed objectives of the scientific research contemplated by the company. 7. Details of the nature of existing in-house Research and Development facilities specifying whether the in-house Research and Development facility is adequate for carrying out scientific research. 8. Whether recognition granted to the in-house Research and Development centre of the company by Department of Scientific and Industrial Research. Total cost of in-house research facility, giving break-up of expenditure on land and buildings. (ASSESSMENT YEAR ) 10. Whether agreement for co-operation and Research and Development facility and for audit of the accounts maintained for that facility entered into. Certified that the above information is true to the best of our knowledge and belief. Place Date Signature of Secretary, DSIR Document 2 INCOME-TAX RULES, 1962 FORM NO. 3CL [See rule 6] Report to be submitted by the prescribed authority to the Income-tax Authority specified under section 35(2AB) of the Income-tax Act, 1961 1. Name ....