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TMI Blog2024 (1) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 2. That the assessment order u/s 143(3) of the Act dated 27th December, 2017 passed by the Ld. AO and order of the Ld. CIT(A) dated 31st May, 2019 u/s 250(6) of the Act are bad in law. The additions/disallowances made by Ld. AO and subsequently upheld by Ld. CIT(A) are wholly illegal, untenable and erroneous. 3. Disallowance of weighted deduction u/s 35(2AB) 3.1 The Ld. CIT(A) has erred in law and in facts and in the circumstances of the appellant's case in upholding the disallowance of weighted deduction u/s 35(2AB) of the Act made by the Ld. AO to the extent of 6,17,97,008/-, being the amount short approved by Department of scientific and industrial research (DSIR) mainly on account of delay in filing of Form No. 3CK. 3.2 The Ld. CIT(A) has failed to appreciate that above disallowance couldn't have been made by Ld. AO as delay in filing Form no.3CK is not attributable to the appellant. 3.3 The Ld. CIT (A) has erred in law and facts of the case, in not appreciating that no disallowance could have been made u/s 35(2AB) of the Act read with Rule 6(7A) as the extant provisions of Rule 6(7A) did not permit DSIR to quantify the expenditure incurred on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves leave to alter, amend or withdraw all or any of the grounds herein or add any further grounds as may be considered necessary either before or during the hearing. * The appellant prays that the appeal be allowed." 3. Facts giving rise to the present appeal are that the assessee company was engaged in the business of manufacturing of nylon tyre cord fabrics, packaging film, chemicals, engineering plastics and refrigerant gases. The original return of income declaring total income of INR 94,05,32,950/- was filed after claiming deduction under Chapter VI-A of INR 1,98,87,500/- and book profit of INR 3,81,66,29,461/- on 30.11.2015. Thereafter, the return of income was revised and declared total income of INR 105,07,73,790/-. The case was selected for scrutiny assessment and a notice u/s 143(2) of the Income Tax Act, 1961 ("the Act") was issued and served upon the assessee. In response to the statutory notices, Ld. Authorized Representative ("AR") of the assessee attended the proceedings and furnished the requisite details as called by the Assessing Authority. The Assessing Officer ("AO") while framing the assessment u/s 143(3) of the Act dated 27.12.2017, made various additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng approval from DSIR is inserted w.e.f 01.07.2016 by amendment made in Rule 6(7A)(b) of Rules. However, such provision cannot override the main Act. In support of this proposition, Ld. Counsel for the assessee relied upon various case laws:- a) "ACIT vs. Crompton Greaves Ltd. ([2019] 111 taxmann.com 338 (Mumbai-Trib.)) (P. no. 197-213 of Case Law Compilation); b) CIT vs. Claris Lifesciences Ltd. ([2008] 174 Taxman 113 (Gujarat)) (P. no. 238-241 of Case Law Compilation); c) CIT-III vs. Sandan Vikas (India) Ltd. ([2012] 22 taxmann.com 19 (Delhi)) (P. no. 242-245 of Case Law Compilation); d) Maruti Suzuki India Ltd. vs. Union of India ([2017] 84 taxmann.com 45 (Delhi)) (P. no. 246-262 of Case Law Compilation); e) Cummins India Ltd. ([2018] 96 taxmann.com 576 (Pune-Trib.)) (P. no. 263-286 of Case Law Compilation); f) Crest Composites & Plastics Pvt. Ltd. (ITA No. 28/Ahd/2017) (P. no. 287-295 of Case Law Compilation); g) Force Motors Ltd. ([2021] 133 taxmann.com 71 (Pune-Trib.)) (P. no. 296-308 of Case Law Compilation); h) Natural Remedies Pvt. Ltd. (TS-36-ITAT-2021(Bang)) (P. no. 309-322 of Case Law Compilation): i) Crest Composites & Plastics Pvt. Ltd. (2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se laws relied upon by the Ld. AR, the judicial authorities had delivered on different facts and circumstances. These decisions are not applicable in the facts of the case of the appellant. 9.3 As per section 35(2AB) of the Act such expenditure on Research & Development facility should be approved by the prescribed authority [in this case Secretary, DSIR], is a pre-condition to be fulfilled by the assessee before being allowed weighted deduction. The reason for short approval by DSIR is not relevant as the authority for this approval lies with DSIR and the amount which has been approved by DSIR has already been allowed at the time of assessment proceeding. The appellant claimed deduction in its ITR u/s 35(2AB) of Rs. 52,62,21,008/-. The deduction as approved by the prescribed authority (DSIR) as submitted by the assessee on 06.11.2017 was Rs. 46,44,24,000/-. The assessee has claimed excess deduction of Rs. 6,17,97,008/- [Rs. 52,62,21,008/- (-) Rs. 46,44,24,000/-]. Therefore, I do not find any infirmity in the finding of the AO, the disallowance of excess claim is confirmed and ground of appeal is dismissed." 