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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
The above batch of 8 appeals filed by the Revenue are directed against the separate orders dated 13.06.2024 and 10.06.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment years as mentioned above. For the sake of convenience, all these appeals were heard together and are being disposed of by this common order.
ITA No.1657/PUN/2024 (A.Y. 2011-12)
Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing of automobile parts. It filed its original return of income on 30.09.2011 declaring total income of Rs.22,23,65,379/- after claiming deduction u/s 80IC of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) at Rs.7,82,78,837/-. The return was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee in response to which the assessee filed the requisite details. The Assessing Officer completed the assessment u/s 143(3) of the Act on 04.03.2014 assessing the total income at Rs.22,23,65,380/-.
Subsequently, the Assessing Officer reopened the assessment as per the provisions of section 147 of the Act on the ground that the assessee has wrongly claimed the deduction of Rs.3,58,47,391/- u/s 35(2AB) which has escaped assessment. The Assessing Officer thereafter issued notice u/s 148 of the I.T. Act, 1961.
4. The assessee objected to the reasons recorded by the Assessing Officer which were not accepted by him and he passed an order disposing off the objections to notice u/s 148 of the Act on 29.10.2018. Subsequently, the Assessing Officer issued notices u/s 143(2) and 142(1) of the Act asking the assessee to explain the deduction claimed in the return u/s 35(2AB). Rejecting the various explanations given by the assessee, the Assessing Officer made addition of Rs.2,63,91,741/- for want of report in Form 3CL from the prescribed authority by observing as under: “11. The explanation put-forth by the assessee is duly considered in the light of provisions of Income Tax Act. However the same is not tenable. In absence of report in Form No. 3CL from the prescribed authority, it is not ascertainable that what amount was actually incurred towards R&D activities. The assessee during the course of assessment proceedings has not submitted Form No. 3CL, therefore it is construed that the same was not issued to the assessee. Accordingly, the deduction claimed u/s 35(2AB) of the Act of Rs.2,63,91,741/- [Rs.94,55,651 + 1,69,36,090] is disallowed. However expenditure @ 100% of actual expenditure u/s. 35(1)/37(1) of the Act related to revenue expenditure is allowed. Penalty proceedings u/s 271(1)(c) of the Income tax Act, for furnishing of inaccurate particulars of income are initiated separately.”
Before the Ld. CIT(A) / NFAC the assessee, apart from challenging the addition on merit, challenged the validity of assessment on the ground that the erstwhile company High Technology Transmission System India Pvt. Ltd. in whose name the order has been passed, has merged with Endurance Technologies Limited w.e.f. 01.04.2013 pursuant to the order of Hon’ble Bombay High Court dated 10.01.2014. It was submitted that Endurance Technologies Limited had filed a letter dated 20.02.2014 along with the copy of High Court order filed with the Registrar of Companies on 10.02.2014. Thus, High Technology Transmission System India Pvt. Ltd. had ceased to exist from the appointed date on the receipt of filing of High Court order w.e.f. 10.02.2014. Endurance Technologies Limited has also filed a letter with the Assessing Officer, Aurangabad informing of the merger. Since the Assessing Officer has passed the order on a non-existing entity, therefore, in view of the decision of the Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. reported in 413 ITR 613 (SC) and various other decisions, it was argued that such an order passed on a non-existing entity is invalid in the eyes of law.
So far as the merit of the case is concerned, it was argued that all the required compliance for getting approval for availing deduction u/s 35(2AB) of the Act was made and all the relevant documents were also submitted to the DSIR which had not issued a letter to the assessee company. Further, the assessee has received Form No.3CM for the period from 01.04.2006 to 31.03.2009 and also for the period from 01.04.2015 to 31.03.2017. The assessee has been doing the same activity consistently year on year without discontinuation, therefore, DSIR has no reason for not issuing Form 3CM for the period under consideration. Since it was a procedural lapse on the part of DSIR and since From No.3CM was processed by DSIR as per the information obtained under the Right to Information Act, it was argued that the deduction claimed u/s 35(2AB) of the Act should be allowed to the assessee.
Based on the arguments advanced by the assessee, the Ld. CIT(A) / NFAC directed the Assessing Officer to allow the weighted deduction u/s 35(2AB) of the Act by observing as under: “5. Decisions I have carefully gone through the facts of the case, assessment order, grounds of appeal
and submission made by the Appellant. I find that the Appellant is aggrieved with the disallowance of weighted deduction Rs.2,63,91,741/- u/s 35(2AB) of the Income Tax Act made in the assessment order dated
31. December 2018. This was the only addition made by AO.
During the course of assessment proceedings, the AO noted that, as per Rule 6(5A) of the Income tax rules, the prescribed authority for the purpose of section 35(2AB) of the Income Tax Act is the Secretary, Department of Scientific and Industrial Research (DSIR), Govt. of India. Information from DSIR reveals that the R&D unit of M/s HTTSPL (now merged with appellant company) was not approved u/s 35(2AB) of the Income Tax Act. The AO held that the Appellant Company did not enter into any agreement for research and development facility for the year under consideration, as per existing provision of law and hence the deduction claimed u/s 35(2AB) of the Act was not allowable. Such material facts were not brought to the notice of Assessing officer by the Appellant Company during the course of assessment proceedings u/s 143(3) of the Income Tax Act. This modus operandi tantamount to concealment of income has come into light as a result of information gathered from DSIR also. I find from the submission of the Appellant that the all required compliances to get the approval for availing deduction u/s 35(2AB) of Income Tax Act has been made. The Appellant has submitted entire chain of documents which was submitted to DSIR. The DSIR has not issued any rejection letter to Appellant Company. Further, the appellant has submitted that the appellant has received the form 3CM for the period from 1 April 2006 to 31 March 2009 and also for the period from 1 April 2015 to 31 March 2017. The Appellant Company has been doing same activity consistently year on year without discontinuation hence DSIR has not any reason to not issuing the form 3CM for the period under consideration. It is procedural lapse on part of DSIR. The Appellant submits the form 3CM of above captioned year. In addition to the above, the appellant has submitted the additional evidence of the response made by DSIR under Right to Information Act. Where it is cleared that form 3CM was processed by DSIR however being the old record, DSIR doesn't have the copy of 3CM. From the perusal of the above submission, it is observed that Form 3CM is mandatory requirement to allow the deduction u/s 35(2AB) of the Act for the year under consideration. Further, the appellant has submitted all the documents to DSIR for getting the form however due to procedural lapse it was not issued within time by DSIR. Further, as per response received under Right to Information Act from DSIR, it is clear that form 3CM & Form 3CL was issued to the Appellant Company however the physical copy of the form is not available with DSIR. The appellant's jurisdiction ITAT in the case of Strides Arcolab Limited vs The Deputy Commissioner of Income Tax, Circle 15(3)(2), Mumbai (ITA 1903/Mum/2015) has held that "Therefore prior to 1.7.2016 there was no legal sanctity for Form No.3CL in the context of allowing deduction u/s 35(2AB) of the Act. This view has been held by the various judicial pronouncements as relied.......” There are similar views has been held by the various judicial pronouncement. It is noted that AO has the information which was sought from DSIR that no approval was given to appellant accordingly, the deduction was denied. However the appellant has the evidence of the response from DSIR where it was accepted by DSIR that form 3CM was issued. Respectfully following the order of ITAT, Mumbai I hold that form 3CM is suffice to claim the deduction u/s 35(2AB) of the Income Tax Act. The form 3CM was issued by DSIR as confirmed by RTI response of DSIR. The AO is directed to examine the evidence and allow the weighted deduction u/s 35(2AB) of the Act. In result, the appeal of the assessee is allowed.”
