AI Drafter 
TaxTMI 
TaxTMI 
2026 (2) TMI 697
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....dustrial Research [DSIR] since 12-05-2010 and availing exemption u/s. 35(2AB) of the Act. For the Asst. Year 2012-13 the Appellant filed its Return of income on 29-09-2012 showing loss of Rs 2,26,01,542/-. The appellant applied for recognition of their inhouse R & D unit to the Department of Scientific Research Organization (DSRO), which granted approval vide letter dated 12- 06-2014 for the period 01.04.2012 to 31.03.2016. Therefore, the appellant was under the wrong impression that they cannot claim benefit of deduction u/s. 35(2AB) for the expenditure incurred prior to 01.04.2012. Accordingly, during the assessment proceedings the appellant withdrew its claim u/s. 35(2AB) for the aforesaid sum of Rs. 4,27,06,806/- and instead claimed depreciation on the R & D assets for a sum of Rs. 26,26,717/-. 2.1. During the appellate proceedings, the appellant relied on judgments of Gujarat High Court in the case of CIT -Vs- M/s. Claris Lifesciences Ltd reported in [2010] 326 ITR 251 and M/s. Banco Products (India) Ltd. -Vs- DCIT reported in [2018] 95 taxmann.com 132, wherein it was held that even though the approval of DSRO has been received late and specifies the period for which deduct....
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....manufacturing is only of Rs. 1,44,05,446/- which is less than 1/3 of total machinery. Production as well as Sale of the assessee is not affected though more than 60% of machinery is transferred to R&D work. The assessee had purchased new machinery of Rs. 9,85,679/- only in the year under consideration. Therefore, it is evidenced that the machinery claimed as transferred to in-house R&D work is used for manufacturing process also. Thus, it shows that no expenditure used in R&D work. 7.3 Further, the appellant was provided specific formats to furnish the details of salaried persons and the details of travelling expenditure, however, no such details were produced before the AO. Also, the appellant claimed expenditure of Rs. 6,03,916/- and Rs. 6,90,184/- for foreign travelling and local travelling as incurred for in house R & D work. However, the appellant failed to justify how the same is related to the in house R & D work except stating that Mr. Jitendra Soni travelled to various countries to explain the research and development work. However, no details of research paper issued or detail of new patent, if any, registered during the year. The assessee was unable to furnish t....
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....tion 35(2AB) made by the AO is confirmed. In view of the above, Grounds no. 1 to 3 are dismissed to the extent of claim of deduction of 35(2AB) of the Act. However, the depreciation of Rs. 16,75,231/- as claimed by the appellant may be considered after due verification of the ITR and the subsequent assessment orders passed by the AO. Therefore, the said sub-ground is allowed for statistical purpose. 6. Aggrieved against the appellate order, the assessee is in second round of appeal before us raising the following Grounds of Appeal: 1. The Hon'ble Commissioner of Income-tax (Appeals) [CIT-A] erred in law and on facts of the case in upholding the disallowance made by Learned AO, amounting to Rs. 2,03,70,390/- u/s 35(2AB) of the Income-tax Act, 1961 (the Act), in respect of in-house R&D expenditure claimed by the appellant. 2. The Hon'ble CIT(A) erred in upholding the disallowance under Section 35(2AB) made by the Learned AO, ignoring the Hon'ble ITAT's directions dated 31.07.2019 for de novo adjudication, relying instead on the quashed order of 17.02.2015 and failed to consider the appellant's submission dated 05.07.2021. 3. The Hon&#....
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....he guidelines of DSIR. Your honour would appreciate the fact that the deduction u/s. 35(2AB) of the Act pertaining to Plant & Machinery not used exclusively for R&D purpose amounting to Rs. 1,11,68,208/- was suo-motu disallowed by the appellant during the course of the set aside proceedings. The appellant had also submitted a list of plant and machinery duly classifying identifying it between R&D and non R&D assets, as can be seen from the Annexure-12 being submitted herewith this submission. The said annexure was already submitted before the learned AO vide the appellant's submission filed on 06.07.2021. Accordingly, the appellant has rightly claimed deduction u/s. 35(2AB) of the Act in respect of the Plant and Machinery used for R&D department. However, the Ld. AO has merely quoted the observation of the erstwhile AO who passed the original assessment order u/s. 143(3) of the Act and based solely on such statements, passed the present order against which the appellant is in appeal before your honour. b) Furthermore, the learned Assessing Officer has also contended that the appellant claimed a deduction under section 80IB earlier in respect of the sa....
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....der was passed denying the benefit of deduction under section 35(2AB) of the Act." 8. Per contra the ld Departmental Representative relied on the orders of the lower authorities and requested to uphold the same. 9. We have carefully considered the rival submissions and perused the material available on record. At the outset, it is to be noted that the issue of claim of deduction u/s. 32[2AB] was restored to the file of the Assessing Officer for de-novo adjudication by this Tribunal vide order dated 31.07.2019. Once an assessment order is set aside, the Assessing Officer is duty bound to examine the issue afresh, uninfluenced by the findings recorded in the earlier order which no longer survives. From a perusal of the set-aside assessment order, it is evident that the AO has not undertaken an independent examination of the revised claim made by the assessee. Instead, he has relied upon the observations made in the original assessment order dated 17.02.2015. Such an approach is contrary to the directions of this Tribunal and is unsustainable in law. 9.1. The Hon'ble Gujarat High Court in Claris Lifesciences Ltd. (supra) has held that approval granted by DSIR is procedural in....