JK TYRE & INDUSTRIES LTD.,,KOLKATA vs. DCIT, CIRCLE 7(1), , KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 11.02.2025& 17.10.2025for the AYs2018-19& 2020-21.

A.Y. 2018-19 ITA No. 675/KOL/2025 2. The ground no.1 is general in nature.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 research and development facility u/s 35(2AB) of the Income- tax Act, 1961 (the Act) aggregating to ₹22,66,04,458/-on the ground that the audit report in form 3CB to be filed by the DSIR directly with the income tax department was not filed.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 submitting herein that the said approval in form 3CL was yet to be received from the department of scientific and industrial research (DSIR) Ministry of Science and Technology. The assessee submitted that the claim u/s 35(2AB) of the Act has already been substantiated with recognition certificate from DSIR that the approval in form 3CL and auditors certificate in form 3CLA in support of expenditure incurred on its approved in-house R and D centre were also furnished. Accordingly, the assessee prayed that the said documents unequivocally proved that theassessee was carrying on in-house activity of R&D and was an eligible for weighted deduction u/s 35(2AB) of the Act. The assessee submitted that so far as form 3CL is concerned, it is issued by DSIR after verification of expenditure incurred on in-house R&D centre only in selective cases and not as a matter of routine for all cases and it is not mandatory for DSIR to issue form 3CL to each company for every year to when the approval in form 3CM was granted. This was also submitted that the DSIR has granted its approval in Form 3CM vide order dated 24.04.2019, for the period from 01.04.2018 to 31.03.2020. However, the submission of the assessee did not find favour with the ld. AO and the ld. AO observed that assessee has incurred revenue expenditure of ₹43,66,70,766/- and capital expenditure of ₹1,65,38,149/- on in-house research and development and had claimed deduction of ₹67,98,13,273/- at 150% u/s 35(2AB) of the Act. Thereafter, the ld. Assessing Officer considering the reply, allowed deduction equal to 100% in respect of revenue expenditure with the result that weighted Page 3 of 26

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 deduction of ₹24,31,42,607/- was disallowed and added to the income of the assessee in the assessment framed u/s 143(3) read with section 144B of the Act dated 29.09.2021.

“6.2 I have perused the assessment order, grounds of appeal, submission filed by the appellant carefully. I find from the assessment that during the course of assessment proceedings, the appellant had not submitted the report in form No 3CL, hence the AO had not allowed the weighted deduction at the rate of 150% u/s 35(2AB) but allowed the deduction at the rate of 100% only on expenditure incurred including the capital expenditure and had made addition of Rs.24,31,42,607/-. During the course of appellate proceedings, the appellant by relying on various decisions including the decision of Hon'ble Gujarat High Court in the case of Sun Pharmaceutical Industries, contended that deduction u/s 35(2AB) should not allowed merely for non-submission of form No.3CL. I have considered the reply of the appellant carefully. I find that as per amended provisions of Rule 6(7A) with effect from 01/04/2016, it is mandatory to submit the Form 3CL and without the verification of the same, the deduction u/s 35(2AB) is not admissible. I further find that most of decisions relied upon by the appellant are delivered before the amendment to Rule 6(7A) and hence, the same are not applicable to the appellant's case. I find from the recent decision of Hon'ble ITAT, Mumbai in the case of FDC Limited Vs PCIT (ITAT Mumbai) in I.Τ.Α. Νo. 1031/Mum/2023 (decision dated 02/08/2023) in which it has been held that Rule 6(7A) requires examination of Form 3CL before allowing deduction u/s 35(2AB) of the Act. The relevant portion of the decision of Hon'ble ITAT, Mumbai is reproduced as under:- "The Ld A.R placed his reliance on the decision rendered by Hon'ble Gujarat High Court in the case of Sun Pharmaceutical industries Ltd (85 com 80)(Guj.) (HC) and certain other decisions in order to contend that the assessee cannot be penalized if the prescribed authority did not send Form 3CL to the revenue. However, we notice that the above said decisions have been rendered for the years prior to the amendment of Rule 6(7A)(b) of the Act, which now requires examination of Form 3CL before allowing deduction u/s 35(2AB) of the Act."

