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2018 (8) TMI 663 - AT - Income TaxRevision u/s 263 - claim of weighted deduction u/s 35(2AB) - CIT observed that the assessee did not submit any details in Form 3CM and 3CL report. Further, as per clause 15 of the 3CD, Auditor has not certified any admissible deduction u/s 35(2AB) - Held that - It is to be admitted that the A.O. has enquired during the assessment proceedings about the recognition of R & D unit and claim at 200% as per the provisions. Assessee had filed necessary expenditure details and recognition of the R & D unit by DSIR upto 31.03.2015. Thus the finding of Ld CIT that A.O. has not enquired is not factually correct as Form 3CM is on record (even though not stated as 3CM but a registration by DSIR as prescribed). We are satisfied that the A.O. has correctly allowed the deduction and there is no error in the order passed by A.O. u/s 143(3). Once a research facility is approved, entire expenditure incurred on Department of R & D has to be allowed weighted deduction as provided u/s 35(2AB). Filing of Form 3CL by assessee does not arise. - Revision order quashed - Decided in favor of assessee.
Issues:
Jurisdiction exercised by Ld Principal Commissioner of Income Tax (Pr. CIT-2) under section 263 - Validity Analysis: The appeal by the assessee questions the validity of the jurisdiction exercised by the Ld Principal Commissioner of Income Tax (Pr. CIT-2) under section 263. The case involved the assessment of the assessee-company for the A.Y. 2012-13, where the Assessing Officer determined the total income. Subsequently, the Ld. CIT invoked jurisdiction under section 263 due to the assessee's claim of deduction under section 35(2AB) of the Income Tax Act. The Ld CIT-2 observed that the allowance of weighted deduction was made without the submission of mandatory forms and certification, as required by law. The Ld CIT-2 set aside the assessment, citing non-compliance with the provisions of law and non-application of mind by the Assessing Officer, referencing the case law of M/s. Malabar Industrial Limited. The assessee, after seeking time to reply, argued that the company had merged with another entity and thus did not exist on the date of assessment. However, the Ld CIT-2 set aside the assessment, emphasizing the mandatory requirement of filing Form 3CM and Form 3CL for claiming weighted deduction under section 35(2AB). The assessee did not challenge the jurisdiction based on the non-existence of the company, focusing instead on the merits of the issue. The assessee contended that the Assessing Officer had indeed enquired about the claim under section 35(2AB) during the assessment proceedings. The submission included documents supporting the compliance with the requirements, such as the filing of Form 3CM in the prescribed format. The Coordinate Bench decision cited by the assessee supported the view that once the research facility is approved, the entire expenditure should be allowed for weighted deduction, as per section 35(2AB). The Tribunal analyzed the facts and legal provisions related to the filing of Form 3CL and the approval process by the Department of Scientific and Industrial Research (DSIR). Referring to the Kolkata Coordinate Bench decision in a similar case, the Tribunal concluded that the Assessing Officer had correctly allowed the deduction under section 35(2AB). The Tribunal held that the Ld CIT had misappreciated the facts and law, leading to an incorrect exercise of jurisdiction under section 263. Consequently, the Tribunal quashed the Ld CIT's order under section 263 and restored the Assessing Officer's order under section 143(3), with a provision for modification if necessary based on subsequent approvals by the prescribed authority. In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the correct application of the law regarding the weighted deduction under section 35(2AB and the procedural compliance related to Form 3CM and Form 3CL. The Tribunal's detailed analysis focused on the factual correctness of the Assessing Officer's actions and the legal requirements for claiming deductions under the Income Tax Act.
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