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2021 (9) TMI 244 - AT - Income TaxExcess deduction u/s.35(2AB) - expenditure incurred on in-house R D facility - excess deduction claimed by the assessee over and above the amount approved by the DSIR - scope of Tenth Amendment Rule, 2010 - DSIR power to quantify the expenditure incurred on inhouse R D facility - HELD THAT - As relying on CUMMINS INDIA LIMITED VERSUS THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 1 (1) , PUNE 2018 (5) TMI 1314 - ITAT PUNE that the amendment brought in by the IT (Tenth Amendment) Rules w.e.f. 01.07.2016, wherein separate part has been inserted for certifying the amount of expenditure from year to year and the amended form No.3CL thus, lays down the procedure to be followed by the prescribed authority. Prior to the aforesaid amendment in 2016, no such procedure/methodology was prescribed. In the absence of the same, there is no merit in the order of Assessing Officer in curtailing the expenditure and consequent weighted deduction claim under section 35(2AB) of the Act. The case before us pertains to FY 2013-14 relevant to AY 2014-15 and therefore, facts and circumstances are absolutely identical in assessee‟s case also. Therefore, respectfully, following the order of the Tribunal (supra.) on the same parity of reasoning and under same set of facts and circumstances, we find no reason to interfere with the findings of the Ld. CIT(Appeal) and relief provided to the assessee is hereby sustained. Thus, grounds raised by the Revenue are dismissed.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Deletion of disallowance made by the Assessing Officer on account of excess deduction claimed by the assessee over and above the amount approved by DSIR. Issue-Wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal by the Revenue was delayed by 21 days. The Revenue filed a letter requesting the condonation of the delay citing the Supreme Court's order in Suo Moto Writ Petition (Civil) No.3 of 2020, which extended the period of limitation due to the pandemic. The assessee did not object to this request. Considering the pandemic situation and the Supreme Court's order, the Tribunal condoned the delay and proceeded to hear the appeal on its merits. 2. Deletion of Disallowance Made by the Assessing Officer: The core issue was the deletion of the disallowance made by the Assessing Officer (AO) regarding the excess deduction claimed by the assessee under section 35(2AB) of the Income Tax Act. The AO disallowed ?2,22,90,095/- as it exceeded the amount approved by the Department of Scientific and Industrial Research (DSIR) in Form No.3CL. Facts and Arguments: - The assessee is engaged in manufacturing commercial vehicles and filed a return declaring a loss. The AO disallowed the excess deduction claimed over the amount approved by DSIR. - The CIT(A) deleted the disallowance, relying on the Pune Tribunal's decision in Cummins India Ltd. for AY 2009-10, which held that before the IT (Tenth Amendment) Rules, 2016, DSIR did not have the power to quantify the expenditure for in-house R&D facilities. Tribunal's Observations: - The Tribunal noted that the issue was covered by its earlier decision in Cummins India Ltd., where it was held that DSIR's role was to approve the R&D facility, not the expenditure incurred. - The Tribunal reviewed the legislative history and relevant rules, emphasizing that the requirement for DSIR to quantify expenditure in Form No.3CL was introduced only with the IT (Tenth Amendment) Rules, 2016, effective from 01.07.2016. - Prior to this amendment, DSIR's approval was limited to the R&D facility, and there was no mandate for DSIR to approve the expenditure year after year. Legal Precedents: - The Tribunal referred to the Gujarat High Court's decision in Claris Lifesciences Ltd. and the Delhi High Court's decision in Sandan Vikas (India) Ltd., both supporting the view that once the R&D facility is approved, the entire expenditure incurred is eligible for weighted deduction under section 35(2AB). - The Tribunal also noted that the amendment requiring DSIR to quantify expenditure was prospective and did not apply to the assessment year in question (AY 2014-15). Conclusion: The Tribunal concluded that the AO's disallowance was not justified as the amendment requiring DSIR to quantify the expenditure was not applicable for the assessment year under consideration. Thus, the Tribunal upheld the CIT(A)'s decision to delete the disallowance and dismissed the Revenue's appeal. Order: The appeal of the Revenue was dismissed, and the order was pronounced on 03rd September 2021.
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