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TMI Blog2023 (4) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... development facility has been approved by the prescribed authority in proper Format, merely because the said authority failed to send intimation to the Department in form 3CL, would not be reason enough to deprive assessee s claim of deduction u/s. 35(2AB) of the Act. Assessment order was passed by the ld. Assessing Officer after making due inquiry regarding the claim of deduction u/s. 35(2AB) of the Act is, not erroneous and prejudicial to the interest of the Revenue - order passed by ld. PCIT u/s. 263 dismissed. - Decided in favour of assessee. - ITA No. 157 /Ahd/2022 - - - Dated:- 27-3-2023 - Shri Waseem Ahmed , Accountant Member And Shri Siddhartha Nautiyal , Judicial Member For the Assessee : Shri Bhavin Marfatia , A. R. For the Revenue : Shri A. P. Singh , CIT - D. R. ORDER PER : SIDDHARTHA NAUTIYAL , JUDICIAL MEMBER : - This is an appeal filed by the assessee against the order of the ld. Principal Commissioner of Income Tax, PCIT, Vadodara-1, in proceeding u/s. 263 vide order dated 31/03/2022 passed for the assessment year 2016- 17. 2. The assessee has taken the following grounds of appeal : - All the grounds of appeal in this appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any of the above grounds of appeal.? 3. The brief facts of the case are that the PCIT observed that during the course of assessment proceedings, the assessee has submitted report from an accountant u/s. 35(2AB) dated 24th October, 2016 stating the eligible research and development ( R D) expenditure of Rs. 12,03,89,427/- for assessment year 2016-17. However, the PCIT observed that the assessee did not submit the necessary documentary evidences i.e. Form 3CL issued by the prescribed authority (DSIR, New Delhi). Further, the assessee has also not submitted Form 3CLA which is the prescribed audit report mandatorily to be filed before DSIR on or before due date of filing of return. The PCIT observed that the assessee has submitted only a Certificate Recognition on in house R D unit at Hosur. Further, the PCIT also observed that the assessee has claimed deduction u/s. 35(2AB) of Rs. 20,12,21,103/- for R D facility. As per the revised return of income filed by the assessee, it claimed that amount of Rs. 8,08,31,676/- was debited to profit and loss account as R D expenditure and allowable deduction u/s. 35(2AB) of the Act was Rs. 20,12,21,103/- and after deducting expenditure a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction shall be allowed if the research and development facility has been approved by the prescribed authority in Form 3CM. The counsel for the assessee further submitted that in the instant facts, the Assessing Officer on due consideration of the materials placed before him has taken one of the possible views and thus allowed the claim of deduction u/s. 35(2AB) of the Act and therefore the order passed by the ld. Assessing Officer is neither erroneous nor prejudicial to the interest of revenue. 5. However, the PCIT rejected the contention of the assessee and held that the order passed by the ld. Assessing Officer is erroneous and prejudicial to the interest of the revenue. While holding so, the ld. PCIT made the following observations:- 7. I have carefully considered the facts of the case, assessment records and written reply furnished by the assessee. The contentions put forth by the assessee in its above referred reply are found to be not acceptable. The assessee has also placed reliance on judicial pronouncements of various Courts and Tribunals. In this regard, it is stated that no differing opinion or position has been taken in respect of the same. However, it is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy debited to Profit Loss Account and therefore, net additional amount of Rs 12,03,89,427 was claimed as deduction us 35(2AB) of the IT Act in the return of income filed for the AY 2016- 17. On perusal of the case records, it was found that while finalizing the assessment, the Assessing Officer has allowed the deduction u/s 35(2AB) of the IT Act of Rs. 12,03,89,427/- claimed by the assessed in the return of income for the AY 2018-17, without any verification regarding the allowability of the deduction u/s 35(2AB) of the LT Act claimed by the assessee during the year under consideration which should have been made during the course assessment proceedings. 7.1 Further as stated in the foregoing paragraph the assessee has claimed deduction us 35(2AB) of the IT Act of Rs. 20,12,21,103 for R D facility. As per revised return of income filed by the assessee in Schedule ESR, the assessee claimed that amount of Rs 8,08,31,676 was debited to Profit Loss Accounts R D expenditure and allowable deduction u/s 35(2AB) of the IT Act was Rs. 20, 12, 21,103 and after deducting expenditure already debited, the net deduction 35(2AB) was claimed at Rs. 12,03,89,427/-. The assessee claimed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income or during the course of assessment proceedings was because the same was issued only in the month of July, 2021 i.e. after the assessment proceedings had concluded. Accordingly, the same was filed before PCIT during the course of 263 proceedings. Further, the counsel for the assessee drew our attention to several case laws to the effect that issuance of Form 3CL is not mandatory for grant of deduction u/s. 35(2AB) of the Act. Accordingly, the submission of the counsel for the assessee before us is that firstly, detailed inquiry were made by the Assessing Officer during the course of assessment proceedings on the aspect of deduction of claim of the assessee u/s. 35(2AB) of the Act and secondly that the assessee had filed detailed reply in respect of the same, which were duly considered by the ld. Assessing Officer while allowing the claim of deduction u/s. 35(2AB) of the Act to the assessee. Thirdly, the ld. Assessing Officer took a view which was legally a tenable view supported by the various judicial precedents on the subject and hence it cannot be inferred that the order passed by ld. Assessing Officer was erroneous or prejudicial to the interest of the Revenue. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80 (Gujarat H.C.) held that where assessee, engaged in research and development on pharmaceutical products, claimed deduction u/s. 35(2AB), in view of fact that research and development facility had been approved by prescribed authority in proper format i.e. Form 3CM merely because said authority failed to send intimation to Department in Form 3CL, it would not be enough to deprive assessee s claim of deduction. 7.1 In view of the above, we observe that in the instant case, the assessee had filed copy of recognition of the in house R D facility dated 25-08-2014 during the course of assessment. The assessee had also filed copy of approval of the in house R D facility dated 07-10-2015 in Form 3CM during the course of assessment, with regard to computation of deduction u/s. 35(2AB) of the Act, the assessee had filed certificate of the auditor certifying the expenditure during the course of assessment. With respect to Form 3CL, we observe that the Form 3CL was issued by prescribed authority on 20-07-2021 after passing of the assessment order u/s. 143(3) of the Act on 17-01-2020. However, the approval of the R D facility in Form 3CM was duly filed by the assessee during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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