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TMI Blog2023 (8) TMIX X X X Extracts X X X X X X X X Extracts X X X X ..... aw was that the prescribed authority had to quantify the quantum of eligible expenditure incurred on in-house research and development facility by the assessee. But prior to that there was no such requirement inlaw and the prescribed authority was the only required to grant approval to the in-house research development activity. The impugned assessment year before are Asst.Year 2014-15 2015-16. Since these assessments are prior to 1.4.2016, the amendment to section 35(2AB)) are not applicable to the same and in terms of un-amended provisions of section 35(2AB) of the Act, since we have held above that the prescribed authority was not required in law to quantify the amount of expenditure incurred on in-house research and development facility, such quantification, if any done by the prescribed authority in Form No.3CL was not required to be taken cognizance of by the Revenue authorities and the assessee is entitled to claim weighted deduction on all expenditure incurred by it, on in-house research development facility. Revenue has erred in restricting the claim of weighted deduction under section 35(2AB) of the Act to the extent approved by the prescribed authority i.e. DSIR - we dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. The ld.DR fairly agreed to the same. In view of the same, we take up both the appeals together for adjudication and dispose them by way of this common order. 4. Drawing our attention to the facts of the case, the ld.counsel for the assessee briefly pointed out that in terms of section 35(2AB) of the Act the assessee is entitled to weighted deduction at the rate of 200% on account of expenditure incurred on scientific research in in-house research and development facility, which facility is approved by the prescribed authority, being Department of Scientific Industrial Research ( DSIR for short). He contended that for both the years the assessee claimed weighted deduction of expenditure incurred on scientific research as claimed in its profits and loss account, but the Department restricted the assessee s claim of weighted deduction to the extent of expenditure which was approved by the prescribed authority i.e. DSIR in Form 3CL. Thus, allegedexcess deduction claimed by the assessee, which in the AY 2014-15 amounted to Rs.23.45 lakhs and in AY 2015-16 amounted to Rs.27.31 lakhs was disallowed. The excess having been calculated in each year as under: Asst.Year Amounted debited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 35(2AB) requires assesses to enter into an agreement with the prescribed authority for cooperation in such research and development facility and for the audit of the accounts maintained for that facility; meaning thereby, the assessee has to get its accounts audited and DSIR is thereafter required to be mention the amounts found spent by the assessee on in-house research and development facility in Form No.3CL. 7. We have heard both the parties; carefully gone through the orders of the authority below and also decisions cited before us. The issue in dispute before us is vis a vis claim of weighted deduction at the rate of 200% of the expenditure incurred on inhouse research and development activity, as allowed by section 35(2AB) of the Act.The Revenue restricting the assessee s claim to the extent approved by the prescribed authority in Form No.3CL, while the assessee claiming weighted deduction on the entire amount of research and development expenditure debited to its P L account. 8. We have gone through the relevant provision of law and the relevant Rules forms prescribed thereto for executing the provision of law in this regard, and we agree with the Ld.Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for cooperation in audit and accounts of the said facility and The report of the prescribed authority granting approval is submitted to a designated officer of the Department in prescribed form within a prescribed period of time. Rule 6 of the Income Tax Rules, 1962, lists all specifications required for the section to be workable. Rule 6(1B) specifies the prescribed authority for section 35(2AB) as being the DSIR, while sub Rule(4) prescribes the application to be made for seeking approval to DSIR in Form 3CK, sub-Rule (5A) in turn prescribes the relevant Form for granting approval to the assessee as Form 3CM. 11. The relevant Rules 6(1B) (4) (5A) are reproduced hereunder for clarity. 6. . [(1B) For the purposes of sub-section (2AB) of section 35, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research.] .. [(4) The application required to be furnished by a company under sub-section (2AB) of section 35 shall be in Form No. 3CK.] . .. [(5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, pass an order in writing in Form No. 3CM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture incurred by assesses on in-house research and development. The only requirement is for assesses to submit their audited accounts of the approved facility to DSIR every year. Form 3CL is only for submitting report of granting approval by DSIR, the report to be submitted to the designated Revenue authority within 60 days of granting approval. The contents of Form 3CL also reveal no requirement of certification of quantum of expenditure incurred on inhouse research and development. At point No.9 DSIR is required to report the total cost of in house research facility ,giving break up of expenditure on land and building and at Pt. No.10 it is required to report whether agreement for cooperation in the facility and for audit of accounts is entered into with the concerned entity. There is no requirement for reporting expenditure incurred year to year on research and development. 13. A conjoint reading of all the above reveals that as per the applicable provisions of law there was no requirement for the prescribed authority to certify the quantum of expenditure incurred by assesses on inhouse research and development activity. That the only reporting requirement in Form 3CL by the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifying 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; (ba) The report in Form No.3CL referred to in clause (b) shall be furnished electronically by the prescribed authority to the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over such company within one hundred and twenty days, (i) of the grant of the approval, in a case referred to in sub-clause (i) of clause (b); (ii) of the submission of the audit report, in a case referred to in sub-clause (ii) of clause (b);] (c) The company shall maintain a separate account for each approved facility; which shall be audited annually and [a report of audit in Form No.3CLA shall be furnished electronically to the Secretary, Department of Scientific and Industrial Research on or before the due date specified in Explanation 2 to sub-section (1) of section 139 of the Act for furnishing the return of income, for each succeeding year]. Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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