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ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 In view of the above, the appellant is not entitled for deduction u/s35(2AB) for non-production of Form No.3CL. However, the contention of the appellant that the addition should have at Rs.22,66,04,458/- instead of Rs.24,31,42,607/- is found to be acceptable since the AO had accepted to claim of deduction to the extent of Rs.45,32,08,915/- in the assessment order. Therefore, the addition to the extent of Rs.22,66,04,458/- (Rs.67,98,13,373/- (-) Rs.45,32,08,915/-) confirmed and the addition of Rs.1,65,38,149/- is hereby deleted. Thus, the ground raised by the appellant is partly allowed.” 5.1. Thus, the ld. CIT (A) partly allowed the appeal by deleting the addition of ₹1,65,38,149/- and sustaining the addition to the tune of ₹22,66,04,458/-.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 u/s 35(2AB) of the Act. The said Form was filed within the prescribed time including all relevant audited documents under Acknowledgement No. 2366 dated 31.10.2018.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 (A) confirmed the order of the AO. The CIT (A) observed that the amended provision of Rule 6 (7A) w.e.f. 01.04.2016 provides for mandatory submitting Form 3CL and without the same deduction u/s 35(2AB) is not admissible.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 facility by a company, u/s 35(2AB). Sub-clause (b) thereof is the specific provision thereto stipulating that the prescribed authority shall submit its report in relation to the approval of in-house research & development facility in Form No. 3CL to the Director General (Income Tax Exemptions) within 60 days of its granting approval. The same is merely in form of intimation to be sent from the prescribed authority's end to the Department. As assessee engaged in such research and development activity having already obtained Form 3CM approval for its facility it has no role to play in the matter of sending such report. The assessee cannot be made to suffer in the absence of such certification and claim of deduction under Section 35(2AB) of the Act can not be denied. The ld. AR relied and referred to the followings decisions wherein under similar facts the issue was decided in favour of the assessee:

i)Astec Life Sciences Ltd Vs. The Assistant Commissioner of Income Tax in Writ Petition No. 1790 of 2022 Order dated 7th August 2023 (Bom) ii)Rallis India Limited, Mumbai Vs. The Asst. Commissioner of Income Tax, Mumbai in I.T.A. No. 4210/Mum/2024 Order dated 13.12.2024 13. The appellant would further like to submit that it is a settled principle in law that conferment of rule-making power by an Act does not enable the rule-making authority to make a Rule which travels beyond the scope of the enabling Act, or which is inconsistent therewith or repugnant thereto. Page 8 of 26

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 14. The ld. AR argued that the amendment in sub-rule (7A) of rule 6 of Income Tax Rules, (with effect from 1-7-2016), to provide for quantification of expenditure as well as a condition for allowing weighted deduction goes beyond the provisions of the Act wherein there is no corresponding amendment to the same effect. It is a well-recognized principle of interpretation of statute that conferment of rule-making power by an Act does not enable the rule-making authority to make a rule which travels beyond the scope of the enabling Act, or which is inconsistent therewith or repugnant thereto. It is settled law that rules can never have any effect on the interpretation or operation of the parent statute. When the language of the main section is clear, it would be immaterial what the relevant form (i.e. Form 3CL in this case) prescribed under the Rule provides. The ld.AR argued that rules cannot override or travel beyond the Substantive provisions under which the rules are framed and to defend his arguments he relied on the decisions of CIT Vs. Tulsyan NEC Ltd (2010) 8 taxmann.com 228 (SC), CIT vs. Bombay State Transport Corporation [1979] 118 ITR 399 (Bombay), Kayyar Subbanna Shetty vs. ITO [ITA No. 2563/Bang/2018][ Order dated 26th October 2018, CIT vs. Taj Mahal Hotel [1971] 82 ITR 44 (SC)

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ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 and accordingly the disallowance be deleted by setting aside rthe order of ld. CIT(A)

i. Pharmanza Herbal (P.) Ltd. vs. Principal Commissioner of Income Tax [2025] 179 taxmann.com 277 (Ahmedabad - Trib.)/[2025] 215 ITD 273 (Ahmedabad - Trib.)[08-10-2025] ii. Gujarat Metal Cast Industries (P.) Ltd. vs. Principal Commissioner of Income-tax [2025] 173 taxmann.com 144 (Ahmedabad - Trib.)/[2025] 212 ITD 178 (Ahmedabad - Trib.)[01-04-2025] Page 10 of 26

