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TMI Blog2022 (10) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... CL in respect of expenditure incurred by R D unit for relevant assessment year. Thus on a perusal of the various Rulings, the position is clear that prior to amendment introduced w.e.f. 01/07/2016, the deduction u/s 35(2AB) of the Act would be available to an assessee having an approved in-house R D facility by the prescribed Authority Act and there is no mention of approval of the quantum of expenditure in the law as it stood prior to that date. The mandate of quantification of expenditure has been put in place only w.e.f. 01.07.2016. In view of the above observations and judicial precedents on the subject, we allow the appeal of the assessee. Addition of PF/ESI expenses u/s. 36(1)(va) - assessee did not deposit employees' contribution to employees' account - HELD THAT:- We note that the issue is squarely covered against the assessee by case of Gujarat State Road Transportation Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT ] wherein it was held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee filed appeal before CIT(A) and submitted Form 3CL before CIT(A). The assessee submitted that the reason for non-filing of form 3CL was that same was lying with the accountant of the assessee, but he had to leave on urgent basis due the causality in the family. Accordingly, form 3CL could not be submitted during the course of appellate proceedings. Further, the assessee submitted before Ld. CIT(A) that copy of the DSIR report was also forwarded to the Chief Commissioner of Income Tax (Exemption), New Delhi by DSIR directly which fact also proves that DSIR had approved the expense by the said Report. In view of the submissions by the assessee, CIT(A) accepted Form 3CL in appellate proceedings and gave part relief to the assessee on the basis of approved amount mentioned in form 3CL. While passing the order, the CIT(A) made the following observations: 13.3.1 Considering the fact that the approval has been given by the competent authority i.e. DSIR vide its report reproduced as above and the fact that a copy of the same has been endorsed to the Chief Commissioner of Income Tax (Exemption) and the fact that the default of the appellant being a procedural default and in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch power was with DSIR i.e. after approval of facility. Under the amended provisions, beside maintaining separate accounts of R D facility, copy of audited accounts have to be submitted to the prescribed authority. These amendments to rules 6 and 7a are w.e.f. 01.07.2016 i.e. under the amended rules, the prescribed authority as in part A give approval of the facility and in part B quantify the expenditure eligible for deduction under section 35(2AB) of the Act. The issue which is raised before us relates to pre-amended provisions and question is where the facility has been approved by the prescribed authority, can the deduction be denied to the assessee under section 35(2AB) of the Act for non issue of form No.3CL by the said prescribed authority or the power is with the Assessing Officer to look into the nature of expenditure to be allowed as weighted deduction under section 35(2AB) of the Act. The first issue which arises is the recognition of facility by the prescribed authority as provided in section 35(2AB) of the Act. ..The amendment brought in by the IT (Tenth Amendment) Rules w.e.f. 01.07.2016, wherein separate part has been inserted for certifying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 taxmann.com 97 (Kolkata - Trib.) held that prior to 1-6-2016 , only requirement to claim deduction under section 35(2AB) was to receive recognition from prescribed authority since said recognition was obtained by assessee on 26-3-2013, deduction could not be denied merely because prescribed authority failed to send intimation in Form 3CL in respect of expenditure incurred by R D unit for relevant assessment year. 4.4 In the case of ACIT v. Crompton Greaves Ltd.[2019] 111 taxmann.com 338 (Mumbai - Trib.) , the Mumbai Tribunal held that since the mandate of approval of quantum of expenditure had been put in place only with effect from 1-7-2016, hence, non-approval of quantum of expenditure for assessment year 2009-10 did not entitle Assessing Officer to make disallowance under section 35(2AB) of the Act. The Mumbai ITAT in the above case made the following observations: 9. The operative phrase here is on in-house research and development facility as approved by the prescribed authority . , the word facility has been hereby show us to emphasis the point that it is the unit which requires approval of the prescribed authority under this provision. Further, in the memo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) of Section (2) apply, the assessee shall be entitled to deduction of amount in computing the income referred to in section 28 if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the 'due date'. In view of the above, late payment of employees contribution toward Provident/ ESI of Rs. 91,215A [34,980 + 56,235] is treated as assessee's income u/s. 2(24)(x) of the I. T. Act, and fee is added to the total income. Penalty proceedings n/s. 271(l)(c) of the Act are initiated separately for furnishing inaccurate particulars of income. (Addition of Rs.91,215/-) 6. In appeal, the ld. CIT(A) confirmed the addition by holding that the issue is squarely covered by the judgment of Hon ble Gujarat High Court in the case of CIT vs. GSRT 266 ITR 170 (Guj) . While passing the order, the ld. CIT(A) made the following observations:- 6.1 I find that the issue is squarely covered by the judgment of Hon'ble High Court of Gujarat in the case of CIT v. GSRTC [2014] 366 ITR 170 (Gujarat), this case Hon'ble High Court have comprehensively dealt with the issue. The relevant part of the judgment is reproduced as below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum referred to in clause (B) i.e. with respect to the employer's contribution, be allowed unless such sum is actually been paid in cash or by issue of cheque or draft or by any other mode on or before the due date as defined in explanation below clause (va) of sub-section (1) of section 36 and where such sum has been made otherwise that in cash, the sum has been realised within 15 days from the due date. By the Finance Act 2003, Second Proviso of section 438 of the Act has been deleted and First Proviso to section 438 has a/so been amended which is reproduced hereinabove. Therefore, with respect to employer's contribution as mentioned in clause (b) of section 43(8), if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 438 on actual payment and such deduction would be admissible for the accounting year. However, it is required to be noted that as such there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 36(1) (va), the assessee shall be entitled to deduction with respect to such employees' contribution. Section 2(24)(x) refers to any sum received by the assessee from his employees as contribution and does not refer to employer's contribution. Under the circumstances and so long as and with respect to any sum received by the assessee from any of his employees to which provisions of sub-clause (x) of sub-section 24 of section 2 applies, assessee shall not be entitled to deduction of such sum in computing the income referred to in section 28 unless and until such sum is credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as mentioned in explanation to section 36(1)(va). Therefore, with respect to the employees contribution received by the assessee if the assessee has not credited the said sum to the employees' account in the relevant fund or funds on or before the due date mentioned in explanation to section 36(1) (va), the assesses shall not be entitled to deductions of such amount in computing the income referred to in section 28 of the Act. 6.2 Keeping in view the provisions of section 2(24)(x) r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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