So far as the legal ground raised
before the Ld. CIT(A) / NFAC challenging the validity of assessment order which has been passed on a non-existing entity is concerned, he allowed the appeal of the assessee by holding that the assessment order passed on a non-existing entity is a nullity and void ab initio. While doing so he noted that the erstwhile company High Technology Transmission System India Private Limited in whose name the orders have been passed has merged with Endurance Technologies Limited w.e.f.
1. April 2013 pursuant to the order of Hon'ble Bombay High Court dated
10. January 2014. Endurance Technologies Limited had filed letter on 28. February 2014 along with copy of High Court order filed with Registrar of companies on 10. February 2014. Thus, High Technologies System India Private Limited had ceased to exist from the appointed date on the receipt of filing of High Court order w.e.f.
10. February 2014. Endurance Technologies Limited filed a letter with the Assistant Commissioner of Income Tax Circle-1, Aurangabd and informed the merger. It was also informed that HTTS is not deemed to be in existence w.e.f.
1. April 2013 and hence all the legal compliances will be carried out by Endurance Technologies Limited. Further, the order has been passed on 31.12.2018 by the same jurisdictional officer who has recorded that HTSS is a non-existing entity. Therefore, it cannot be a case that the department was not aware of the merger of erstwhile company with ETL. Relying on the decision of Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. reported in 413 ITR 613 (SC) he held that since the notice has been issued to a non-existing entity, therefore, the entire assessment order is null and void. He accordingly quashed the same.
Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.2,63,91,741/- which was claimed by the assessee company as deduction u/s.35(2AB).
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in holding that Form 3CM and Form 3CL was issued by DSIR, for the year under consideration. Whereas, the DSIR, vide its letter dated 24.01.2018 has categorically informed the department that M/s. High Technology Transmission System India Pvt Ltd was not issued report in Form 3CL because their R&D unit located at K-226/1, MIDC Industrial area, Waluj, Aurangabad was not approved u/s.35(2AB) for the F.Y.2010- 11 to F.Y.2013-14.
3. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in admitting the additional evidence of the assessee during appellate proceedings, without giving Assessing officer an opportunity of examining/cross examining of the additional evidence.
4. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in quashing the entire assessment order treating the same against non-existing entity without considering the facts that in the assessment order passed u/s.143(3) r.w.s.147 of the Act, both the names were mentioned as "M/s. High Technology Transmission System India Pvt. Ltd (Now merged with Endurance Technologies Ltd) P. No. K-226/1, MIDC, Waluj, Aurangabad-431136"
5. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in quashing the entire assessment order without considering that the mistake in name of the assessee company is curable u/s.292B of Income Tax Act. 6. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated. 7. The appellant craves leave to add, amend or alter ail or any of the grounds of appeal.
10. The Ld. DR while objecting to the order of the Ld. CIT(A) / NFAC referred to the grounds raised by the Revenue and submitted that the Ld. CIT(A) / NFAC has violated the provisions of Rule 46A of the IT Rules. Referring to the order of the Co-ordinate Bench of the Tribunal in the case of ACIT vs. Ajeet Seeds Ltd. reported in 148 taxmann.com 14, he submitted that the Tribunal in the said decision has held that deduction u/s 35(2AB) is not allowable if the approval was not granted by DSIR. He heavily relied on the order of the Assessing Officer and submitted that the order of the Ld. CIT(A) / NFAC being not in accordance with law should be reversed and that of the Assessing Officer be restored.
The Ld. Counsel for the assessee on the other hand reiterated the same arguments as made before the Ld. CIT(A) / NFAC and supported his order. He submitted that High Technology Transmission System India Pvt. Ltd. had merged with Endurance Technologies Private Limited as per the order of Hon’ble Bombay High Court dated 10.02.2014. The appointed date of merger was 01.04.2013 which was informed to the JCIT, Range-1, Aurangabad vide letter dated 20.02.2014, copy of which is placed at pages 4 and 5 of the of the paper book. Referring to pages 6 and 7 of the paper book, he submitted that the fact of amalgamation was also informed to the ACIT, Circle-1, Aurangabad vide letter dated 24.02.2014. He submitted that the Assessing Officer had issued notice u/s 148 of the Act on 16.02.2018 which was issued in the name of High Technology Transmission System India Pvt. Ltd. even though the said company had already merged with Endurance Technologies Pvt. Ltd. w.e.f. 01.04.2013 as per the order of Hon’ble Bombay High Court dated 10.02.2014. He submitted that the assessee had duly informed the Assessing Officer regarding the fact of merger along with the copy of the order of Hon’ble High Court. Therefore, issue of notice u/s 148 of the Act on 16.02.2018 in the name of a non existing entity is bad in law. For the above proposition, he relied on the decision of Hon’ble Bombay High Court in the case of City Corporation Ltd. vs. ACIT reported in 171 taxmann.com 301 (Bom). He submitted that in this case also the Assessing Officer had issued notice u/s 148 in the name of Amanora Future Towers Pvt. Ltd. which had merged with City Corporation Ltd. The Hon'ble Bombay High Court has held that the notice issued u/s 148 in the name of a non existing entity is bad in law.
The Ld. Counsel for the assessee submitted that the Assessing Officer passed the order u/s 147 of the Act wherein he has mentioned under the name column “High Technology Transmissions Systems India Pvt. Ltd. (now merged with Endurance Technologies Ltd.)”. However, the PAN mentioned by the Assessing Officer in the assessment order is AABCH1184Q which belongs to High Technologies Transmissions Systems India Pvt. Ltd. He submitted that the Assessing Officer should have mentioned PAN of Endurance Technologies Pvt. Ltd. Since the PAN of High Technologies Transmissions Systems India Pvt. Ltd. has been mentioned, therefore, the assessment order passed in the PAN of the non- existent entity is bad in law. He relied on the following decisions to the proposition that the order passed on a non existing entity is bad in law: a) Maruti Suzuki India Ltd. [416 ITR 613 (SC)] b. Kuber India Systems Ltd. [168 taxmann.com 200 (Bom)] c. Alok Knit Exports Ltd. [446 ITR 748 (Bom)] Capgemini Technology Services India Ltd. [173 taxmann.com 616 (Pune)] d.