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 iii. Ashok Leyland Ltd. vs. ACIT [2025] 172 taxmann.com 42 (Chennai - Trib.)[14-02-2025] iv. Garware Technical Fibres Ltd. vs. Deputy Commissioner of Income-tax [2025] 171 taxmann.com 302 (Pune - Trib.)[09- 01-2025] v. FDC Limited Vs. PCIT in ITA No. 1031/MUM/2023 vide order dated 02.08.2023 16.1. The ld. DR therefore prayed that considering all the facts, amendment in Law and the decisions cited above, the appeal of the assessee may be dismissed. The ld. DR while referring to the decision of the Hon'ble Bombay High Court in case of AstecLife Sciences Ltd. v. The Assistant Commissioner of Income Tax in Writ Petition No. 1790 of 2022 order dated 7th August, 2023, submitted that the order involved was A.Y. 2013-14 and therefore, the same is not applicable whereas, so far as the decision of Hon'ble Mumbai Bench of ITAT in case of Rallis India Limited Vs. The Asst. Commissioner of Income Tax, Mumbai in ITA No. 4210/MUM/2024, order dated 13.12.2024 is concerned, the same was in favour of the assessee.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 wherein reducing the loss to Rs.41,28,24,426/- by making a disallowance of weighted deduction claimed u/s 35(2AB) of the Act of Rs.24,31,42,607/-. The Ld. AO allowed 100% of revenue and capital expenditure aggregating to Rs.45,32,08,915/- and disallowed the weighted portion i.e. 50% of Rs.45,32,08,915/- which works out to Rs.22,66,04,458/- but he while calculating the amount calculated the disallowable amount at Rs.24,31,42,607/-. On appeal the Ld. CIT (A) corrected the above calculation error on the part of the ld. AO but confirmed the disallowance of weighted portion of ₹ 22,66,04,458/-.Now the issue before us whether the assessee is entitled to the weighted deduction despite the fact that the DSIR has not forwarded its report in Form 3CL to the tax authorities. We find that both the parties agreed that there was no dispute that the assessee was admittedly an entity running the specified in-house research & development facilities approved by the prescribed authority. The prescribed authority in the instant case is the "DSIR" i.e.. Department of Scientific & Industrial Research, Ministry of Science & Technology, Govt. Of India. This prescribed authority has undisputedly issued "Order of approval of in- house research & development facility u/s 35 (2AB) of the Income Tax Act 1961" in Form 3CM on 16.01.2018 as pertaining to the previous year relevant to the impugned assessment year. We note that it contains a list of assessee’s various in-house research and development facilities. The Revenue’s case is that assessee has failed to produce Form 3CL with respect to approval of quantum of expenditure Page 12 of 26

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 incurred during the year. In their view assessee’s weighted deduction cannot be accepted in the absence of the above certification in Form 3CL by the prescribed authority.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 company complied with all requirements on time according to Rule 6 of 2016 by filing Form 3CLA before the DSIR, in support of which the following documents were filed before the AO as well as the CIT (A):

i) Copy of Registration Certificate from DSIR ii) Copy of approval in Form 3CM from DSIRCopy of Auditors Certificates in Form 3CLA in supporting of expenditure incurred on approval in-house R&D centers during the year. iv) Details of Revenue (Salary) and Capital Expenditure incurred by the company on in-house R&D centers during the year. 21. It is also undisputed that DSIR has not sent the Form 3CL to the tax authorities on which the assessee company has no control and the non-filing cannot be attributed to the assessee.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 1962 framed under the provisions of the Act. The above sub- rule is relevant for approval of expenditure incurred on in- house research & development facility by a company, u/s 35(2AB). Sub-clause (b) thereof is the specific provision thereto stipulating that the prescribed authority shall submit its report in relation to the approval of in-house research & development facility in Form No. 3CL to the Director General (Income Tax Exemptions) within 60 days of its granting approval. The same is merely in form of intimation to be sent from the prescribed authority's end to the Department. The assessee engaged in such research and development activity having already obtained Form 3CM approval of its facility has no role to play in such correspondence.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 to suffer for the lapse of the Govt department and the Commissioner was not correct in observing that in the absence of such certification, claim of deduction under Section 35(2AB) of the Act was not allowable. The Court further held that merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee's claim of deduction under Section 35(2AB) of the Act.

