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TMI Blog2013 (8) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... had incurred an expenditure of Rs. 1,50,44,807/- and the same was claimed for weighted deduction of Rs. 2,25,67,212/- u/s 35(2AB). The Form 3CM evidencing registration was also placed before the AO. However, the AO had disallowed the entire claim u/s 35(2AB) as the assessee was not able to furnish the Form 3CM and Form 3CL of the IT Rules to substantiate the claim. 3. On appeal, the CIT(A) held that the said Form 3CM is an order of approval for in-house research & development facility to be issued by the Department of Scientific and Industrial Research (DSIR), Government of India while Form 3CL is a certificate of expenditure incurred issued by the same agency. He further held that it is generally noticed that the Form 3CM & Form 3CL are issued with much delay by the said agency and it is also noticed that the assessee company has been accepted as R&D Centre in AY 2005-06. The CIT(A) noted that, accordingly, the AR had pleaded that till the Form 3CL is issued by the DSIR, the assessee may be allowed normal deduction for the expenditure incurred on the R&D activity as the same has not been disputed. The CIT(A) concluded that the there is strength and reasoning in the argument of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A)-II/Hyd/07-08, dated 19/06/08. While deciding the appeal I had held that since the appellant is having an R&D Centre which is duly recognized by DSIR, the appellant is at least entitled for deduction u/s 35(1) in respect of expenditure on scientific research. While deciding so, I had relied on the communication received by the appellant from the Ministry of Science & Technology for renewal of recognition of the in house R&D Unit as also decisions of ITAT, Special Bench in the case of JCIT Vs. ITC (112 ITD 57) as also the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Yamuna Digital Electronics Pvt. Ltd. (238 ITR 717). I had also allowed 100% deduction u/s 35(1)(iv) on the capital expenditure incurred on the R&D activity. While allowing the deduction u/s 35(1)(iv), I had relied on the decision of Hon'ble Madras High Court in the case of Tube Investments of India Ltd., 260 ITR 94. Since the appellant itself has added back the expenditure on research and development while computing the income, it will tantamount to double disallowance if the amount is not allowed u/s 35(1)/35(1)(iv). Since the issue in the year under consideration is identical to the one d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 172.40 lakhs, the AO brought the same to tax in the present assessment year. 10. On appeal, before the CIT(A) the AR of the Assessee had submitted that that the AO had made an addition taking the cumulative amount as reflected in the notes to accounts of the balance sheet while the amount relevant for AY is Rs. 89,75,967. It was also submitted that similar issue in AY 2004-05 was set aside by the Hon'ble ITAT for fresh examination and filed a copy of the same order. Further it was submitted that as there was no discussion by the AO in his assessment or making the addition about the nature of dispute, it was gathered from the order of the ITAT that the dispute is whether the said receipts tantamount to revenue receipt or capital receipt. It was the contention of the assessee that the amount not collected by the Sales Tax Department under target 2000 scheme, the said amount was treated as sales tax deferment loan. The AR submitted that this sales tax deferment loan had been assigned to another company on payment of portion of the amount and the balance amount was not offered as income since it was treated as a capital receipt by the assessee. Further, the AR submitted that the AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The only issue in all the three appeals is identical to the issue raised in ITA No. 882/Hyd/10 for AY 2006-07. During the year 2007-08 the assessee had incurred expenditure of Rs. 1,46,05,521/- on research and development (R&D). It claimed deduction @150% u/s 35(2AB) of the Act of Rs. 2,19,08,282/-. The AO noticed that in Schedule 18(B)(12) to the balance sheet, under the heading 'Notes to Accounts', the auditors had certified such expenditure, stating that out of Rs. 1,46,05,521/-, Rs. 1,21,76,744/- was in respect of 'process and product development' and that such expenditure was to be amortized over a period of 5 years, beginning with the year of commercial exploitation. Likewise, in Annexure V, relating to the column 15 of Form 3CB, they had certified the expenses on in-house R&D, qualifying for deduction u/s 35(2AB) at Rs. 1,46,05,521/-. The AO noticed that such development expenditure had also been reflected in the balance sheet as an 'asset' and included in the amount of Rs. 3,67,16,306/-. The AO noted that the provisions of section 35(2AB) are applicable to expenditure on 'scientific research' on in-house R&D facility approved by the Department of Science and Industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. The requisite form No. 3CM dtd. 1.1 1.2006 in this regard is on record. Vide their letter No. F No. TU/IV-RD-1382/2010, dtd. 26.3.2010, the recognition of the In-house R &, D Unit of the appellant has been renewed upto 31.3.2013. On the other hand, it is seen that for the A.V. 2008-09, the total R & D cost incurred by the appellant of Rs. 1,64,98,362/ - has been certified by the auditors in the audit report. It has not been disputed that such revenue expenditure has been incurred wholly and exclusively for the purpose of the business during the year. It has also not been shown that any part of such expenditure was either not incurred for business purpose of the appellant or was of personal or capital nature. Further, even if the sum of Rs. 1,60,91,701/ - had been mentioned as 'development expenditure', it is clear that such expenses were towards Products Research and Development, and therefore, the same have been certified by the auditors as expenses on In-house R&D qualifying for deduction u/s 35(2AB), as these constitute expenses towards Scientific Research and Development related to the products manufactured by the assessee. 22. The CIT(A) observed that even if such expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) Ltd. Vs. ACIT in ITA No. 1105/Del/2009 dt. 22/03/2010 for the AY 2005-06 have referred to the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Claris Life Sciences Ltd. (326 ITR 251) and have opined that the cut off date mentioned in the certificate issued by the DSIR is of no relevance. They also observed that a plain reading of the section shows that the assessee has to develop the facility, which pre-supposes incurring the expenditure in this behalf, application to the prescribed authority, who, after following the proper procedure will approve the facility, or otherwise, and the assessee will be entitled to weighted deduction of any and all expenditure so incurred. The CIT(A) held that it is clear that in the assessee's case also, all these requirements have been duly met. As regards the non furnishing of Form 3CL, the assessee cannot be said to have any control over the same, as the said Form is to be submitted by the Secretary, DSIR to the Director General (Exemptions), marking a copy thereof to the assessee. 25. Aggrieved by the order of CIT(A), the revenue is in appeal before us. 26. Identical issue has been considered by us in ITA No. 882/Hyd/1- for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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