So far as the merit of the case is concerned, the Ld. Counsel for the assessee submitted that the assessee had claimed deduction u/s 35(2AB) of Rs.3,58,47,391/- which was denied by the Assessing Officer on the ground that the relevant R & D unit was not approved by DSIR u/s 35(2AB) and therefore, the assessee is not entitled to claim the deduction. He submitted that before the Assessing Officer it was clarified that the assessee had made an application before DSIR and merely because the prescribed authority had not submitted Form 3CL, the deduction should not be disallowed.
Referring to page 29 and 30 of the paper book, the Ld. Counsel for the assessee submitted that the R & D unit at K-226/1, MIDC Industrial, Waluj, Aurangabad-431136 was approved as an eligible R & D unit u/s 35(2AB) by DSIR in Form No. 3CM dated 11.03.2008. In the said Form 3CM, DSIR has mentioned that the R & D facility is approved for the purposes of section 35(2AB) from 01.04.2006 to 31.03.2009. Referring to paper book pages 31 and 32 he submitted that the said unit has been approved by DSIR for the purposes of weighted deduction u/s 35(2AB) for the period 01.04.2015 to 31.03.2017. Referring to pages 40-41 of the paper book, he submitted that for the period 01.04.2009 to 31.03.2012, the said unit was recognized as a R & D unit by DSIR.
Referring to pages 42 and 43 of the paper book, he submitted that the recognition has been issued by DSIR for the period from 01.04.2012 to 31.03.2015. Referring to pages 33 to 39 of the paper book, he submitted that the assessee had also applied for approval in Form 3CK. He submitted that since DSIR had given its approval for the period 01.04.2006 to 31.03.2009 and also for the subsequent period from 01.04.2015 to 31.03.2017 and there is no dispute that the assessee had made an application in Form 3CK for the intervening period and there is no order of DSIR rejecting the application filed by the assesse, therefore, the claim of deduction u/s 35(2AB) cannot be denied. For the above proposition, he relied on the following decisions: a. Minilec India Pvt. Ltd. [93 taxmann.com 213 (Pune)] b. Advance Enzyne Technologies Pvt. Ltd. [116 taxmann.com 498 (Mum)] C. Meco Instruments Pvt. Ltd. [7 taxmann.com 24 (Mum)] Nath Bio Genes India Ltd. [ITA No. 367-417/PN/12] d.
16. He submitted that the approval issued by DSIR for the period 01.04.2006 to 31.03.2009 was approved by DSIR for the first time which was in Form 3CM. In the said form issued by DSIR, it is stated that the facility is approved from 01.04.2006 to 31.03.2009. Referring to Form 3CM as per the Income Tax Rules, he submitted that the period of validity prescribed by DSIR in its approval dated 11.03.2008 was not a condition stipulated in Form 3CM which was prescribed by CBDT. The date and validity of recognition to be granted by DSIR was introduced in Form 3CM w.e.f. 01.07.2016. Accordingly, till that time, DSIR had no authority to prescribe the period of validity in Form 3CM. He accordingly submitted that once the unit has been approved by DSIR, the assessee would be eligible for weighted deduction and the period of validity prescribed by DSIR in Form 3CM is beyond its jurisdiction since there was no such condition prescribed in Form 3CM at the relevant period of time. He accordingly submitted that the claim of deduction u/s 35(2AB) should be allowed.
17. Referring to page 45 of the paper book, the Ld. Counsel for the assessee submitted that the assessee had filed an application before DSIR under RTI and had sought information as to whether Form 3CM was issued by it for the concerned period. Referring to page 46 of the paper book, he submitted that in response to the RTI application, DSIR replied that as per its record, Form 3CM and 3CL was generated for the concerned period. However, it was also stated that the copy of the same is not available since it is an old record. He accordingly submitted that the above reply of DSIR clearly indicates that the assessee company was granted approval in Form 3CM for the period concerned and on this ground also the claim of weighted deduction is justified in law. He accordingly submitted that the order of Ld. CIT(A) / NFAC being in accordance with law should be upheld and the grounds raised by the Revenue should be dismissed.
18. So far as the decision relied on by the Ld. DR in the case of ACIT vs. Ajeet Seeds Ltd. (supra) is concerned, the Ld. Counsel for the assessee submitted that the Tribunal in the said decision has held that deduction u/s 35(2AB) is not allowable if the approval was not granted by DSIR. He submitted that the said decision is not correct and per incuriam. He submitted that in that case the Ld. CIT(A) / NFAC has allowed the claim of deduction u/s 35(2AB) by following the decisions of the Pune Bench of the Tribunal in the case of Minilec India Pvt. Ltd. reported in 171 ITD 124 and Nath Bio Genes India Ltd. vide order dated 27.01.2014. Although the Tribunal in the case of ACIT vs. Ajeet Seeds Ltd. (supra) refers to this fact in para 6 of its order, however, without following the above two decisions or without distinguishing the same or without any discussion as to how these two decisions are not applicable to the facts of the present case before it, the Tribunal simply dismissed the claim of deduction u/s 35(2AB). Therefore, the decision relied on by the Ld. DR cannot be followed the same being per incuriam. Further, in para 13 of the order in the case of ACIT vs. Ajeet Seeds Ltd. (supra), the Tribunal has discussed regarding the decisions in the case of Meco Instruments Pvt. Ltd. reported in 7 taxmann.com 24 (Mum) and Advance Enzyme Technologies Pvt. Ltd. reported in 116 taxmann.com 498. It has been held by the Tribunal that these decisions are not applicable since in those cases admittedly the requisite approval in Form 3CM was obtained by the assessees for the relevant assessment year. The Ld. Counsel for the assessee submitted that the above factual assertion in para 13 of the order is also not correct.
Referring to the decision in the case of Meco Instruments Pvt. Ltd. (supra) he submitted that in that case the concerned assessment year was 2005-06. Referring to para 6.1 of the said order he submitted that the Tribunal has clearly held that no approval was issued for the relevant assessment year. He drew the attention of the Bench to para 6.1 of the said order which reads as under: "6.1 In the backdrop of these facts, the issue before us is whether non- availability of the approval in the prescribed form for the relevant assessment year could disentitle the assessee of deduction under section 35(2AB) or not. In this regard, we may first refer to section 35 which deals with expenditure on scientific research. This section entitles the assessee to get deduction in respect of expenditure on scientific research laid out or expended in relation to business.”
