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2020 (12) TMI 177 - AT - Income TaxRevision u/s 263 - assessee did not furnish approval granted by DSIR in Form 3CL before the AO in support of its claim made u/s 35(2AB) till the date of completion of assessment - HELD THAT - There was two possible views with regard to the question as to whether furnishing of Form 3CL is mandatory or not for claiming deduction u/s 35(2AB) of the Act. Hence, it has to be held that the AO has followed one of the possible views in which case, the impugned assessment order cannot be termed as prejudicial to the interests of the revenue. In that view of the matter, one of the two conditions would fail and hence the impugned revision order cannot be sustained. We have noticed earlier that the co-ordinate bench has also decided this issue in favour of the assessee in AY 2013-14 and 2015-16. Accordingly, we set aside the revision order passed by Pr. CIT for AY 2015-16. - Decided in favour of assessee.
Issues Involved:
1. Validity of the revision order passed by Ld Pr. CIT under Section 263 of the Income-tax Act, 1961. 2. Requirement of Form 3CL for claiming deduction under Section 35(2AB) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of the Revision Order Passed by Ld Pr. CIT under Section 263 of the Income-tax Act, 1961: The assessee challenged the revision order dated 14.08.2019 passed by Ld Pr. CIT-5, Bangalore under Section 263 of the Income-tax Act, 1961 for the assessment year 2015-16. The Ld Pr. CIT noticed that the assessee claimed a deduction of ?2,65,43,330/- under Section 35(2AB) of the Act, which was allowed by the AO without the assessee furnishing the approval in Form 3CL from the Department of Scientific & Industrial Research (DSIR). The Ld Pr. CIT concluded that the assessment order was erroneous and prejudicial to the interests of revenue as the AO failed to verify the factual aspects related to the approval of the expenditure. Consequently, the Ld Pr. CIT initiated revision proceedings under Section 263 of the Act. The assessee contended that the submission of Form 3CL is the responsibility of DSIR and not the company. However, the Ld Pr. CIT rejected this argument, relying on the Karnataka High Court decision in Tejas Network Limited, which held that the AO must allow the deduction based on the expenditure approved by DSIR in Form 3CL. The Tribunal referred to the Supreme Court decision in Malabar Industrial Co. Ltd vs. CIT, which clarified that for the Commissioner to exercise jurisdiction under Section 263, the order must be both erroneous and prejudicial to the interests of revenue. The Tribunal noted that if the AO adopted a permissible legal view, the order could not be considered erroneous merely because the Commissioner disagreed with it. 2. Requirement of Form 3CL for Claiming Deduction under Section 35(2AB) of the Income-tax Act, 1961: The Tribunal examined whether the submission of Form 3CL was mandatory for claiming the deduction under Section 35(2AB) of the Act. The assessee argued that the requirement for Form 3CL became mandatory only from 1.7.2016, as per the amendment to Rule 6(7A)(b) of the Income-tax Rules. The Tribunal noted that the co-ordinate bench had previously allowed similar claims for the assessee for AY 2013-14 and 2014-15, holding that Form 3CL was not mandatory before 1.7.2016. The Tribunal also referred to the decision in M/s Mahindra Electric Mobility Ltd vs. ACIT, where it was held that prior to 1.7.2016, Form 3CL had no legal sanctity, and the deduction should be allowed based on the approval of the R&D facility by DSIR. The Tribunal highlighted that several judicial decisions supported the view that the deduction under Section 35(2AB) should not be denied merely due to the absence of Form 3CL. Given these precedents, the Tribunal concluded that the AO had taken a permissible legal view by allowing the deduction without Form 3CL, and thus, the assessment order could not be deemed erroneous or prejudicial to the interests of revenue. Consequently, the revision order under Section 263 could not be sustained. Conclusion: The Tribunal set aside the revision order passed by Ld Pr. CIT for AY 2015-16, allowing the appeal of the assessee. The Tribunal held that the AO had adopted a permissible legal view, and the absence of Form 3CL did not render the assessment order erroneous or prejudicial to the interests of revenue.
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