2020 (3) TMI 550 - HC - Income Tax

Denial of grant of the approval u/s 35(2AB) - Non submission of application that is Form 3CK needs to be submitted online - Form 3CK submitted with the respondent in the physical form only on 27.04.2018 - HELD THAT - Clause 6 of the Guidelines prescribes that the application that is Form 3CK needs to be submitted online. It seems that only because the portal of the respondent was not working, the respondents decided to accept the application even in physical form, however, for reasons mentioned hereinabove, the petitioner could not submit the application in physical form in time. At the same time, the petitioner cannot be denied the grant of the approval under Section 35(2AB) of the Income Tax Act on such hyper technical ground. On the petitioner satisfying the respondent of the reasons for non-submission of Form 3CK in physical form with the respondent on or before 31.03.2018, the respondent shall consider the request of the petitioner to condone the delay and grant approval to the petitioner under Section 35(2AB) for the financial year 2017-18. The petitioner in this regard shall be entitled to make a representation to the respondent, which shall be considered by the respondent within four weeks of receipt of such representation. Mere absence of a provision for condoning such delay, shall not be a ground for rejecting the representation of the petitioner inasmuch as it is not denied that the portal of the respondent was not functioning from 08.03.2018.

Summary

Issues:
Challenge to the approval date of Research and Development facility under Section 35(2AB) of the Income Tax Act, 1961.

Analysis:
The petitioner challenged the approval date of their Research and Development facility under Section 35(2AB) of the Income Tax Act, 1961, which was approved by the respondent from 01.04.2018 instead of the petitioner's claim for approval from 01.04.2017. The respondent based their decision on the submission date of Form 3CK, which was submitted by the petitioner on 27.04.2018, after the deadline of 31.03.2018 as per the Guidelines. The respondent relied on a previous judgment by the Division Bench of the Court to support their decision (paragraphs 1-4).

The petitioner argued that the application (Form 3CK) was required to be submitted online as per Clause 6 of the Guidelines. However, due to the non-functioning of the respondent's online portal between 08.03.2018 to 25.04.2018, the petitioner submitted the application in physical form. The petitioner explained the delay was unintentional due to technical glitches and the absence of their Managing Director in India during the submission period. The respondent, in their counter affidavit, did not specifically deny the non-functioning of their portal but stated that physical copies were accepted (paragraphs 5-7).

The Court considered the petitioner's submission regarding the non-functioning of the respondent's portal as crucial. Referring to a previous judgment related to a different matter, the Court emphasized that the rights of the parties should not be affected by inefficient systems. The Court noted that the petitioner's inability to submit the application in physical form on time due to technical issues should not be a reason to deny approval under Section 35(2AB) of the Income Tax Act (paragraphs 9-10).

Consequently, the Court directed the respondent to consider the petitioner's request to condone the delay in submitting Form 3CK in physical form and grant approval for the financial year 2017-18. The petitioner was given the opportunity to make a representation to the respondent, which should be considered within four weeks of receipt. The Court emphasized that the absence of a provision for condoning such delay should not be a ground for rejecting the petitioner's representation, especially considering the non-functioning of the respondent's portal during the submission period (paragraphs 11-12).