He submitted that thereafter, it has been held that even if the approval in Form No.3CM was not issued the claim of deduction u/s 35(2AB) cannot be rejected. Similarly in the case of Advance Enzyme Technologies Pvt. Ltd. (supra) is concerned, he submitted that the assessment year was 2010-11. In para 5 it has been clearly mentioned that the deduction u/s 35(2AB) has been denied on the ground that the approval in Form No.3CM was not available for the year under consideration. Thereafter, it has been held that the deduction u/s 35(2AB) is allowable. The Ld. Counsel for the assessee drew the attention of the Bench to para 17 of the order which reads as under: “17. In this case, it is undisputed fact that the recognition was valid from 1-4- 2001, and which was available during this period. The application for approval in form 3CK was filed as back as in 9-1-2002. The assessee has claimed deduction u/s 35(2AB) of the Act right from A.Y 2001-02 to A.Y 2008-09 and such claim was accepted by the department. Further, the facility was approved/recognized up to 31.032016, vide communication dated 15-1-2014, and such approval was once again renewed up to 31-3-2019. From the above, it is very clear that the assessee facility was approved by the competent authority i.e. the Secretary DSIR, but there was no approval in form No. 3CM for the impugned Assessment year. Therefore, we are of the considered view that from the settled legal position of the law by the various cases of High Courts as discussed here in above in preceding paragraphs
what is relevant to decide eligibility for weighted deduction u/s 35(2AB) of the Act, is existence of R&D facility and recognition of such facility by the competent authority. Once the facility has been approved by the competent authority, then there is no cut off date is prescribed for approval of such facility and the benefit of deduction u/s 35(2AB) of the Act, should be given to the assessee as long as the recognition is in force. Hence, we are of the considered view that the AO as well as Ld. CIT(A) were in correct in denied the benefit of weighted deduction claimed u/s 35(2AB) of the Hence, we direct the AO to allow weighted deduction claimed u/s 35(2AB) of the Act."
He accordingly submitted that although in both the above referred cases of the Mumbai Bench of the Tribunal the approval in Form 3CM was not granted for the concerned assessment year, still the Tribunal in those cases held that the deduction u/s 35(2AB) was allowable. However, the Tribunal in the case of ACIT vs. Ajeet Seeds Ltd. (supra) has mentioned that these decisions are not applicable since in those cases the approval in Form 3CM was granted for the relevant assessment year. Thus, reasonings given by the Tribunal in the case of ACIT vs. Ajeet Seeds Ltd. (supra) is totally incorrect and therefore, on this ground also the decision cannot be followed. The Ld. Counsel for the assessee reiterated that the decision in the case of ACIT vs. Ajeet Seeds Ltd. (supra) is per incuriam and is not applicable to the facts of the present case.
22. The Ld. Counsel for the assessee referring to the decision of Hon’ble Andhra Pradesh High Court in the case of B.R. Constructions reported in 202 ITR 222 (Full Bench) submitted that the Hon’ble High Court in the said decision has held that the decision, which is per incuriam is not a binding precedent. He accordingly submitted that since the said decision is not applicable to the facts of the present case, the argument of the Ld. DR on this issue has to be rejected outright. He submitted that a similar view has been taken by the Mumbai Bench of the Tribunal in the case of Mehratex India Ltd. reported in 3 SOT 539. The Ld. Counsel for the assessee referring to the decision of Hon’ble Gujarat High Court in the case of Claris Lifesciences Ltd. reported in 174 taxmann.com 113 (Guj) submitted that the Hon’ble High Court has specifically held that Form No.3CM, which is order of approval as provided by the Rules in this behalf also does not have any mention of the date of approval rather it speaks only of the approval. This fact has been ignored by the Tribunal in the case of ACIT vs. Ajeet Seeds Ltd. (supra).
23. Referring to para 11 of the order of the Tribunal in the case of ACIT vs. Ajeet Seeds Ltd. (supra), he submitted that the Tribunal in the said decision has stated that the application of the assessee for extension of the approval was denied by the prescribed authority on account of the fact that the assessee company had not adhered to the prescribed conditions. However, in the present case, DSIR has confirmed that the approval was granted to the assessee and therefore, even on factual aspects also the said decision is not applicable. He accordingly submitted that the argument of the Ld. DR on this issue should be rejected.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the original assessment in the instant case was completed u/s 143(3) on 04.03.2014 accepting the returned income filed by the assessee.
Subsequently, the Assessing Officer reopened the assessment u/s 147 of the Act on the ground that the assessee has wrongly claimed deduction u/s 35(2AB) of the Act which tantamount to concealment of income and which came to light as a result of information gathered from DSIR. We find the Assessing Officer, rejecting the various explanations given by the assessee and observing that the assessee has not obtained Form 3CL from the prescribed authority for which it is not ascertainable as to what amount was actually incurred towards R&D activities, rejected the claim of deduction u/s 35(2AB) of the Act amounting to Rs.2,63,91,741/-. We find before the Ld. CIT(A) / NFAC the assessee, apart from challenging the addition on merit, challenged the validity of the assessment on the ground that the same has been passed on a non existing entity. We find the Ld. CIT(A) / NFAC not only directed the Assessing Officer to delete the addition on merit but also held that the assessment order, which has been passed on a non existing entity, is null and void. While holding so, he relied on the decision of Hon’ble Supreme Court in the case of Maruti Suzuki Ltd. (supra). The reasonings given by the Ld. CIT(A) / NFAC while allowing the claim of deduction on merit has already been reproduced in the preceding paragraphs.
25. We do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. Admittedly the erstwhile company High Technology Transmission System India Pvt. Ltd., in whose name the orders have been passed, has merged with Endurance Technologies Limited w.e.f. 01.04.2013 pursuant to the order of Hon’ble Bombay High Court dated 10.01.2014. We find the assessee, vide letter dated 20.02.2014, has addressed to the JCIT, Range-1, Aurangabad (copy of which is placed at pages 4 and 5 of the paper book) has intimated regarding the merger of the company, the contents of which read as under:
26. Similarly, the assessee vide letter dated 24.02.2014, copy of which is placed at pages 6 and 7 of the paper book, has addressed a letter to the ACIT, Circle-1, Aurangabad intimating the merger of the company which reads as under:
27. Thus, High Technology Transmission System India Pvt. Ltd. had ceased to exist from the appointed date on the receipt of filing of High Court order w.e.f. 10.02.2014 which has been duly intimated to the JCIT as well as the Assessing Officer. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC holding that it cannot be a case where the department was not aware of the merger of the erstwhile High Technology Transmission System India Pvt. Ltd. with Endurance Technologies Limited. Further, we find that although the Assessing Officer in the assessment order in column 1 has mentioned the name and address of the assessee as M/s. High Technology Transmission System India Pvt. Ltd. (now merged with Endurance Technologies Limited), however, he has used the PAN number AABCH1184Q which is the PAN of High Technology Transmission System India Pvt. Ltd. which can be verified from the original order passed u/s 143(3) of the Act on 04.03.2014 and page 1 of the assessment order reads as under:
Thus, the Assessing Officer despite being informed by the assessee has passed the assessment order on a non existing entity.