“16. Dealing with similar situation, the Gujarat High Court in Commissioner of Income Tax, Vadodara – 2 Vs. Sun Pharmaceutical Industries Ltd held that one of the main grounds which appealed to the Commissioner was that the prescribed authority had not sent the intimation in Form 3CL to the Revenue, in absence of which, according to the Commissioner, claim could not have been accepted. The Gujarat High Court in paragraph 5 held that the communication in Form 3CM was between the prescribed authority and the department. The assessee cannot be made to suffer and the Commissioner was not correct in observing that in absence of such certification, claim of deduction under Section 35(2AB) of the Act was not allowable. The Court further held that merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee’s claim of deduction under Section 35(2AB) of the Act.” 25. Similarly in the case of Rallis India Limited, Mumbai Vs. The Asst. Commissioner of Income Tax, Mumbai in I.T.A. No. 4210/Mum/2024 Order dated 13.12.2024 involving the exact same facts as have been raised in the case of the assessee, the Coordinate Bench has held as follows:-

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 expenditure on scientific research u/s 35(1)(1), 35(1)(tt), 36(2AB) of the Act. 16.1. The AO noticed that the assessee has not filed certificate from DSIR in Form 3CL for claiming the above expenditure. Accordingly, showcause notice was issued to the assessee. It was explained that under Rule 6 of the Income Tax Rules, 1962, the Department of Scientific & Industrial Research (DSIR), is required to submit its report to the Income Tax Authorities in Form 3CL and there is no requirement of the assessee to file the said Form but From No. 3CL is required to be submitted by the DSIR, therefore, failure to file the same cannot be attributed to the assessee. This contention of the assessee did not find any favour with the AO who was of the firm belief that as the assessee failed to furnish the certified copy of the Form 3CL issued by the Secretary, DSIR, claim of the assessee lacks any merit. The AO accordingly denied the claim of deduction by making addition of Rs. 22,06,10,038/-. The denial was affirmed by the DRP. 17. Before us, the ld. Counsel straightaway drew our attention to the decision of the Hon'ble Bombay High Court in the case of Astec Lifesciences Ltd. vs. ACIT (WP 1790 of 2022) (Bom. HC) and pointed out that on identical set of facts, the Hon'ble High Court held as under:- "13. As regards the deduction under Section 35(2AB) of the Act, admittedly Form 3CL duly filled in and certified by the Secretary of Department of Scientific and Industrial Research to Director General (Income Tax Exemptions) under Section 35(2AB) of the Act has to be submitted by the Department of Scientific and Industrial Research directly to the Income Tax Authorities. The allegation of failure to file the said Form cannot be attributed to petitioner." 18. Similar view was taken by the Hon'ble High Court of Gujarat in the case of CIT vs. Sun Pharmaceutical Industries Ltd. (250 Taxman 270)(Guj. HC). The relevant findings read as under:- "....One of the main grounds which appealed to the Commissioner was that the prescribed authority had not sent the intimation in Form 3CL to the Revenue, in absence of which, according to the Commissioner, claim could not have been accepted. 4. The assessee approached the Tribunal. The Tribunal by the impugned judgment allowed the appeal inter-aliaholding that the prescribed authority shall submit its report in relation to the approval of the in-house research and development in Form Page 17 of 26

