2017 (8) TMI 248 - HC - Income Tax

Entitlement to deduction u/s 35 (2AB) - expenditure incurred for its R has submitted the Auditor s certificate required for the same; has entered into an agreement with the DSIR as required for sharing of technologies; and has also repeatedly requested for certification of the expenditure incurred by it. Under such circumstances an isolated error in an application cannot result in the entire benefit itself being refused to the Petitioner resulting in it being deprived of the deduction as permissible under Section 35 (2AB). Thus this Court holds that the Petitioner is entitled to deduction under Section 35 (2AB) of the Act for the expenditure in respect of its Rohtak R&D Centre as per the provisions of Section 35 (2AB) for AYs 2011-12 2012-13 and 2013-14. - Decided in favour of assessee.

Issues Involved:
1. Entitlement to deduction under Section 35 (2AB) of the Income Tax Act, 1961 for R&D expenditure incurred at the Rohtak R&D Centre for AY 2011-12, 2012-13, and 2013-14.
2. Validity of the Corrigendum dated 7th May, 2015 issued by DSIR reducing the R&D expenditure eligible for deduction.
3. Requirement of certification in Form 3CL from DSIR for claiming deductions.
4. Legislative intent behind Section 35 (2AB) and its interpretation.

Issue-Wise Detailed Analysis:

1. Entitlement to Deduction under Section 35 (2AB) for Rohtak R&D Centre:
The petitioner, Maruti Suzuki India Ltd., sought deductions under Section 35 (2AB) for R&D expenditure incurred at its Rohtak Centre for AY 2011-12, 2012-13, and 2013-14. The petitioner had kept the DSIR informed about the Rohtak Centre since its inception and had submitted necessary documents and auditor's reports delineating the expenses for both Gurgaon and Rohtak Centres. Despite this, the DSIR initially did not recognize the Rohtak Centre's expenses, leading to the issuance of a Corrigendum reducing the eligible R&D expenditure.

2. Validity of the Corrigendum dated 7th May, 2015:
The Corrigendum issued by DSIR reduced the R&D expenditure eligible for deduction by excluding the expenses related to the Rohtak Centre. The petitioner argued that this was arbitrary and contrary to Section 35 (2AB), which aims to encourage R&D activities. The court found that the petitioner had fulfilled all necessary conditions and had been transparent with DSIR about the Rohtak Centre's expenses. The court held that the Corrigendum was unsustainable and set it aside.

3. Requirement of Certification in Form 3CL:
The petitioner had submitted applications for certification of R&D expenses, including those for the Rohtak Centre. The DSIR's refusal to include the Rohtak Centre in the certification despite having granted recognition was deemed unreasonable. The court directed DSIR to issue fresh certification in Form 3CL for the Rohtak Centre for the relevant assessment years.

4. Legislative Intent behind Section 35 (2AB):
The court emphasized that the legislative intent behind Section 35 (2AB) is to promote innovation and R&D in India. The provision allows for deductions on R&D expenditure to encourage companies to invest in research. The court referred to precedents such as Sandan Vikas and Claris Lifesciences, which clarified that the date of recognition or approval by DSIR is not a cut-off for eligibility of deductions. The existence of recognition is sufficient for claiming deductions.

Conclusion:
The court concluded that the petitioner is entitled to deductions under Section 35 (2AB) for the Rohtak R&D Centre for AY 2011-12, 2012-13, and 2013-14. The DSIR was directed to issue fresh certification in Form 3CL for the Rohtak Centre, and the Income Tax Department was instructed to grant the consequential deductions. The writ petition was allowed in favor of the petitioner.

← Previous Next →