We find an identical issued had come up before Hon’ble Bombay High Court in the case of City Corporation Ltd. vs. ACIT (supra). In that case there was merger of AFTPL into assessee company CCL w.e.f. 01.04.2018 and the merger was brought to the notice of the department. The Revenue issued notice u/s 148 of the I.T. Act, 1961 in the name of AFTPL. Since the impugned notice was issued on a non existing company despite Revenue’s knowledge of its non-existence, the Hon’ble Bombay High Court, following the decision of Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. (supra) quashed such notice. The relevant observations of Hon’ble Bombay High Court read as under:
21. The averments in the above paragraphs support the Petitioner's case. In paragraph 4.3, there is a clear admission that the amalgamation of the company was brought to the notice of the Department. The only explanation is that notice was issued on the non-existing company due to technical glitch in the system wherein no field in the notice u/s 148 of the Act is editable."
In paragraph 4.2, the approval obtained from the Principal Commissioner for the issue of impugned notices is emphasised. The affidavit states that files were moved proposing notices in the names of both entities, AFTPL and the Petitioner (CCL). There was a reference to seizure proceedings, the two PAN numbers, and the lack of an editable field on this notice. Therefore, it was submitted that the notice was generated on AFTPL's PAN.
In short, the averments in paragraphs 4.2 and 4.3 of the affidavit purport to apportion the blame on the department's utility system. Based upon this, the fundamental error is sought to be passed off as a mere technical glitch. Finally, the concluding sentence of paragraph 4.2 of the affidavit urges this Court: "Thus, Hon'ble Court is requested to direct petitioner to treat the notice as good as in the name of existent entity. "
24. Based on the above averments and the arguments, we are afraid we cannot condone the fundamental error in issuing the impugned notices against a non- existing company despite full knowledge of the merger. The impugned notices, which are non-est cannot be treated as "good" as urged on behalf of the Respondents. In Maruti Suzuki (supra), the Hon'ble Supreme Court has held that issuing notice in the name of a non-existing company is a substantive illegality and not a mere procedural violation of the nature adverted to in Section 292B of the IT Act.
Mr Suresh Kumar's contention about the facts in the present case being akin to those in Skylight Hospitality LLP (supra) cannot be accepted. Except for submitting that the facts are similar or comparable, nothing was shown to us based upon which such a submission could be entertained, much less sustained. In any event, the Hon'ble Supreme Court, in the case of Maruti Suzuki (supra), considered the Delhi High Court's decision in Skylight Hospitality LLP (supra) and held that the same was delivered "in the peculiar facts of wp.6076-2023 & ors.docx the case". In fact, even the Delhi High Court had clarified that the decision was in the case's peculiar facts.
In that case, there was substantial and affirmative material and evidence on record to show that issuing the notice in the name of the dissolved company was only a mistake. The Court held that the Special Leave Petition filed by the Skylight Hospitality LLP (supra) against the judgment of the Delhi High Court rejecting its challenge was dismissed in the peculiar facts of the case, which weighed with the Court in concluding that there was merely a clerical mistake within meaning of Section 292B. The Hon'ble Supreme Court held that in Maruti Suzuki (supra) the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer, was issued to a non-existent company. The assessment order was issued against the amalgamating company. "This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B".
The argument now sought to be raised by Mr Suresh Kumar based on Skylight Hospitality LLP (supra) was considered and rejected by the Gujarat High Court in Anokhi Realty (P) Ltd. Vs. Income-tax Officer5. In Adani Wilmar Ltd. Vs. Assistant Commissioner of Income-tax6, another Division Bench of the Gujarat High Court rejected the Revenue's argument based on lack of inter-departmental coordination or non-application of mind when materials relating to amalgamation were already available with the department. The Court held that based upon such grounds, notices could not have been issued to a non-existent company.
28. The Delhi High Court, in the case of Principal Commissioner of Income Tax - 7, Delhi Vs. Vedanta Limited 7 rejected a contention very similar to that raised by Mr Suresh Kumar, relying on Skylight Hospitality LLP (supra). The Delhi High Court noted that the decision of the Supreme Court in Maruti Suzuki (supra), while enunciating the legal position concerning an order being framed in the name of a non- existent entity, had unequivocally held as being a fatal flaw which could neither be corrected nor rectified. It had held explicitly that such an order cannot be salvaged by taking recourse to Section 292B of the IT Act. The Court also noticed the peculiar facts obtained in Skylight Hospitality LLP (supra), which alone had led to the Supreme Court upholding the assessment made, albeit in the name of an entity that had ceased to exist.
29. Accordingly, after considering the above facts and circumstances and the law, we are satisfied that the impugned notices deserved to be quashed and set aside. We do so by making the rule absolute in these petitions.
Before we conclude, we need to clarify that nothing in this order would preclude the respondents from issuing a fresh notice to CCL for reassessment, should the law otherwise permit it, and if the circumstances justify it. We have quashed the impugned notices only because they were issued to a non- existing company or entity despite the respondents' knowledge of its non-existence. All contentions in this regard are left open because we have not addressed them in this order.”
30. The various other decisions relied on by the Ld. Counsel for the assessee also supports his case to the proposition that the issue of notice u/s 148 of the Act on a non existing entity is void ab initio. We, therefore, do not find any infirmity in the order of the Ld. CIT(A) / NFAC holding that the entire assessment order, which has been passed in the case of a non existing entity is null and void. The grounds raised by the Revenue on this issue are accordingly dismissed.
Even otherwise on merit also we do not find any infirmity in the roder of the Ld. CIT(A) / NFAC on this issue. We find the Assessing Officer in the instant case rejected the claim of deduction u/s 35(2AB) on the ground that the relevant R & D unit is required to be approved by DSIR u/s 35(2AB). Since the unit of the assessee was not approved by DSIR u/s 35(2AB), therefore, he rejected the claim of the assessee. We find the Ld. CIT(A) / NFAC allowed the claim of the assessee, the reasons of which have already been reproduced in the preceding paragraphs.