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 3CL to the Director General of Income Tax (Exemption) within 60 days of its granting approval. In the opinion of the Tribunal, same was merely in form of intimation to be sent by the prescribed authority to the department. In case of the assessee, the research and development activity having already been approved in Form 3CM, the assessee thereafter, had no further role to play in the interdepartmental correspondence. The Tribunal therefore, held that the assessee was entitled to deduction on the capital and revenue expenses incurred on in-house research and development amounting to Rs.237,77,05,310/- 5. Having heard learned counsel for the parties and having perused the orders on record, we are broadly in agreement with the view of the Tribunal. Undisputedly, the research and development facility set up by the assessee was approved by the prescribed authority and necessary approval was granted in the prescribed format. The communication in Form 3CM was thereafter, between the prescribed authority and the department. If the same was not so, surely, the assessee cannot be made to suffer. To this extent, the Tribunal was perfectly correct and the Commissioner was not, in observing that in absence of such certification, claim of deduction under section 35(2AB) was not allowable. However, neither the prescribed authority nor the Assessing Officer has applied the mind as to the expenditure, be it revenue or capital in nature, actually incurred in developing the in-house research and development facility. To the limited extent, the Commissioner desired the Assessing Officer to verify such figures, we would allow the Assessing Officer to do so. In other words, in principle, we accept the Tribunal's reasons and conclusions. Merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee's claim of deduction under section 35(2AB) of the Act. However, in facts of the present case, it would be open for the Assessing Officer to verify the actual expenditure incurred by the assessee." 19. Considering the facts of the case in light of the judicial decisions discussed hereinabove and taking a leaf out of the decision of the Hon'ble High Court in the case of Sun Pharmaceuticals Industries Ltd. (supra), in principle we accept the contention that, communication is between the prescribed authority and the Department and for the default in same, the assessee cannot be made to suffer. However, it would be open for the AO to verify the actual expenditure incurred by the assessee. With these directions, Ground Nos. 11 to 15 are allowed. The assessee has also relied on the decisions of the co-ordinate Bench of Delhi ITAT in case of Sona BLW Precision Forgings Ltd. Vs. CIT (A) in ITA Nos. 5349 & 5350/DEL/2025 vide order dated 27.07.2026, wherein the co-ordinate Bench has held as under:- Page 18 of 26

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 “29. Comstar (hereinafter referred to as 'the Assessee) filed its income-tax return for AY 2018-19 on 25 November 2018 under section 139(1) of the Act declaring a total income of INR 1,46,22,91,480 and claiming a refund of INR 87,13,150 therein. Subsequently, the case was selected for scrutiny assessment and accordingly notice under Section 143(2) of the Act was issued for AY 2018-19. TheNational e-Assessment Centre, Delhi (hereinafter referred as 'Ld. AO') completed the assessment vide order dated 2 April 2021 passed under Section 143(3) of the Act (enclosed at Page No. 29 to 38 of the PB) by making the following disallowances:

Income as per Normal provisions of the Act Amount in INR

Taxable income as per return of income 1,46,22,91,480 Add: Disallowance of excess deduction claimed under 1,36,70,201 section 35(2AB) of the Act Add: Disallowance of provision for warranty 90,00,000 Total taxable income 148,49,61,681 30. Upon appeal, the CIT(A) upheld the disallowances. Aggrieved the assessee is before us. 31. The ld AR did not agitate the Ground No. 1, hence the same is not adjudicated. 32. With respect to ground 2, the ld AR presented the same arguments as in AY 2017-18, hence it is not repeated here. 33. With respect to Ground No. 3, the ld AR submitted that the Assessee claimed deduction of INR 30,72,38,842 under Section 35(2AB) of the Act on the basis of valid approval granted by the Department of Scientific and Industrial Research (DSIR), being the sole statutory requirement for claiming such deduction. The R&D expenditure incurred was duly disclosed in Note 35 of the audited financial statements and certified by an independent accountant in Form 3CLA.

S. No. Nature of expense Amount of expenses Amount of deduction (A) claimed (150% of A) 1. Capital expenditure 5,79,25,492 8,68,88,238 2. Revenue expenditure 14,69,00,403 22,03,50,604 Total 20,48,25,895 30,72,38,842 34. During assessment proceedings the AO took the lower amount of revenue expenditure as certified by DSIR, in Form 3CL, and restricted the allowances under Section 35(2AB) of the Act to Rs 26,62,28,238 and disallowed the balance amount of Rs 4,10,10,604, solely on the basis of variance with Form 3CL. Out of the said disallowance, revenue expenditure of

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ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 INR 2,73,40,403 was allowed under Section 37(1) of the Act, and the remaining Rs 1,36,70,201 was disallowed.

