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TMI Blog2019 (12) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of justice, we deem it appropriate to remit this issue to the file of the learned Assessing Officer for fresh adjudication. The assessee will be at liberty to submit any evidence exhibiting the role of Mr. Dhiran Shah as an Executive Director-cum-Chief Technology Officer helping the research activity. In case it is established that he was hired in the research activity related work and he has played an active role in the research operations, then the expenditure incurred towards his salary will qualify for grant of deduction under Section 35(2AB) - Assessing Officer shall re-adjudicate this issue after providing due opportunity of hearing to the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... (DSIR). He disallowed a sum of ₹ 48,79,636/- in Assessment Year 2012-13 and ₹ 69.12 lakhs in Assessment Year 2013-14. The findings recorded by the Assessing Officer in Assessment Year 2012-13 read as under:- "3.2 In this regard, Annexure 5A to 5F enclosed by foe assessee was also perused. Further, the audit report as submitted by the assessee as per Annexure 5G has also been perused. In this regard, relevant Para 2, 3 & 4 of the auditor's report is reproduced for the sake of clarity on the issue. "2. We certify that a) The Company has maintained separate accounts for the R&D Centre recognized by DSIR u/s 35(2AB). b) The accounts have been satisfactorily maintained. The expenditure certified is also in consonance with DSIR guidelines. c) The firm-has extended full co-operation to us in carrying out the audit of the accounts of the R&D Centre. The expenditure of ₹ 24,195,393/- reported for the financial year 2011-12 relevant to the assessment year 2012-13 as detailed out in Appendix II to Annexure IV of DSIR guidelines at Para a'4' is correct to the best of our knowledge and belief as per the result of the audit of the recognized R&D Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R & D expenditure u/s. 35(2A8) approved by the DSIR was ₹ 19315757/- only comprising of capital expenditure of ₹ 1709557/- and revenue expenditure of ₹ 17606200/-. The DSIR has approved the full amount of capital expenditure of ₹ 1709557/- as R&D expenditure but restricted the revenue expenditure to ₹ 17606200/- as against the claim of the revenue expenses made by the assessee at ₹ 22485836/-. Since the assessee has claimed excess expenditure of ₹ 4879636 (22485836-17606200) on account of revenue expenditure, the disallowance @ 200% u/s. 35(2AB) comes to ₹ 9759272/-. However, the assessee itself has added back a sum of ₹ 4879636/- which is included in the amount of ₹ 22485836/-, the net disallowance comes to ₹ 4879636 (₹ 9759272 - ₹ 4879636). In view of the above, a sum of ₹ 4879636/- is disallowed u/s. 35(2AB) of the IT Act and added back to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) of the Act is being initiated separately for furnishing inaccurate particulars of income." 6. Appeal to the learned CIT(A) did not bring any relief to the assessee. On same analogy, the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt submitted in Form No.3CL. Therefore, it is not admissible. This view point has been further fortified by the Assessing Officer with the help of the Auditor's remarks in Audit Report. It is pertinent to observe that exactly identical aspect has been considered by the ITAT, Pune Bench in the case of Cummins India Ltd (supra) and following findings are worth to note:- "45. The issue which is raised in the present appeal is that whether where the facility has been recognized and necessary certification is issued by the prescribed authority, the assessee can avail the deduction in respect of expenditure incurred on in-house R&D facility, for which the adjudicating authority is the Assessing Officer and whether the prescribed authority is to approve expenditure in form No.3CL from year to year. Looking into the provisions of rules, it stipulates the filing of audit report before the prescribed authority by the persons availing the deduction under section 35(2AB) of the Act but the provisions of the Act do not prescribe any methodology of approval to be granted by the prescribed authority vis-à-vis expenditure from year to year. The amendment brought in by the IT (Tenth Amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t could be called for from the Assessing Officer and it could be ascertained his actual role in the research activity. However, we find that in earlier years, no such disallowance was made by the Assessing Officer - even in scrutiny assessment. The assessment order for Assessment Year 2011-12 has been placed on record. A perusal of this order would indicate that there is no discussion on the claim made under Section 13(2AB) of the Act. In other words, it is not ascertainable whether any claim was available in that year or not. Faced with above situation and in the interest of justice, we deem it appropriate to remit this issue to the file of the learned Assessing Officer for fresh adjudication. The assessee will be at liberty to submit any evidence exhibiting the role of Mr. Dhiran Shah as an Executive Director-cum-Chief Technology Officer helping the research activity. In case it is established that he was hired in the research activity related work and he has played an active role in the research operations, then the expenditure incurred towards his salary will qualify for grant of deduction under Section 35(2AB) of the Act. The learned Assessing Officer shall re-adjudicate this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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