We do not find any infirmity in the order of the Ld. CIT(A) / NFAC. It is an admitted fact that R & D unit at K-226/1, MIDC Industrial, Waluj, Aurangabad is an eligible R & D unit u/s 35(2AB) by DSIR in Form No. 3CM dated 11.03.2008, copy of which is placed at pages 29-30 of the Paper Book. A perusal of the said Form 3CM shows that DSIR has mentioned that the R & D facility is approved for the purposes of section 35(2AB) from 01.04.2006 to 31.03.2009. Page 2 of the said order reads as under:
Similarly, the said unit has been approved by DSIR for the purposes of weighted deduction u/s 35(2AB) for the period 01.04.2015 to 31.03.2017, copy of which is placed at pages 31-32 of the Paper Book. We find for the period 01.04.2009 to 31.03.2012, the said unit was recognized as a R & D unit by DSIR and the copy of the recognition dated 09.04.2009 is placed at pages 40-41 of the Paper Book. Similarly the recognition issued by DSIR for the period from 01.04.2012 to 31.03.2015 vide letter dated 18.07.2012 is placed at pages 42-43 of the Paper Book. We further find from pages 33 to 39 of the Paper Book that the assessee had also applied for approval in Form 3CK.
So far as the period between 01.04.2009 to 31.03.2015 is concerned, there is no dispute to the fact that the assessee had made an application under Form 3CK which has not been rejected by DSIR. Further DSIR had granted recognition to the said unit for period from 01.04.2009 to 31.03.2012 and for the period from 01.04.2012 to 31.03.2015. Therefore, when the approval has been granted for the earlier period as well as the subsequent period, we find merit in the argument of the Ld. Counsel for the assessee that the claim of weighted deduction u/s 35(2AB) should not be denied for the intervening period.
We further find from Form 3CM approved by DSIR for the period from 01.04.2006 to 31.03.2009 that the facility of the assessee is approved for the said period. The period of validity prescribed by DSIR in its approval dated 11.03.2008 was not a condition stipulated in Form 3CM which was prescribed by CBDT. The date and validity of recognition granted by DSIR was introduced in Form 3CM w.e.f. 01.07.2016. Therefore, till that time, DSIR had no authority to prescribe the period of validity in Form 3CM. We further find merit in the argument of the Ld. Counsel for the assessee that once the unit has been approved by DSIR, the assessee would be eligible for weighted deduction and the period of validity prescribed by DSIR in Form 3CM is beyond its jurisdiction in absence of such condition prescribed in Form 3CM at the relevant period of time. We find when the assessee filed an application before DSIR under RTI and had sought information as to whether Form 3CM was issued by it for the concerned period, DSIR filed a reply that as per its record, Form 3CM and 3CL were generated for the concerned period. However, it was also stated that the copy of the same is not available since it is an old record. The copies of RTI application and reply of DSIR are placed at pages 45 and 46 of the Paper Book. A perusal of the reply given DSIR clearly indicates that the assessee company was granted approval in Form 3CM for the concerned period. Therefore, we find merit in the argument of the Ld. Counsel for the assessee that the weighted deduction was rightly allowed by the Ld. CIT(A) / NFAC.
We find the Pune Bench of the Tribunal in the case of Minilec India (P.) Ltd. vs. ACIT (supra) has held that if recognition to facility given by prescribed authority which is mandate of section 35(2AB) is maintained, assessee has to be accorded deduction under section 35(2AB); non-receipt of Form No. 3CM is at best a procedural lapse and is not fatal for denial of claim of deduction under section 35(2AB). The relevant observations of the Tribunal at para 30 read as under: “30. The issue which arises is whether the assessee can be denied deduction under section 35(2AB) of the Act for non receipt of form No.3CM. The assessee admittedly, had received recognition in the initial period and thereafter, it is case of renewal of recognition of in-house R&D facility, which was also granted by the prescribed authority for the period ending 31.03.2012 and also for the period ending 31.03.2015. The correspondence between the assessee and DSIR for the third phase reflects a reminder being sent by DSIR to renew the recognition of in- house R&D facility beyond 31.03.2012. In other words, DSIR had not de- recognized the facility for the years 2009-12. The recognition to the facility has been granted from start till date and has not been withdrawn. In other words, recognition given by the prescribed authority which is mandate of section 35(2AB) of the Act is maintained and once the recognition is so maintained, the assessee has to be accorded deduction under section 35(2AB) of the Act. The non receipt of form No.3CM for the intervening three years is at best a procedural lapse and is not fatal for denial of claim of deduction under section 35(2AB) of the Act. Accordingly, we hold so. The prescribed authority in any case under the pre- amended provisions had no authority to look into the nature and quantum of expenditure except in the first year to see investment in land and building. After recognition of facility and approval by DSIR, the Assessing Officer is to allow the claim of assessee after verifying the same. Thus, we direct the Assessing Officer to allow deduction claimed under section 35(2AB) of the Act to the facility for the year under appeal. The ground of appeal No.1 raised by the assessee is thus, allowed.”
We find the Mumbai Bench of the Tribunal in the case of Advance Enzyne Technologies Pvt. Ltd. (supra) has held that once existence of R & D facility was not disputed and expenditure for that purpose was genuine in nature and recognition to facility was granted way back in 2001-02, which was valid during relevant period, then merely for reason of non-issue of approval for certain period in prescribed Form 3CM by competent authority, weighted deduction claimed under section 35(2AB) could not be denied. The relevant observations of the Tribunal from para 15 to 20 read as under: “15. In this case, on perusal of facts available on record, we find that the assessee facility was approved from assessment year 2001-02 and such recognition was continued up to 31.07.2012. Thereafter, the assessee has filed an application for recognition on 09.06.2012 and such recognition has been granted by the competent authority vide its communication dated 15.01.2014, which is valid up to 31.03.2016, subsequently, the renewal has been granted up to 31.03.2019. Further, the A.O neither disputed existence of R&D facility nor genuineness of expenditure incurred by the assessee. Once existence of R&D facility was not disputed and expenditure for that purpose is genuine in nature and also the recognition was granted way back in 2001-02, which is valid even now, then merely for the reason of non issue of approval for certain period in prescribed form 3CM by the competent authority, even though, the assessee has made an application for approval in prescribed form 3CK and also filed necessary evidence including details of expenditure then, the assessee cannot be furnished non issue of such approval by the competent authority and weighted deduction claimed u/s 35(2AB) cannot be denied.