S. No. Nature of expense Amount of expense reported Amount of dedn under Form 3CL by DSIR allowed by AO (A) (150% of A)

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ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 37. The ld AR placed reliance on the decision of Hon'ble Delhi High Court in case of Nagravision India (P.) Ltd. vs. Secretary, Department of Scientific and Industrial Research [2024] 159 taxmann.com 558 (Delhi HC), for the proposition that section 35(2AB) of the Act does not link the expenditure incurred to the approval of R&D facility by DSIR. Further, reliance is placed on the following decisions wherein it has been held that Section 35(2AB) of the Act refers to 'any expenditure' and hence the entire R&D expenditure should be permissible for weighted deduction, though DSIR certified lesser amount of deduction: • CIT v. Claris Lifesciences Ltd. [2008] 174 Taxman 113 (Gujarat HC) (Refer Page No. 450 to 453 of the PB) • Sandhar Technologies Ltd. vs. Deputy Commissioner of Income-tax [2024] 160 taxmann.com 1208 (Delhi-Trib.) (Refer Page No. 454 to 460 of the PB) • Banco Products (India) Ltd. vs. DCIT [2018] 95 taxmann.com 132 (Gujarat HC) (Refer Page No. 480 to 487 of the PB) • USV Ltd. vs. DCIT [2012] 24 taxmann.com 218 (Mumbai Trib.) (Refer Page No. 488 to 502 of the PB) 38. The ld. DR vehemently relied on the order of the AO and the CIT(A). 39. We have heard the rival submissions and have perused the materials on record. As far ground 2 is concerned, the decision rendered herein above for AY 2017-18 applies mutatis mutandis to the facts of the case for AY 2018- 19. The ground is therefore allowed. 40. To adjudicate the issue in ground 3, it would be pertinent to extract the relevant provision of law u/s 35(2AB). "(2AB)(1) Where a company engaged in the business of bio- technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in- house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to one and one-half times of the expenditure so incurred:”

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 for the R&D facility. The CBDT vide Circular No. 763 dated 18 February 1998 explains the same. We are further in agreement with the assessee that Section 35(2AB)(1) refers to 'any' expenditure, therefore, weighted deduction is to be allowed on expenditure 'so incurred'. We are of the considered view that the provisions of section 35(2AB) do not, either expressly or impliedly, require the prescribed authority (ie., DSIR) to certify/approve the expenditure incurred. Therefore, once the in-house R&D facility is approved by DSIR, expenses incurred on scientific research, except cost of land and building, are eligible for weighted deduction under the section 35(2AB) of the Act. 42. We further find that the issue has been settled in favour of the assessee by the hon’ble Delhi High Court in case of Nagravision India (P.) Ltd. vs. Secretary, Department of Scientific and Industrial Research [2024] 159 taxmann.com 558 (Delhi HC), wherein it was held that section 35(2AB) of the Act does not link the expenditure incurred to the approval of R&D facility by DSIR and therefore, it does not prescribe that it is only such expenditure that gets incurred post approval of the facility which would qualify for deduction. Further, it was observed by the Hon'ble Delhi High Court that quantification of expenditure under Rule 6(7A) is only a preparatory step or a precondition for the consideration of weighted deduction of expenditure under Section 35(2AB) of the Act and the only condition which the DSIR Guidelines impose for availing the benefits of Section 35(2AB) is that the R&D center must be "subsequently recognized by DSIR". The relevant extract of the judgement has been reproduced below: "19................. While the approval of the indigenous R & D facility may be a precondition for further consideration of a claim for deductions under section 35(2AB), the eligible expenditure incurred in the creation of such a facility clearly does not appear to be restricted to a date anterior to the grant of approval under Rule 6(5A). Approval under Rule 6(5A) and the certification of expenditure incurred in accordance with Rule 6(7A) are preparatory steps and a pre-condition for the ultimate consideration of deductions under section 35(2AB). 20. Interpreting Section 35(2AB) and Rule 6 in the manner suggested by the respondent would also appear to be wholly illogical when one bears in mind the indubitable fact that Section 35(2AB) is aimed at according deductions in respect of expenditure already incurred. This is manifest from the provision using the expression "expenditure so incurred." If the expenditure which could form the subject of Section 35(2AB) were to be restricted only to that which is incurred post the grant of approval to the center in terms of Rule 6(5A), there would hardly be any incentive for the creation of such a facility. The irrationality of that stand further comes to the fore when one bears in mind the fact that if the facility were not existing, there would be no occasion for the DSIR to either inspect the same or enter into a collaborative arrangement. Page 22 of 26

