BOTIL OIL TOOLS INDIA PVT.LTD., NEW DELHI vs. ACIT, CIRCLE-5(1), NEW DELHI
What did the Tribunal hold?
The Tribunal restored the issue to the file of the CIT(A) with a direction to the assessee to submit Form 3CM from DSIR. The CIT(A) is to decide the matter afresh after the assessee produces the necessary approval documents.
What were the facts?
The assessee claimed deductions for R&D expenditure under Section 35(2AB) for AY 2015-16 and 2016-17. The Assessing Officer disallowed the claim due to lack of Form 3CM from DSIR, and the CIT(A) upheld this disallowance.
What were the issues?
Whether the disallowance of R&D expenditure under Section 35(2AB) is justified without the requisite Form 3CM from DSIR. Whether disallowance under Section 40A(1A) is warranted for non-deduction of TDS on parties without a permanent establishment or business income in India.
Which sections of the Income-tax Act were involved?
Section 35(2AB),Section 40A(1A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, [ DELHI BENCH: ‘A’ NEW DELHI ]
Before: SHRI B.R.R. KUMAR & SHRI YOGESH KUMAR U.S.
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
PER YOGESH KUMAR U.S., JM
These two appeals are filed by the assessee against two separate orders, both dated 30.09.2019 of the Ld. Commissioner of Income Tax (Appeals)-2 [(hereinafter referred to CIT (Appeals)] New Delhi, for assessment years 2015-16 and 2016-17.
The assessee has raised the following substantive ground of appeal :-
“Disallowance of claim u/s 35(2AB) amounting to Rs.3,84,91,572/-
The ld. CIT(A) has erred in law and on facts in confirming the disallowance of claim u/s 35(2AB) which is related to the R&D expenditure incurred by the assessee recognized R&D Centre duly approved by DSIR. The R&D expenditure of the assessee is certified by the Statutory Auditor. The order passed by the Assessing Officer is arbitrary and the disallowance is prayed to be deleted.”
I.T.A. No. 9207/DEL/2019 (A.Y. 2016-17)
The assessee has raised the following substantive grounds of appeal :-
“1) Disallowance of claim u/s 35(2AB) amounting to Rs.2,24,47,089/-
The ld. CIT(A) has erred in law and on facts in confirming the disallowance of claim u/s 35(2AB) which is related to the R&D expenditure incurred by the assessee recognized R&D Centre duly approved by DSIR. The R&D expenditure of the assessee is certified by the Statutory Auditor. The order passed by the Assessing Officer is arbitrary and the disallowance is prayed to be deleted.
2) Disallowance as per section 40a(1a) of the Act for Rs.64,50,805/-
The ld. CIT(A) has erred in law and on facts in ratifying the arbitrary disallowance made by the Assessing Officer for non-deduction of tax at source on parties who have neither permanent establishment in India nor have any business income in India.”
Brief facts of the case are that, the assessee Company filed return declaring income of Rs. 26,92,98,410/-, the case of the assessee was selected or scrutiny through CASS and an assessment order came to be passed u/s 143 (3) of the Act on 11/08/2017 by determining the total income of the assessee at Rs.30,77,89,980/- by disallowing the claim made u/s 35(2AB) of the Act.
As against the assessment order, the assessee has preferred an appeal before the CIT(A) and contended that the assessee company is recognized by DSIR as genuine R & D facility centre for the purpose of Section 35(2AB) of the Income Tax Act. The assessee company has claimed deduction on the said bonafide belief. However, the A.O. disallowed the claim made u/s 35(2AB) amounting to Rs. 3,84,91,572/- of the Act merely on some technical irregularities. The CIT(A) vide order dated 30/09/2019 dismissed the appeal filed by the assessee.
As against the order of the CIT(A) dated 30/09/2019, the assessee has preferred the present appeal on the grounds mentioned above.
The Ld. counsel for the assessee vehemently submitted that the CIT(A) has erred in law and on fact in confirming the disallowance of claiming u/s 35(2AB) which is related to R & D expenditure incurred by the assessee recognized R & D and duly approved by DSIR. The R & D expenditure of the assessee is certified by the statutory auditor. Therefore submitted that the order of the Lower Authorities are arbitrary and the disallowance is deserves to be deleted.
On the other hand, the Ld. DR submitted that before the CIT(A), sufficient opportunity has been provided to the assessee for filing Form 3CM from DSIR. Even after providing sufficient opportunities, the assessee has not filed Form 3CM from DSIR before the CIT(A). Therefore, now the assessee cannot find fault with the CIT(A), thus, prayed for dismissal the appeal.
We have heard the parties perused the material available on record and gave our thoughtful consideration.
During the appellate proceedings while dismissing the appeal the CIT(A) has held as under:-
“6.3. During appellate proceedings, The appellant requested on 25.02.2019 for time for filing of form 3CM from DSIR, Time was granted as requested. Further time was requested on two more occasions. Time was granted till 30.09.2019. There is no response from the appellant. Long time has already lapsed” from the date of institution of the appeal on 20.09.2017. Sufficient time has further been granted to the appellant for obtaining the necessary approval. But the appellant has not been able to adduce the requisite documentary evidence to allow its claim.
6.4. It is seen from the submissions and paper book that in earlier years, the application was filed by the appellant in form 3CK, But for the period 01.04.2013 to 31.03.2017, the application is not in form 3CK. It is not possible to dispute the correctness of reply given by the Scientist, DSIR.
6.5. Keeping in view all the facts and absence of documentary evidence regarding administrative approval from DSIR, it is not possible to allow the claim of the appellant. The addition is sustained. The Ground is ruled against the appellant.”
It is found that the assessee has claimed the expenditure during the year on its own research and development centre which is duly approved by DSIR.
The A.O. made independent enquiry u/s 133(6) of the Act from the scientist of DSIR, the Scientist vide letter dated 02/08/2017 stated that the assessee had not submitted the application on form 3CK. Therefore held that the assessee is not entitled for claiming u/s 35(2AB). Even during the appellate proceedings the assessee has sought time for filing Form 3CM from DSIR but the same has not been filed.
By considering the above facts and circumstances, we deem it fit to restore the issue involved in the Appeal to the file of CIT(A) with a direction to the assessee to file Form 3CM issued by DSIR within the reasonable time and once the assessee produces the requisite documents of granting necessary approval to the assessee, the CIT(A) shall decide the matter afresh in respect of entitlement of the assessee for claiming deduction u/s 35(2AB) of the Act in accordance with law.
Ordered accordingly.
Ergo, the appeal of the assessee is partly allowed for statistical purpose.
In the result, the appeal of the assessee in is partly allowed for statistical purpose.
I.T.A. No. 9207/DEL/2019 (A.Y. 2016-17)
The CIT(A) while deciding the issue invoked in the Assessment Year 2016-17, relied on the order of A.Y 2015-16 in Assessee’s own case since the facts and circumstances of the case are similar to that of Assessment Year 2016-17, the issue involved in the present appeal is also restored to the file of the CIT(A) with a direction to the assessee to file Form 3CM issued by DSIR within the reasonable time and once the assessee produces the requisite documents of granting necessary approval to the assessee, the CIT(A) shall decide the matter afresh in accordance with law.
Ordered accordingly.
Ergo, the appeal of the assessee is partly allowed for statistical purpose.
In the result, the appeal of the assessee in is partly allowed for statistical purpose.
Order pronounced in the open court on : 13/03/2023.
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