Coming back to the case laws relied upon by Ld. DR for the Revenue. The Ld. DR has vehemently argued the case in light of the decision of ITAT Mumbai, in the case of PCP Chemicals Pvt Ltd., Vs. ITO (supra) and submitted that facts of the present case are entirely similar to facts considered by the Tribunal and hence the assessee case is covered squarely by the decision of ITAT Mumbai, in the case of PCP Chemicals Pvt Ltd., Vs. ITO. We find that although the Tribunal has distinguished the decision of Hon’ble Gujarat High Court in the case of Claris LifeScience Ltd., Vs. CIT and Hon’ble Delhi High Court in the case of Maruthi Suzuki India Ltd. vs. Union of India, but fact remains that in the case of PCP Chemical Pvt Ltd., Vs. ITO (supra) the assessee has filed an application for recognition / approval on 12.08.2011 and in form No. 3CK and the competent authority has approved the facility for the period from 01.04.2011 to 31.03.2013. The assessee has claimed deduction for the A.Y 2011-12 for which neither recognition nor approval from the competent authority was received by the assessee. Under those facts, the Tribunal came to the conclusion that when the initial approval / recognition was granted with effect from 01.04.2011 on the basis of application filed by the assessee on 12.08.2011 then the deduction for expenditure incurred for the previous period i.e before the facility was approved by the competent authority cannot be claimed u/s 35(2AB) of the Act. We further, noted that in the case before the Tribunal in PCP Chemicals Pvt Ltd., (supra) the facts were entirely different because the unit was first approved from 01.04.2011 and for the assessment year prior to 01.04.2011 there was no recognition / approval from the competent authority. The assessee has filed an application on 12.08.2011 on that basis the competent authority has given approval with retrospective effect from 01.04.2011. From the above, it is clear that although the Tribunal has taken a different view in the matter, but it has followed the ratio laid down by the Hon’ble Gujarat High Court in the case of Claris lifescience Ltd vs CIT (supra) and the Hon’ble Delhi High Court in the case of Maruthi Suzuki India Ltd., vs. Union of India (supra), which is evident from the fact that approval cannot be taken back from the financial year form which date the assessee has filed its application in form No. 3CK. In fact, the case law relied upon by the DR in PCP Chemicals Pvt Ltd., (supra) supports the case of the assessee in as such the Tribunal has accepted the decision Gujarat High Court to the effect that the approval should be granted from the first day of the financial year in which the application is filed, irrespective of the date of the order granting such approval. Coming back to another case relied upon by the Ld. DR in the case of Nivo Controls Ltd. Vs. CIT. We find that the Tribunal has rejected the claim of the assessee on entirely different facts which is evident from the fact that in 263 proceedings it has upheld the findings of the Ld. CIT for rejection of deduction u/s 35(2AB) of the Act, on the ground that the assessee has failed to maintain separate books of account for its R&D facility on the basis of admission of authorized representative of the assessee that no such separate books of accounts were maintained.
In this case, it is undisputed fact that the recognition was valid from 01.04.2001, and which was available during this period. The application for approval in form 3CK was filed as back as in 09.01.2002. The assessee has claimed deduction u/s 35(2AB) of the Act, right from A.Y 2001-02 to A.Y 2008-09 and such claim was accepted by the department. Further, the facility was approved / recognized up to 31.032016, vide communication dated 15.01.2014, and such approval was once again renewed up to 31.03.2019. From the above, it is very clear that the assessee facility was approved by the competent authority i.e the Secretary DSIR, but there was no approval in form No. 3CM for the impugned Assessment year. Therefore, we are of the considered view that from the settled legal position of the law by the various cases of High Courts as discussed here in above in preceding paragraphs what is relevant to decide eligibility for weighted deduction u/s 35(2AB) of the Act, is existence of R&D facility and recognition of such facility by the competent authority. Once the facility has been approved by the competent authority, then there is no cut off date is prescribed for approval of such facility and the benefit of deduction u/s 35(2AB) of the Act, should be given to the assessee as long as the recognition is in force. Hence, we are of the considered view that the A.O as well as Ld. CIT(A) were in correct in denied the benefit of weighted deduction claimed u/s 35(2AB) of the. Hence, we direct the A.O to allow weighted deduction claimed u/s 35(2AB) of the Act.
In the result, appeal filed by the assessee is allowed.”
We find the Mumbai Bench of the Tribunal in the case of ACIT vs. Meco Instruments Pvt. Ltd. (supra) has held that merely on ground of technicalities of procedure, benefit bestowed by legislature (section 35(2AB) of Income-tax Act) cannot be denied. The relevant observations of the Tribunal from para 6.1 read as under: “6.1 In the backdrop of these facts, the issue before us is whether non-availability of the approval in the prescribed form for the relevant assessment year could disentitle the assessee of deduction u/s.35(2AB) or not. In this regard, we may first refer to section 35 which deals with expenditure on scientific research. This section entitles the assessee to get deduction in respect of expenditure on scientific research laid out or expended in relation to business. 6.2 Section35(2AB) deals with a situation where a company engaged in the business of [bio-technology] or in the business of manufacture or production or any other article or thing not specified in the list of 11th Schedule]] incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land and building) on in-house research and development facility as approved by the prescribed authority i.e. Secretary, Government of India, Ministry of Science and Technology, Department of Scientific & Industrial Research. It is pertinent to note that this section talks of only approval of the prescribed authority but nowhere in the section the phrase “as prescribed” has been used. Therefore, if the approval simpliciter is available from the prescribed authority, then as per this section, no objection could be raised. However, sub-section(4) of Section 35
requires the prescribed authority to submit its report in relation to the approval of the said facility to the Director General in such form and within such time as may be prescribed. Therefore, it would be too technical to hold that merely because the term ‘prescribed’ has not been used in section 35(2AB)(i) it follows that there were no prescribed rules for the same. However, at the same time, absence of phrase ‘prescribed’ in section 35(2AB)(i) mitigates the assessee’s default. Rule 6 of the I.T.Rules prescribes the authority for expenditure on scientific research and as per Rules 6(1B) for the purposes of sub-section (2AB) of section 35, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research. The sub-Rule (4) requires the company to furnish the application in Form No.3CK. As per sub-Rule (5A), if the prescribed authority is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, then pass an order in writing in Form No. 3CM. However, as per the proviso to sub-rule (5A), if the prescribed authority is not so satisfied it is to grant reasonable opportunity to the assessee company before rejecting its application. Sub-Rule (7A) prescribes the certain conditions subject to which approval is to be granted. A close reading of the section r.w. Rule 6 would reveal that nowhere any time has been prescribed within which the application is required to be filed by the assessee company. Further, nowhere, any condition has been prescribed regarding cut off date from which the approval could be made effective. Therefore, once the assessee