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TMI Blog2016 (12) TMI 1539X X X X Extracts X X X X X X X X Extracts X X X X ..... tribunal in ACIT vs. M/s. Torrent Pharmaceuticals [2009 (11) TMI 819 - ITAT AHMEDABAD] holds that the impugned weighted deduction is not to be restricted to the extent of the amount of the necessary expenditure incurred stated in such Form 3CL. We further find that hon’ble jurisdictional high court’s decision in CIT vs. CLARIS LIFESCIENCES Ltd. (2008 (8) TMI 579 - Gujarat High Court) upholds this tribunal’s decision in the very assessee’s case observing that expenses incurred before Form 3CM approval cannot be denied for the purpose of Section 35(2AB) weighted deduction. We follow the very reasoning to opine that facts of the instant case rather go a step further wherein the appellant has only claimed those expenses which relate to the time period as approved in the Form 3CM. We accordingly hold that the assessee is very much entitled for claiming the above capital and revenue expenses incurred on in house research and development. The Assessing Officer had rightly held it entitled for the above weighted deduction after verifying all necessary particulars during the course of scrutiny. We have no reason to disagree that the assessee’s weighted deduction claim raised u/s.35(2AB) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to revise the above regular assessment by exercising Section 263 revisional jurisdiction. He issued a show cause notice dated 10.03.2016 for the following reasons: 2. If was noticed from the records that the assesses had claimed deduction u/s. 35(2AB) of the Act on account of R D revenue and capital expenditure @ 100% and 150% respectively in the return of Income, without the approval of the prescribed authority i.e. DSIR In Form 3CL, as under : Particulars Weighted deduction the assessee claimed by Deduction claimed of R D Revenue expenditure @ 150% ₹ 2,03 ,86,37,456/- Deduction claimed of R D capital @ 150% ₹ 33,90,67,854/- Total weighted deduction claimed ₹ 237,77,05,310/- The A.O. white finalising assessment u/s. 143(3) of the Act allowed the weighted deduction u/s.35(2AB) of the Act of ₹ 237,77,05,310/-, claimed by the assessee (without the approval of the prescribed authority i.e. D.S.I.R. in Form 3CL, though the assessee was not entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact of having obtained Form 3CM approval from the prescribed authority. The assessee s case thereafter was that it fulfilled each and every condition for claiming the impugned weighted deduction as prescribed u/s.35(2AB) of the Act read with Rule 6 of the Income Tax Rules. It further quoted a catena of case law to buttress all its submissions. We find that all this failed to impress learned Principal Commissioner of Income Tax. He declines assessee s various pleas in the order under challenge extracted as follows: 5. I have considered the facts of the case and the submission of the assessee. The contention of the assessee is not acceptable It is an undisputed legal position that where the A.O, has not computed the correct total income or allowable claim or deduction and where no proper enquiries, investigations or examination of the materials has been carried out, such assessment order is erroneous in so far as prejudicial to the interest of the revenue and that calls for action u/s. 263 of the Act If the A.O had done so, the computation of income or allowance would have been in conformity of facts as well as in !aw. It is noticed that the assessee has claimed deduction u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee further contended that it had fulfilled all the conditions for claiming deduction u/s. 35(2AB) of the Act. The assessee company vide its above referred letter dated 21-03-2016, has filed Form No. 3CH (Order of approval of in house Research and Development Facility) issued by Secretary, D.S.R.I.R, New Delhi on 11-06-2009. 6.1 I have considered the facts of the case on merit and of the view that the contention of the assessee is not acceptable . On a plain reading of section 35(2AB), of the Act, it is crystal clear that expenditure on scientific research or in house research facility as approved by the prescribed authority i.e.. D.S.I.R shall be allowed as deduction. Further Rule 6(7A) of the I.T. Rules read as under : Rule 6(7A) Approval of expenditure incurred on in house research and development facility by a company under sub-section 2(AB) of section (1AB) shall be subject to the following conditions namely : (a) The facility should not relate purely to market research, sales promotion quality control, testing, commercial production, style changes, routing data collection or activities of a like nature (b) The prescribed authority shall submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct or not. In the instant case, the assessee has not produced any evidence to prove that it had filed all requisite documents and submitted report for purpose of certification of claim of R D expenditure by its Statutory Auditor to the D.S.I.R. to enable the D.S.I.R. to issue order of approval of said expenditure in Form 3CL. The assessee company cannot be allowed to claim weighted deduction u/s. 356(2AB) of the Act, without production of approval of expenditure on R D in form No. 3CL. 6.4. The assessee has claimed weighted deduction for R D expenditure of capital expenditure mentioned hereunder Deduction claimed of R D Expenditure @ 50% of Revenue debited in P L A/c. Revenue expenditure ₹ 2,03,86,37,456/- Deduction claimed of R D Capital expenditure 150% ₹ 33,90,67,854/- Total, weighted deduction claimed ₹ 2,37,77,05,310/- 6.5. The A.O. had simply accepted the assessee's contention on claim of weighted deducted u7s. 35(2AB) of the Act pertaining to R D capital expenditure as well as reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment. An assessee engaged in such Research Development activity having already obtained Form 3CM approval of its facility has no role to play in such correspondence. We notice that a co-ordinate bench of this tribunal in ACIT vs. M/s. Torrent Pharmaceuticals ITA No.3569/Ahd/2004 decided on 13.11.2009 holds that the impugned weighted deduction is not to be restricted to the extent of the amount of the necessary expenditure incurred stated in such Form 3CL. We further find that hon ble jurisdictional high court s decision in CIT vs. CLARIS LIFESCIENCES Ltd. (2010) 326 ITR 251 (Gujarat) upholds this tribunal s decision in the very assessee s case observing that expenses incurred before Form 3CM approval cannot be denied for the purpose of Section 35(2AB) weighted deduction. We follow the very reasoning to opine that facts of the instant case rather go a step further wherein the appellant has only claimed those expenses which relate to the time period as approved in the Form 3CM. We accordingly hold that the assessee is very much entitled for claiming the above capital and revenue expenses incurred on in house research and development amounting to ₹ 237,77,05,310/-. The Ass ..... 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