8.1. It is evident from the above finding that lower authorities disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "[one and one-half] times of the expenditure] so incurred: Provided that where such expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility is incurred in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the expenditure so incurred.] "[Explanation. For the purposes of this clause, "expenditure on scientific research", in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970).] (2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act. (3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and [fulfils such conditions with regard to maintenance of accounts and audit there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Nos.4 & 6 raised by the assessee are inter-connected and raised against disallowance of depreciation on goodwill of INR 19,15,183/- under normal provisions. 18. At the outset, Ld. Counsel for the assessee submitted that the issue is squarely covered by the decision of Co-ordinate Bench of the Tribunal in assessee's own case. Ld. Counsel for the assessee contended that the assessee company recognized goodwill of INR 3,68,94,006/- on account of purchase of three (03) businesses in 2008 for consideration of INR 150,31,26,228/- as slump sale from SRF Polymers Ltd. and paid in excess of value of assets acquired of INR 146,62,32,222/- with respect of three (03) businesses. The assessee has claimed Goodwill of INR 19,15,183/- for the period under appeal. The assessee duly submitted the requisite facts and evidences during the course of assessment proceedings. The AO disallowed the claim of depreciation of goodwill on the ground that it is balancing figure and not goodwill which the assessee paid in excess of its valuation to its group company. The assessee had not furnished any reasons as to why valuation of assets & liabilities were not made before purchase. Further, goodwill was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that Co-ordinate Bench of Tribunal while deciding the issue for A.Y. 2014-15 (ITA No.6620/Del/2018 order dated 13.12.2021) by following the order of the Tribunal for A.Y. 2012-13 has decided the issue in favour of the assessee by observing as under: "36. During the course of assessment proceedings, it was noticed that assessee had claimed depreciation on goodwill amounting to Rs 25,53,577/-. It was submitted that assessee had purchased three business namely Industrial Yarn Business at Manali (Tamilnadu), Engineering Plastic business at Manali (Tamilnadu) and Engineering Plastic business at Pantnagar (Uttrakhand) for a consideration of Rs. 150,31,26,228/- as slump sale on 31st December 2008. It was submitted that the businesses was purchased from M/s SRF Polymers Limited on lump sum basis and the amount of goodwill appearing in the Balance Sheet as at 31.03.2009 represents the total consideration paid for acquiring business which exceeds the value of assets taken over by the assessee. Assessee also relied on various decisions in respect of its claim for depreciation. The submissions of the assessee were not found acceptable to AO. AO noted that the assessee had purchased thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to their findings submitted that the AO was fully justified in denying the claim of depreciation. 40. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the claim of depreciation on goodwill. We find that issue of depreciation on goodwill also arose in assessee's own case in A.Y. 2012-13 and the Co-ordinate Bench of Tribunal in ITA No.5784/Del/2016 order dated 24.04.2020 by relying on the decision of Hon'ble Apex Court in the case of Smifs Securities Ltd. (supra), held that assessee is eligible to claim depreciation on goodwill. However in that order since the claim of depreciation was made as an additional claim before the Tribunal, the matter was remitted to the AO for examination. In the year under consideration, we are of the view that since the claim was already made in the return of income and was denied by AO and DRP, we are of the view that ratio of the decision rendered by Hon'ble Apex Court in the case of Smifs Securities is squarely applicable to the facts of the case. We are therefore direct the AO to grant the depreciation of such goodwill. Thus the ground of assessee is allowed." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of INR 29,51,16,052/- during the assessment proceedings. The AO did not discuss this claim and Ld.CIT(A) also did not entertain the claim. Reliance is placed upon the judgement of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs CIT [200] 157 taxman-1 (SC). He submitted that the issue is fully covered by the orders of the Tribunal in assessee's own case in different years and remitted the issue back to the file of AO. It is pointed out by the Ld. Counsel for the assessee that the AO passed order giving appeal effect for providing balance additional depreciation in assessee's own case for AY 2014-15 and AO also quantified amount of additional depreciation for the year under appeal. 24. On the other hand, Ld. CIT Dr relied on the orders of lower authorities. 25. We have heard the rival submissions and perused the material available on record. Under the identical facts, the Tribunal was pleased to remit the matter back to the AO in the assessee's own case for AY 2014-15 by observing as under:- 57. "We further find that following the decision of the tribunal for A.Y. 2010-11, the claim was allowed in A.Y. 2012-13. Before us, no distinguishing features in the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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