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TMI Blog2020 (2) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... ter due process of verification by the concerned authorities. Therefore, the Hon ble High Court directed the AO to verify the actual expenditure incurred by the assessee in that case. Neither the AO nor Pr.CIT gave finding of fact on the R D nature of expenditure under consideration. There, we cannot examine them and give a finding of fact. Ld. AR also requested for remand for verification. Considering the above settled nature of the issue, we are of the opinion that the deduction u/s 35(2AB) of the Act cannot be denied merely for the procedural lapses. Therefore, the order of the PCIT needs modification. Modification include (1) the judgment of Hon ble High Court of Gujarat in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. (supra) and other judgments, if any, on the subject, are required to be following by the PCIT; and (2) Due verification of the expenditure and the allowability of expenditure u/s 35(2AB) of the Act has to be examined by the PCIT too. We modify the orders of Pr.CIT accordingly, for both assessment years. PCIT is directed to pass consequential order after hearing the assessee. The assessee is directed to demonstrate the allowability of the said expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s extracted as under:- 16. Our company is an In-house Research and Development Company duly approved by the Department of Science Industrial Research (DSIR), Govt. of India, New Delhi. Copy of the approval issued by the Department of Scientific Industrial Research (DSIR), Govt. of India, New Delhi is enclosed herewith for your kind perusal. Hence, various types of R D activities had conducted by the Company during the previous year. The R D activities are basically targeting creation of new hybrid seeds for the farming community, at large. The activities include, Large Scale Trials (LST) and Multi Location Trials (MLT) expenses, Field Day and Crop Seminars, Farmer Advisory expenses, Salaries and other expenses of the R D staff, etc. These expenses are duly debited to the R D expenditure after proper identification. Hence company has claimed 200% of its expenditure incurred on Research Development activities during the year under assessment. Copies of the relevant supporting enclosed herewith. 4. After considering the reply of assessee, the AO allowed the claim of deduction u/s 35(2AB) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). There is no ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopments over the period from A.Y. 2008-09 to 2010-11. The ld. Counsel mentioned the assessee never filed requisite Form Nos.3CM and 3CL to the Department. However, the assessee got the relief from the Tribunal despite absence of Form No.3CM. Referring to the developments in A.Y. 2011-12, ld. Counsel submitted there is no dispute about non furnishing of these both forms to the Department. Therefore, there is no litigation and when it comes to A.Y. 2012-13, Form No.3CM is available and Form No.3CL is not available. The assessee did not submit the audit accounts to the DSIR. Coming to the current year under consideration, ld. Counsel brought our attention to page 1 of the Paper Book and submitted that Form No.3CM is very much available on record and Form No.3CL could not be furnished as the assessee failed to furnish the financial statements to DSIR. Notwithstanding the same, ld. Counsel mentioned the said statements are now furnished (on 12.02.2020) to DSIR and the assessee tried to rectify the same defect for A.Y. 2014-15 also. It is argued by the ld. Counsel that the Tribunal and the Hon ble High Courts are consistently granting deduction u/s 35(2AB) of the Act to the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous. The claim is very much allowable provided the expenditure portion is examined and found allowable under the said provisions. In any case, such expenditure can also be allowable u/s 37 of the Act, provided the conditions are met. Further, we also examined the judgment of Hon ble High Court of Gujarat in the case of CIT Vs. Sun Pharmaceutical Industries Ltd. (supra). We find it relevant to extract the same as under:- 3. The Commissioner of Income tax was of the opinion that the Assessing Officer had not made proper inquiries before accepting the claim. After giving notice to the assessee, he passed an order dated 28.3.2016 under section 263 of the Act and held that the order of assessment was passed without proper verifications, investigation and examination. The same was therefore, erroneous and prejudicial to the interest of the Revenue. He therefore, directed the Assessing Officer to examine the issues discussed in the order and pass a fresh order of assessment in view of such discussion. In the process the Assessing Officer would also consider correct amount of disallowable expenditure after considering the financial documents and other relevant details/sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to verify such figures, we would allow the Assessing Officer to do so. In other words, in principle, we accept the Tribunal's reasons and conclusions. Merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee's claim of deduction under section 35(2AB) of the Act. However, in facts of the present case, it would be open for the Assessing Officer to verify the actual expenditure incurred by the assessee. 9. From the above, it is inescapable conclusion that the claim of deduction u/s 35(2AB) of the Act cannot be denied merely for want of Form No.3CL subject to fulfilment of other conditions under Rule 7 of IT Rules. It is merely a procedural lapse. Further, it is also a decided issue that the expenditure which is claimed under the said section is allowable after due process of verification by the concerned authorities. Therefore, the Hon ble High Court directed the AO to verify the actual expenditure incurred by the assessee in that case. Neither the AO nor Pr.CIT gave finding of fact on the R D nature of expenditure under consideration. The contents are available in page 51 of the Paper Book. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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