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Facts
The assessee, engaged in installing wind electric generators, filed its return declaring Nil income. The assessment was completed at a loss. The assessee filed an appeal against the order confirming the disallowance of expenditure for scientific research under Section 35(2AB).
Held
The Tribunal held that there was sufficient cause for condoning the delay in filing the appeal. It also noted that the CIT(A) had missed a vital direction regarding the eligibility of weighted deduction based on the date of approval. The matter was remitted back to the Assessing Officer for a fresh decision.
Key Issues
Whether the CIT(A) erred in confirming the disallowance of expenditure for scientific research under Section 35(2AB) and whether the delay in filing the appeal should be condoned.
Sections Cited
35(2AB), 253(5)
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI AVDHESH KUMAR MISHRA
A.Y. 2011-12 RRB Energy Ltd. Addl. Commissioner of GA-1/B-1 Extension, Income Tax, Range-15, Mohan Coop. Ind. Estate Vs. New Delhi Mathura Road, New Delhi PAN:AAACV0109N (Appellant) (Respondent) Appellant by Sh. K. Sampath, Advocate, Sh. V. Rajkumar, Advocate Respondent by Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing 20/02/2025 Date of Pronouncement 09/05/2025 ORDER
PER AVDHESH KUMAR MISHRA, AM
This appeal of the assessee for the Assessment Year (hereinafter, the ‘AY’) 2011-12 is directed against the order dated 25.07.2016 of the Commissioner of Income Tax (Appeals)-7, New Delhi [hereinafter, the ‘CIT(A)’].
The sole ground raised before us reads as under: -
“That on facts and in the circumstances of the case, the action of the ld. CIT(A) in confirming disallowance of expenditure for scientific research u/s 35(2AB) of the Income Tax Act, 1961 aggregating to Rs.402.32 Lakhs. Is arbitrary, and untenable and must be quashed with directions for appropriate relief.”
The relevant facts of the case giving rise to this appeal are that the assessee, engaged in the business of installing of wind electric generators (WEGs), filed its Income Tax Return (hereinafter, the ‘ITR’) on 30.09.2011 declaring Nil income. The case was picked up for scrutiny and the consequential assessment was completed at loss of (-) Rs.97,08,812/-. Aggrieved, the assessee filed appeal before the CIT(A), who allowed the part relief. The sole issue agitated before us is with respect to the weighted deduction under section 35(2AB) of the Income Tax act, 1961 (hereinafter ‘the Act’). The relevant part of the impugned order reads as under: -
“4.5 In view of the Rule as above, expenditure as approved by DSIR (Prescribed Authority) in the certificate issued in Form 3CL alone is the basis for grant of weighted deduction as per provisions of Section 35/2AB). Since the Prescribed Authority has certified expenditure eligible for weighted deduction at Rs.633.53 lacs, the weighted deduction as per Section 35/2AB) is allowable with reference to this expenditure only. Reliance placed by the Ld. AR on judgement of the Hon'ble Gujarat High Court in the case of CIT vs. Claris Lifesciences Ltd. 174 Taxman 113 and the Hon'ble Delhi High Court in the case of CIT vs. Sandan Vikas Ltd. (2011) 335 ITR 117(Del) does not help as the said judgements are on different facts le. allowability of expenditure with reference to the date of approval accorded by the Prescribed Authority. In the case on hand Form No. 3CL has clearly quantified and certified the R&D expenditure eligible for weighted deduction u/s. 35(2AB). The AO is directed to allow weighted deduction with reference to Rs.633.53 lacs only as against expenditure of Rs.1035.85 lacs claimed by the appellant company. This ground of appeal is partly ruled in favour of the appellant."
4. This appeal is delayed by 271 days. In the condonation application, the appellant assessee has submitted that it has faced serious financial RRB Energy Ltd. crisis and HR difficulties due to cessation of foreign collaboration with Vestas of Denmark and the subsequent passing away of the Director, which delayed this appeal. At the outset, the Ld. Counsel submitted that the appellant assessee had not derived any benefit by filing the appeal after due date. The Ld. Sr. Departmental Representative (hereinafter, the ‘Sr. DR’) with the help of facts mentioned in the assessment order and appellate objected admission of the belated appeal.
