2022 (7) TMI 802 - HC - Income Tax

Deductions u/s 35(2AB) - expenditure incurred by the Petitioner in Form 3CL - HELD THAT - Having heard learned counsel for the parties, this Court is of the view that DSIR is statutorily bound to issue the Form 3CL within 120 days in accordance with Rule 6(7A)(ba) - no restrained DSIR from issuing Form 3CL for any other assessment year. Consequently, the present writ petitions are allowed with a direction to the DSIR to issue reports on the expenditure incurred by the Petitioner for the Assessment Years 2017-18, 2018-19 and 2020-21 in Form 3CL within six weeks. With the above direction, present writ petitions stand disposed of.

Summary

Issues:
Seeking directions for issuance of reports on expenditure incurred by the Petitioner in Form 3CL and declaration for deductions under Section 35(2AB) for specific Assessment Years.

Analysis:
The petitioner filed writ petitions to direct Respondent No. 1 to issue reports on the expenditure incurred by them in Form 3CL and to declare certain expenditures eligible for deductions under Section 35(2AB) of the Income Tax Act, 1961. The petitioner sought deductions for specific amounts spent in Assessment Years 2017-18, 2018-19, and 2020-21. The Court noted the similarity in facts across the cases and referred to the specifics in one of the cases, W.P.(C) No. 3043/2022.

The case revolved around the recognition and approval granted to the Petitioner's in-house R&D units by the Department of Scientific and Industrial Research (DSIR). The petitioner's units received recognition until March 31, 2020, and approval for custom duty exemption until the same date. The petitioner submitted necessary agreements and applications as per the guidelines, including Form 3CK, Form 3CM, and Form 3CLA. However, despite compliance, DSIR did not issue the essential report in Form 3CL certifying the expenditure incurred by the Petitioner on their R&D units.

The petitioner argued that without the Form 3CL report, assessments for the mentioned years would deny deductions under Section 35(2AB), leading to substantial financial implications. The Court was presented with the legal framework under Section 35(2AB) and relevant rules, emphasizing the necessity of DSIR's actions in issuing the required reports for entitlement to deductions.

The Respondent's defense was based on DSIR's alleged inaction in issuing Form 3CL, citing a lack of directions from a previous case. The Petitioner clarified that the previous case only challenged deductions for different assessment years. The Court, after hearing both parties, concluded that DSIR was obligated to issue Form 3CL within 120 days as per the rules and that there were no restrictions preventing DSIR from issuing the form for the relevant assessment years.

Consequently, the Court allowed the writ petitions, directing DSIR to issue reports on the expenditure incurred by the Petitioner for the specified Assessment Years in Form 3CL within six weeks. The matters were listed for compliance on a future date.