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TMI Blog2020 (2) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... ayer on in-house research and development. All reports in Form 3CL shall be issued by the DSIR effective from 01.07.2016 which should include in Part B is to quantification of the expenses incurred by the tax payers in in-house research in terms of section 35(2AB) of the Act. Hence, the contention of the assessee has no legs to stand and is out rightly rejected. Thus, the entire claim of weighted deduction claimed by the assessee cannot be acceded to over and above the restriction made by the DSIR. CIT(A) has rightly directed the Assessing Officer to allow the correct amount of deduction under section 35(2AB) of the Act after taking note of the DSIR certificate dated 16.03.2017. Thus, the ground raised by the assessee stands dismissed. Disallowance under section 14A r.w. Rule 8D - HELD THAT:- Now it is a well settled proposition that in case no exempt income is received during year under consideration, no disallowance of expenditure can be made by invoking provisions of section 14A of the Act. It is a matter of fact that the assessee earned no exempt income during the year under consideration. Further, it is observed that Assessing Officer has not recorded any satisfactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 14A r.w. Rule 8D at ₹ 18,40,430/-. On appeal, while confirming the disallowance made under section 14A r.w. Rule 8D, the ld. CIT(A) directed the Assessing Officer to sallow correct amount of deduction under section 35(2AB) of the Act after taking note of the DSIR certificate. 3. On being aggrieved, the assessee is in appeal before the Tribunal. With regard to the disallowance made under section 35(2AB) of the Act, the ld. Counsel for the assessee has submitted that the DSIR has been empowered to restrict the claim under section 35(2AB) of the Act only from 01.07.2016 i.e., from assessment year 2017-18 onwards vide IT Tenth Amendment Rule 2016. By relying upon various case law, the ld. Counsel for the assessee prayed for allowing the relief under section 35(2AB) of the Act as claimed in the return. 4. Per contra, by placing copy of the Notification dated 28.04.2016, the ld. DR has argued that nowhere in the Income Tax (10th Amendment) Rules 2016, the CBDT has stated that the said rule is applicable from the assessment year 2017-18, despite it was stated at para 1 (2) that They shall come into force on the 1st day of July, 2016 while amending the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility from subsequent assessment year stands ruled out. 7. Coming to the case law relied on by the assessee in the case of Cummins India Limited v. DCIT in I.T.A No. 309/Pun/2014 dated 15.05.2018, the Pune Bench of the Tribunal has observed at para 46 that the first step was the recognition of facility by the prescribed authority and entering an agreement between the facility and the prescribed authority. Once such an agreement has been executed, under which recognition has been given to the facility, then thereafter the role of Assessing Officer is to look into and allow the expenditure incurred on in-house R D facility as weighted deduction under section 35(2AB) of the Act. The above findings of the Pune Bench are contrary to the amended Rule of the Income Tax Rules, 1962, wherein, the prescribed authority i.e., DSIR was empowered in quantifying the expenditure incurred on in-house research and development facility by the company during the previous year and eligible for weighted deduction under sub-section (2AB) of section 35 of the Act in Part B of Form No. 3CL, when in the case of Electronic Corporation of India Ltd. v. ACIT (supra), the Hyderabad Bench of the Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Karnataka High Court has observed as under: A plain reading of Section 35(2AB) would clearly indicate that where a company is engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) or in-house research and development facility as approved by the prescribed authority, then, they shall be allowed a deduction of a sum equal to one and a half times of the expenditure so incurred. The word used 'shall' in the above said provision would ordinarily mean that it should be understood in the context in which it is used and there cannot be departure in this regard. The said provision would also indicate that such expenditure as approved by the prescribed authority would be entitled for being allowed as a weighted deduction. There being no dispute to the fact that DSIR being the prescribed authority in the instant case, had issued the report in Form No. 3CL - Annexure - M certifying the total R D expenditure (excluding land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year cannot be said to have adversely affected or restricted the substantive right of the tax payer and no prejudice said to have been caused by the said amendment of Income Tax Rules, 1962 to the assessee and in fact, the DSIR, who is a technical body is well equipped to assessee to quantify the expenses incurred by the tax payer on in-house research and development. Hence, all reports in Form 3CL shall be issued by the DSIR effective from 01.07.2016 which should include in Part B is to quantification of the expenses incurred by the tax payers in in-house research in terms of section 35(2AB) of the Act. Hence, the contention of the assessee has no legs to stand and is out rightly rejected. Thus, the entire claim of weighted deduction claimed by the assessee cannot be acceded to over and above the restriction made by the DSIR. In view of the above facts and circumstances and case law relied on, we are of the considered opinion that the ld. CIT(A) has rightly directed the Assessing Officer to allow the correct amount of deduction under section 35(2AB) of the Act after taking note of the DSIR certificate dated 16.03.2017. Thus, the ground raised by the assessee stands dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking the provisions of section 14A of the Act r.w. Rule 8D made disallowance of expenditure to the tune of ₹ 18,40,430/-, which was confirmed by ld. CIT(A). Now it is a well settled proposition that in case no exempt income is received during year under consideration, no disallowance of expenditure can be made by invoking provisions of section 14A of the Act. It is a matter of fact that the assessee earned no exempt income during the year under consideration. Further, it is observed that Assessing Officer has not recorded any satisfaction before invoking Rule 8D of the 1962 Rules and has simply invoked provisions of section 14A of the Act r.w. Rule 8D. The Assessing Officer has not analysed modus operandi followed by the assessee in making investments, personnel deployed nor has looked into books of accounts of the assessee to compute expenditure incurred in relation to earning of an exempt income. 8.3 We find that the in the case of Chettinad Logistics Private Limited(supra), the Hon ble Madras High Court has held that no disallowance of expenditure under section 14A of the Act can be made when no exempt income is earned by the assessee. The SLP filed by Revenue aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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