PLAZMA TECHNOLOGIES PVT.LTD,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -10, , PUNE

The brief facts of the case as emanating from records are: The assessee company is engaged in manufacturing of Plasma Cutter, Robotic Plasma Cutting machines, Plasma Trolley cutting machines and Plasma Hand cutting machines, Swift Beam and Template Profiler. The assessee filed its return of income for the impugned assessment year on 29-09-2015 declaring Nil income. The assessee had claimed weighted deduction of Rs.1,71,01,530/- u/s. 35(2AB) of the Act. In scrutiny assessment proceedings the Assessing Officer observed that the assessee has not furnished necessary supporting documents viz. Form 3CM and Form 3CL from Directorate of Scientific & Industrial Research (DSIR). The Assessing Officer disallowed assessee’s claim of weighted deduction and restricted the deduction to the actual expenditure i.e. Rs.85,50,765/- u/s. 35(1) of the Act.

Shri Kishor Phadke appearing on behalf of the assessee submitted that the assessee has been claiming weighted deduction @ 200% in the past and the same was allowed to the assessee. The weighted deduction was disallowed in the assessment year under appeal merely on the ground that the assessee has failed to furnish certificate from DSIR quantifying the deduction in the Form 3CL. The ld. AR contended that the provisions of Rule 6(7A) of the Income Tax Rules, 1962 have been amended w.e.f. 01-07- 2016, therefore, they would be applicable from the assessment year

Per contra, Shri M.K. Verma representing the Department vehemently defended the impugned order. The ld. DR submitted that the certification from the compete authority in Form 3CL and 3CM is mandatory requirement for claiming deduction u/s. 35(2AB) of the Act. In the absence of mandatory certificates the assessee cannot claim weighted deduction in respect of R & D expenditure. To strengthen his submissions the ld. DR placed reliance on the decision of Hon’ble Mumbai Bench of Tribunal in the case of PCP Chemicals (P.) Ltd. Vs. Income Tax Officer reported as 168 ITD 26 (Mumbai-Trib.).

We have heard the submissions made by the representative of rival sides and have perused the documents available on record. We have also considered the decisions on which respective sides have placed reliance. The solitary issue in present appeal is whether for the impugned assessment year the assessee is required to obtain certificate from DSIR for claiming weighted deduction u/s. 35(2AB) of the Act. In so far as assessee’s expenditure towards R & D during the period relevant to the assessment year under appeal is concerned, it is not disputed. The only reason for disallowing assessee’s claim u/s. 35(2AB) is that the assessee has failed to furnish certificate from competent authority i.e. DSIR in the prescribed Form 3CL.

Rule 6(7A) of the Income Tax Rules, 1962 under which Form 3CL was required to be furnished was amended by the Income Tax (10th) Amendment Rule, 2016 w.e.f. 01-07-2016. After the amendment a new Form No. 3CL was introduced. The new Form No. 3CL had two parts i.e. Part A – requiring the prescribed authority to furnish details of approval of in-house research and development facilities and Part B - wherein the prescribed authority had to quantify the expenditure incurred on in-house research and development facilities during the previous year and eligible for weighted deduction u/s. 35(2AB) of the Act. Prior to the amendment to Rule 6(7A), the prescribed authority had to furnish report in Form No. 3CL giving the approval of in-house research and development facilities u/s. 35(2AB) in order to entitle the assessee to claim weighted deduction. There was no requirement for quantification of expenditure eligible for weighted deduction by the prescribed authority. The assessee has placed on record a certificate of registration from DSIR dated 29-08-2013 at page 42 of the paper book. A perusal of registration certificate shows that the same is valid till 31-03-2016. The assessee has also furnished Form No. 3CM

The Hon’ble Gujarat High Court in the case of Banco Products (India) Ltd. Vs. Deputy Commissioner of Income Tax (supra) has held that once research and development facility is approved, entire expenditure incurred on development of research and development facility has to be allowed for weighted deduction u/s. 35(2AB) of the Act.

We further find that the Hon’ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Sun Pharmaceutical Industries Ltd. reported as 250 Taxman 270 has held that where the assessee has been approved by the prescribed authority for in-house research and development facility, the benefit of deduction u/s. 35(2AB) of the Act cannot be denied to the assessee, merely for the reason the prescribed authority failed to furnish Form 3CL.

The Co-ordinate Bench of Tribunal in the case of Cummins India Limited Vs. Dy. Commissioner of Income Tax (supra) had considered the applicability of amendment brought in by the Income Tax (10th) Amendment Rules relating to the issuance of Form No. 3CL. The Tribunal held that prior to the amendment no such procedure/methodology was

In view of undisputed fact of the case, document on record and the decisions discussed above, we do not see any reason to deny the benefit of deduction u/s. 35(2AB) to the assessee. Accordingly, the impugned order is set aside and the appeal of assessee is allowed.

In the result, the appeal of assessee is allowed.