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 22. Both Section 35(2AB) and Rule 6 speak of expenditure which has already been incurred and therefore it would be wholly incorrect to read those provisions as envisaging benefits being extended only to such expenditure that may have been sustained after the facility has been accorded approval. We also find ourselves in agreement with the view expressed by the Gujarat High Court in Claris Lifesciences Ltd. (supra) 23. The conditions which have come to be incorporated by the respondent in the impugned communications and which are impugned before us are rendered unsustainable even when one evaluates them on the basis of the Guidelines framed by the DSIR and more particularly clause 5(v) thereof. As is evident from a reading of clause 5(v), it clearly contemplates a situation where an applicant may have moved an application for approval under the Rules in respect of an in- house facility which is yet to be accorded recognition by the DSIR. Clause 5(v) while dealing with such a scenario in unambiguous terms speaks of expenditure "incurred from the commencement of said preceding year". It also employs the phrase "capital investments on R & D ...... in the financial year preceding the year in which the firm applied to the prescribed authority for the approval". It is thus manifest that a centre which is yet to be accorded recognition by the DSIR is not prevented from claiming benefits contemplated under section 35(2AB) of the Act. The only condition which the Guidelines impose for the extension of Section 35(2AB) benefits in such a situation is of the center being "subsequently recognized by DSIR" 43. In view of the above discussion and judicial precedents, we hold that the amount certified by DSIR is not the basis for claiming the weighted deduction and the expenditure which is eligible as per the provisions of Section 35(2AB) of the Act. Once the expenditure incurred for R&D facility, approved by the DSIR, is not in dispute, the same cannot be restricted. The disallowance made is deleted. The ground is allowed. 44. Ground No. 4 related to interest u/s 234C is consequential. 45. The assessee had taken an additional ground in both the AYs, with regard to format of Notice u/s 143(2) being not in prescribed format as per CBDT Instruction dated 23.06.2017 is dismissed in view of the decision of the hon’ble Delhi High Court in the case of Bharat Bansal v. NFAC (order dated 17.2.2026) and the decision of the Special Bench of ITAT in the case of MD Sons in ITA 1413/Bang/2025 dated 13/07/2026. 46. In the result, both the appeals of the assessee in ITA Nos.5349 & 5350/Del/2025 are partly allowed. ”

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ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 26. We find that the issue which requires our adjudication i.e. in absence of intimation in Form 3CL by the Department of Scientific and Industrial Research (DSIR) to the prescribed authority will disentitle the assessee from weighted deduction otherwise allowable u/s 35(2AB) is squarely covered in favour of the assessee by above discussed judgment of the Hon’ble Bombay High Court and Hon’ble Delhi High Court which has been followed by the two Co-ordinate Benches of the Tribunal. The latest is the decision of the Delhi Bench of the Tribunal in the case of Sona BLW Precision Forgings Ltd Vs. CIT (A) NFAC, Delhi in ITA Nos. 5349 & 5350/Del/2025 Assessment Years: 2017-18 & 2018-19 Order dated 27.07.2026.

ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21 incurred by the assessee in respect of Research & Development which works out to Rs.67,98,13,373/-. Consequently, disallowance of Rs.22,66,04,458/- is hereby deleted. Thus the grounds of appeal of the assessee are allowed.

A.Y. 2020-21 ITA No. 2787/KOL/2025 31. The issue raised in this appeal is similar to one as decided by us in ITA No. 675/KOL/2025. Accordingly, our decision would, mutatis mutandis, apply to this appeal of assessee. Hence, the appeal of assessee is allowed.

Order pronounced on 28.10.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 28.10.2026 Sudip Sarkar, Sr.PS

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ITA No. 675 & 2787/KOL/2025 JK Tyre& Industries Ltd.; A.Y. 2018-19 & 2020-21

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy// Sudip Digitally signed by Sudip Sarkar Sarkar Date: 2026.10.29 17:05:20 +05'30' Dy. Registrar Income Tax Appellate Tribunal, Kolkata

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