2023 (4) TMI 283 - AT - Income Tax

Disallowance in regard to late deposit of employees contribution to PF beyond the due date - HELD THAT - As after the judgment of Checkmate Services (P.) Ltd. 2022 (10) TMI 617 - SUPREME COURT the issue is no more res integra and settled against the assessee. Accordingly this ground is decided against the assessee. Deduction u/s 35(2AB) disallowed - expenditure incurred on in house research facility - assessee company has not provided any details/documentary evidences of any revenue capital expenditure on in house R D for claiming deduction u/s 35(2AB) - CIT(A) has deleted the addition - HELD THAT - The bench is of considered opinion that the period mentioned in the approval is not relevant and would relate back to the beginning of financial year in which the application is filed. In the case in hand the Form 3CM application once filed on 29/3/12 then for the FY 2011-12 assessee will be entitled to weighted deduction for AY 2012-13. Ld. CIT(A) has rightly relied the judgment of Maruti Suzuki India Ltd 2017 (8) TMI 248 - DELHI HIGH COURT and Sandan Vikas (India) Ltd 2011 (2) TMI 66 - DELHI HIGH COURT and Claris Life Sciences 2008 (8) TMI 579 - GUJARAT HIGH COURT There is no justification with the Revenue to support the findings of Ld. AO that assessee has failed to justify its claim on account of above mentioned expenses and failed to produce copy of any ledger account of the said expenses etc. while assessee in its submission as reproduced in the order of ld. CIT given the submissions along with details / ledger of R D expenditure - Thus, the bench is inclined to accept the findings of Ld. CIT(A) on facts also that before it the assessee had justified the expenses on the basis of ledger accounts etc. There is no error in the findings of Ld. CIT(A) requiring interference. Decided against revenue.

Summary

Issues Involved:
1. Eligibility for weighted deduction under Section 35(2AB) of the Income Tax Act.
2. Disallowance of late deposit of employees' contribution to PF.

Summary:

Issue 1: Eligibility for weighted deduction under Section 35(2AB)
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals)-9, New Delhi, which allowed the assessee's claim for a 200% deduction under Section 35(2AB) of the Income Tax Act for expenses incurred on in-house Research & Development (R&D). The Assessing Officer (AO) had disallowed the deduction, stating that the assessee's R&D facility was approved by the Department of Scientific and Industrial Research (DSIR) only from 16.03.2012 to 31.03.2014, and thus expenses incurred before 16.03.2012 were not eligible for deduction. The AO also noted the lack of documentary evidence provided by the assessee.

The CIT(A) reversed the AO's decision, citing that Section 35(2AB) does not specify a cut-off date for eligibility and that the mere existence of DSIR approval is sufficient. The CIT(A) relied on judgments from the Delhi High Court in Maruti Suzuki India Ltd. and Sandan Vikas (India) Ltd., which held that the legislative intent behind Section 35(2AB) is to encourage R&D and that the cut-off date in DSIR approval is not relevant. The ITAT upheld the CIT(A)'s decision, stating that the period mentioned in the approval relates back to the beginning of the financial year in which the application was filed, thus allowing the assessee's claim for the entire financial year 2011-12.

Issue 2: Disallowance of late deposit of employees' contribution to PF
The AO had disallowed the deduction for late deposit of employees' contribution to PF, which was deleted by the CIT(A) based on the Delhi High Court's judgment in CIT vs AIMIL Limited. The ITAT noted that after the Supreme Court's judgment in Checkmate Services (P.) Ltd., the issue is settled against the assessee, and thus, this ground was decided in favor of the Revenue.

Conclusion:
The ITAT decided the first issue in favor of the assessee, allowing the weighted deduction under Section 35(2AB) for the entire financial year 2011-12. The second issue was decided in favor of the Revenue, disallowing the late deposit of employees' contribution to PF. The appeal of the Revenue was thus partly allowed.