We have heard both parties and have perused the material available on the record. There is no dispute that under section 253(5) of the Act, the Tribunal may admit an appeal filed beyond the period of limitation where it is satisfied that there exists a sufficient cause on the part of the appellant for not presenting the appeal within the prescribed time. The explanation of the assessee therefore, becomes relevant to determine whether the same reflects sufficient and reasonable cause on its part in not presenting the present appeal within the prescribed time.
In case of Collector, Land Acquisition vs MST Katiji (Supra), the Hon'ble Supreme Court has held that the expression ‘Sufficient Cause’ employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner to sub-serves the ends of justice that being the life-purpose of the existence of the institution of Courts. It was further held by the Hon’ble Supreme Court that such liberal approach is adopted on one of the principles that refusing to condone delay can result RRB Energy Ltd. in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Another principle laid down by the Hon’ble Supreme Court is that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. It was also held by the Hon’ble Supreme Court that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
In the instant case, applying the same principles, we find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of the present appeal and he does not stand to benefit by resorting to such delay more so considering the fact of the case. Therefore, in the factual matrix of the present case, we find that there exists sufficient and reasonable cause for condoning the delay in filing this appeal and as held by the Hon’ble Supreme Court, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred. In light of aforesaid discussions, in exercise of powers under section 253(5) of the Act, we hereby condone the delay in RRB Energy Ltd. filing the present appeal as we are satisfied that there is sufficient cause for not presenting the appeal within the prescribed time and the appeal is hereby admitted and is being decided accordingly.
The Ld. Counsel contended that the Ld. CIT(A) had missed a vital direction in the order. According to the Ld. Counsel, the decision in the case of Claris Lifesciences Ltd. (2010) 326 ITR 251 (Guj.), the context of the dates from which the expenditure eligible for weighted deduction had to be considered. The fact that the judgment also says that the totality of the expenditure incurred by the assessee on scientific research would qualify for weighted deduction under section 35(2AB) of the Act. The relevant part of the decision in the case of Claris Lifesciences Ltd. (supra) is as under: -
"The provisions nowhere suggest or imply that the research and development facility is to be approved from a particular date and in other words, it is nowhere suggested that the date of approval only will be the cut-off date for eligibility of weighted deduction on the expenses incurred from that date onwards. A plain reading clearly manifests that the assessee has to develop the facility, which presupposes incurring expenditure in this behalf, application to the prescribed authority, who after following proper procedure will approve the facility or otherwise and the assessee will be entitled to weighted deduction of any and all expenditure so incurred. The Tribunal has, therefore, come to the conclusion that on a plain reading of the section itself, the assessee is entitled to weighted deduction on expenditure so incurred by the assessee for development of facility. The Tribunal has also considered rule 6(SA) and Farm No. 3CM and come to the conclusion that a plain and harmonious reading of the rule and Form clearly suggests that once the facility is approved, the entire expenditure so incurred on development of the research and development facility has to be allowed for weighted deduction as provided by section 35AB(2), The Tribunal RRB Energy Ltd. has also considered the legislative intention behind the above enactment and observed that to boost the research and development facility in India, the Legislature has provided this provision to encourage the development of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted was development of facility, the intention of the Legislature by making the above amendment is very clear that the entire expenditure incurred by the assessee on development of facility, if approved, has to be allowed for the purpose of weighted deduction."
Further, the Ld. Counsel, placing reliance on the decision of Hon’ble Delhi High Court in the case of Sandan Vikas India Ltd. 335 ITR 117, submitted that the section 35(2AB)(1) of the Act, though prospective, would also apply to the pending cases. He drew our attention to the following provision of Section 35(2AB)(1) of the Act: - "[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 1 day of April, 2021, the deduction under this clause shall be equal to the expenditure so incurred.]"
The Ld. Counsel prayed for remitting the matter back to the Assessing Officer (hereinafter, the ‘AO’) for verification and doing needful.
We gave a thoughtful consideration on material available on the records. We find merit in the arguments of the Ld. Counsel. Without offering any comment on merit of the case and keeping in view the facts in entirety in the interest of justice, we deem it fit to remit the matter back to the file of the AO for deciding the appeal on merit afresh after affording
In the result, the appeal of the assessee is allowed for statistical purposes.