Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri A. Mohan Alankamony
This is assessee’s appeal for the A.Y 2016-17 against the order of the CIT (A)-2, Hyderabad, dated 14.6.2019.
Brief facts of the case are that the assessee company, engaged in the business of manufacture of Fertilizers, Chemicals and Paints, etc., filed its return of income for the A.Y 2016-17 on 23.11.2016 admitting total income of Rs.42,09,818/-. The case was selected for limited scrutiny through CASS. During the assessment proceedings u/s 143(3) of the Act, the AO observed that the assessee has claimed deduction u/s 35 of the Act, amounting to Rs.62,61,298/- (Revenue Expenditure) and Rs.9,22,965/- (Capital expenditure). The AO was therefore, required the assessee to furnish Forms 3CL/3CM in support of the claim of deduction, but the same not submitted by the assessee. Thereafter, the assessee was given a final opportunity to show cause why the deduction of Rs.31,30,649/- and Rs.9,22,965/- should not disallowed u/s 35 of the I.T. Act. The assessee furnished a letter dated 20.09.2018 stating that it has the DSIR Certificate which is valid upto 31.3.2021. However, on perusal of the certificate the AO observed that the certificate is issued for the purpose of custom duty exemption which cannot be considered for the purpose of deduction u/s 35 of the I.T. Act. Observing that the assessee has not furnished forms 3CL/3CM in the prescribed form before the prescribed authority, the AO disallowed the claim u/s 35 of the I.T. Act. Aggrieved, the assessee preferred an appeal before the CIT (A) who granted partial relief to the assessee by deleting the addition of Rs.9,22,965/- and confirmed the disallowance of weighted deduction u/s 35(2AB) of the Act. Aggrieved, the assessee is in second appeal before the Tribunal by raising the following grounds of appeal: “1. The Learned Commissioner of Income Tax (Appeals)-2 has erred in Law and fact by confirming the disallowance of weighted deduction u/s 35(2AB) of the Income Tax Act,1961 (hereinafter referred to as "Act") to the extent of Rs.31,30,649 without appreciating the fact that the Appellant has an in house R&D facility which has been given recognition by prescribed authority and has fulfilled all the conditions provided in section 35(2AB) of the Act read with Rule 6 of the Income Tax Rules, 1962 (hereinafter referred to as "Rules") from it side.
2. The Learned Commissioner of Income Tax (Appeals)-2 has erred in Law and fact by confirming the disallowance of weighted deduction u/s 35(2AB) of the Act by failing to note that the Appellant has approval from the prescribed authority in Form 3CM for the block period prior to the year under Appeal (01.04.2010 to 31.03.2015) and the block period subsequent to the year under Appeal (01.04.2018 to 31.03.2021) and the absence of form 3CM for the interim period in which the year. under Appeal is included was due to a clerical lapse on part of the prescribed authority (DSIR).
3. The Learned Commissioner of Income Tax (Appeals)-2 has erred in Law and fact by confirming the disallowance of weighted deduction u/s 35(2AB) by failing to note that the legal maxim "Lex non cogit impossibila" (law does not compel a man to do that which he cannot possibly perform) is applicable to the case of your Appellant since your Appellant has duly filed application in Form 3CK after which the issue of Form 3CM is vested with the prescribed authority and wholly out of the scope of your Appellant.
4. The Learned Commissioner of Income Tax (Appeals)-2 has erred in Law and fact by confirming the disallowance of weighted deduction u/s 35(2AB) by failing to note that: -
a) The In-house R&D facility of the Appellant has been recognized up to 31.03.2021 b) The Appellant has received approval in Form 3CM for the period 01.04.2010 to 31.03.2015. c) The Appellant has filed Form 3CK for the subject AY, maintained separate books of Accounts for the facility and filed Audit Report within prescribed time with the DSIR. d) After filing Form 3CK, Appellant was under a bonafide belief that the Form 3CM would be received. e) On follow up with DSIR for Form 3CM, it was orally informed that Form 3CK was not traceable and that any further reminders would be considered as fresh application i.e. considered prospectively. f) Appellant has received Form 3CM for the period subsequent to subject AY i.e 01.04.2018 to 31.03.2021. g) Appellant has fulfilled all the conditions cast on it under section 35(2AB) of the Act and under Rule 6 of the Rules.
5. The Learned Commissioner of Income Tax (Appeals)-2 has erred in Law and fact by confirming the disallowance of weighted deduction u/s 35(2AB) and has failed to note that the existence of recognition of the In house R&D facility is sufficient for claiming deduction u/s 35(2AB) and the non- receipt" of Form 3CM for a particular year due to clerical error is only a technical lapse.
6. Any other ground/grounds that may be urged at the time of Hearing”.
The learned Counsel for the assessee submitted that the assessee has been granted certificate by DSIR for the earlier as well as subsequent A.Ys and it is only for the relevant A.Y, that forms 3CL/3CM were not issued by the DSIR. He submitted that the assessee has submitted form 3CK to the prescribed authority i.e. DSIR but has not received any communication from them and on oral inquiry by the assessee, the assessee was informed that the assessee’s application has not reached the prescribed authority and the assessee was directed to submit another form. He submitted that the assessee has furnished all the material before the DSIR and the assessee cannot be found to be at fault as the assessee cannot be expected to do the impossible, and therefore, the assessee should be granted wt. deduction u/s 35(2AB) of the Act as claimed by the assessee. For this proposition, the learned Counsel for the assessee placed reliance upon the decision of the Hon'ble Madras High Court in the case of CIT vs. TVS Electronics Ltd (2019) 419 ITR 187 (Mad.).
The learned DR, on the other hand, submitted that Form 3CM/3CL are not mere procedural forms but have to be issued by the prescribed authority i.e. DSIR quantifying the amount eligible for deduction u/s 35 (2AB) of the Act, and therefore, without such form, the assessee cannot be granted wt. deduction u/s 35AB of the Act.
Having regard to the rival contentions and the material on record, we find that the assessee has filed Form 3CK before the prescribed authority and the postal acknowledgement is also placed before us as proof of the said submission. In view of the same, we are of the opinion that the assessee should pursue and seek information from the prescribed authority for issuance of Forms 3CL/3CM and the AO is also directed to seek information from the DSIR about the outcome of the application made by the assessee i.e. form 3CK. On the basis of such information received Page 4 of 5 assessee i.e., from DSIR, the AO shall grant deduction u/s 35(2AB) of the Act in accordance with law.
In the result, assessee’s appeal is treated as allowed for statistical purposes.
Order pronounced in the Open Court on 3rd March, 2021.