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2021 (3) TMI 416 - AT - Income TaxWeighted deduction u/s. 35(2AB) - significance of date of application for approval - whether date of approval only will be cut off date for eligibility? - HELD THAT - Assessee was granted recognition of Assessee s in house R D unit granted by the Government of India, Ministry of Science and Technology on on 19th January, 2011 and therefore for AY 2011-12, the Assessee was entitled to deduction u/s.35(2AB) of the Act. The date of application as 12.5.2011 as mentioned in the approval in Form No.3CM was the date on which application for issue of Form No.3CM was made. The application for issue of Form No.3CM is not relevant for allowing deduction under section 35(2AB) of the Act. Form 3CM quantifies the expenditure incurred for carrying out scientific research. The assessee has to make an application for approval in prescribed form 3CK for issue of Form No.3CM and also filed necessary evidence including details of expenditure. Therefore the date of application for approval does not assume any significance as admittedly, the Assessee has obtained approval u/s.35(2AB) of the Act and in any case for AY 2011-12, there was in fact an approval dated 19.1.2011. The Assessee is therefore entitled to deduction u/s.35(2AB) of the Act. We hold and direct accordingly.
Issues Involved:
1. Allowability of weighted deduction under section 35(2AB) of the Income Tax Act, 1961 for AY 2010-11 and AY 2011-12. Issue-wise Detailed Analysis: 1. Allowability of Weighted Deduction under Section 35(2AB) for AY 2010-11: The Tribunal examined whether the assessee was eligible for weighted deduction under section 35(2AB) for AY 2010-11. The key consideration was the requirement of approval from the prescribed authority for scientific research on in-house R&D facilities. The assessee applied for approval on 12.05.2011, and the approval was granted on 07.12.2011, effective from 01.04.2011. The Assessing Officer (AO) disallowed the deduction, arguing that the application was not made during the relevant previous year. The assessee cited the Hon’ble Gujarat High Court decision in Claris Lifesciences Ltd., which stated that the date of approval is not the cut-off date for eligibility. However, the CIT(A) distinguished this case, noting that approval in Claris Lifesciences was received during the relevant year, unlike in the present case. The Tribunal upheld the CIT(A)'s decision, stating that since the approval was not obtained during the relevant previous year, the assessee was not eligible for the deduction for AY 2010-11. 2. Allowability of Weighted Deduction under Section 35(2AB) for AY 2011-12: For AY 2011-12, the Tribunal initially allowed the deduction, noting that the application for approval was made during the relevant previous year (12.05.2011). However, the revenue filed a Miscellaneous Petition (MP) arguing that the application date was after the end of the previous year relevant to AY 2011-12. The Tribunal recalled its order for re-adjudication, noting a mistake regarding the correct date of approval. Upon re-hearing, the Tribunal found that the R&D facility was recognized on 19.01.2011, which fell within the relevant previous year. The Tribunal cited the Hon’ble Gujarat High Court decisions in Claris Lifesciences Ltd. and Banco Products (India) Ltd., as well as the Hon’ble Delhi High Court decision in Maruti Suzuki India Ltd., which held that the date of approval is not crucial as long as the facility is recognized and the expenditure is incurred for the specified purpose. Consequently, the Tribunal concluded that the assessee was entitled to the deduction for AY 2011-12, as the approval was granted within the relevant year. Conclusion: The Tribunal dismissed the appeal for AY 2010-11, upholding the disallowance of the deduction due to the lack of approval during the relevant previous year. For AY 2011-12, the Tribunal allowed the deduction, recognizing that the R&D facility was approved within the relevant year, aligning with judicial precedents that the date of approval is not the cut-off date for eligibility.
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