company is granted approval it will apply till it is revoked with reference to all the assessment years, which come within the ambit of that period. Therefore, mere mentioning of 1.4.2007 in the order dated 28.8.2008 was of no consequence and the approval granted in Form 3CM was also applicable for A.Y. 2005-06. In this regard, it is further noticeable that while granting of approval on 28.8.2008, the prescribed authority has, inter alia, observed in para 5 as under:- ‘Ref.No. and Date of the application : Ref NBil dated 16.8.2007 The above Research & Development facility is further approved for the purpose of section 35(2AB) from 1.4.2007 to 31.3.2011 subject to the conditions underlined therein.” The term ‘further’ makes it clear that the approval was not limited to 1.4.2007 to 31.3.2011 but was in addition to periods already approved. It is further noticeable that information obtained under RTI clearly showed that the assessee’s applications were processed for earlier years also but no orders have been passed with reference to earlier assessment years. At the same time, the assessee has not been given any opportunity of being heard as required under proviso to Rule 6 (5A) before rejecting the said application. Therefore, impliedly, the application for the entire period, for which it was made, has to be deemed to have been granted. On the basis of above discussion, we are of the opinion that the assessee was entitled for weighted deduction u/s. 35(2AB). 6.3 Now, we will also examine the issue having regard to the object of legislation. The entire scheme deals with the granting of approval to the facilities and the object is that the research and development facility is not related purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of a like nature. The purpose is to have research and development facilities which contribute to the technological advancement and not merely limited to earning of profits. Therefore, once the approval is there by the prescribed authority, it could be easily concluded that the same met the basic requirement and merely the same is not in prescribed form, it would not lead to the conclusion that the approval was of no purpose. As per the terms and conditions of the recognition of In-house R&D unit framed by the Ministry of Science and Technology, the assessee company is required to submit brief summary of the achievements of the R&D unit to the Department of Science and Industrial Research every year which includes paper published, patents obtained and processes developed, new products introduced, awards and prizes received and other achievements. Further, as per clause 8, commercial exploitation of the know-how/process developed by in-house R&D Unit was to be solely governed by the licensing policies in operation from time to time and the decision of the licensing authorities in this regard is considered to be final. Thus, stringent conditions have been imposed by the prescribed authority itself though the said approval was not meant for tax exemption but in substance, there was not much difference between the objects sought to be achieved by these approvals. 6.4 Further, in any view of the matter, at best it could be said that it was only a procedural defect and from the various decisions, noted in the arguments of ld Counsel for the assessee, it is clear that merely on the ground of technicalities of procedure, the benefit bestowed by legislature cannot be denied. When it comes to follow the prescribed procedure, the exemption provisions have to be liberally construed and if in substance, the assessee has fulfilled the basic requirements then the exemption cannot be denied. 6.5 We find that similar view has been taken by the Ahmedabad Bench of the Tribunal in the case of Claris Lifesciences Ltd (supra), which has been confirmed by the Hon’ble Gujarat High Court, reported in 174 Taxman 113 (Guj)(supra).”
So far as the decision relied on by the Ld. DR in the case of Ajeet Seeds Ltd. (supra) is concerned, we find the Tribunal in the said decision without considering the decisions of the Coordinate Benches of the Tribunal and mentioning incorrect factual details of the Mumbai Benches of the Tribunal has passed the order holding that the deduction u/s 35(2AB) is not allowable if the approval was not granted by DSIR. The Ld. Counsel for the assessee has successfully demonstrated before us as to how the said decision is per incuriam and therefore has to be disregarded. Since in the decision of ACIT vs. Ajeet Seeds Ltd. (supra) relied on by the Ld. DR there is no discussion at all as to how the decisions in the cases of Minilec India Pvt. Ltd. (supra) and Nath Bio Genes India Ltd. (supra) are not applicable and the reasoning given for not following the decisions in the cases of Meco Instruments Pvt. Ltd. (supra) and Advance Enzyne Technologies Pvt. Ltd. (supra), are based on incorrect facts, therefore, the decision of the Tribunal in the case of ACIT vs. Ajeet Seeds Ltd. (supra) cannot be followed being per-incurium.
40. We find Hon’ble Andhra Pradesh High Court in the case of B.R. Constructions (supra) has held that a decision which is per-incurium is not a binding preceding. We find the Mumbai Bench of the Tribunal in the case of Mehratex India Ltd. vs. DCIT (supra) has held that a decision, which is per- incurium is not a binding judicial precedent. Therefore, the decision relied on by the Ld. DR being per incurium is not applicable to the facts of the present case. In this view of the matter and in view of the detailed reasoning given by the Ld. CIT(A) / NFAC, we do not find any infirmity in his order allowing the claim of deduction u/s 35(2AB). Accordingly, the same is upheld. The appeal filed by the Revenue is accordingly dismissed.
ITA Nos.1659/PUN/2024 (A.Y. 2012-13)
41. Grounds raised
by the Revenue are as under:
1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.3,96,39,745/- which was claimed by the assessee company as deduction u/s.35(2AB).
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in holding that Form 3CM and Form 3CL was issued by DSIR, for the year under consideration. Whereas, the DSIR, vide its letter dated 24.01.2018 has categorically informed the department that M/s. High Technology Transmission System India Pvt Ltd was not issued report in Form 3CL because their R&D unit located at K-226/1, MIDC Industrial area, Waluj, Aurangabad was not approved u/s.35(2AB) for the F.Y.2010- 11 to F.Y.2013-14.
3. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in admitting the additional evidence of the assessee during appellate proceedings, without giving Assessing officer an opportunity of examining/cross examining of the additional evidence.
4. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in quashing the entire assessment order treating the same against non-existing entity without considering the facts that in the assessment order passed u/s.143(3) r.w.s.147 of the Act, both the names were mentioned as "M/s. High Technology Transmission System India Pvt. Ltd (Now merged with Endurance Technologies Ltd) P. No. K-226/1, MIDC, Waluj, Aurangabad-431136" 5. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in quashing the entire assessment order without considering that the mistake in name of the assessee company is curable u/s.292B of Income Tax Act. 6. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated. 7. The appellant craves leave to add, amend or alter ail or any of the grounds of appeal.
ITA No.1683/PUN/2024 (A.Y. 2013-14)
42. Grounds raised
by the Revenue are as under:
1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.6,86,91,937/- which was claimed by the assessee company as deduction u/s.35(2AB).
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in holding that Form 3CM and Form 3CL was issued by DSIR, for the year under consideration. Whereas, the DSIR, vide its letter dated 24.01.2018 has categorically informed the department that M/s. High Technology Transmission System India Pvt Ltd was not issued report in Form 3CL because their R&D unit located at K-226/1, MIDC Industrial area, Waluj, Aurangabad was not approved u/s.35(2AB) for the F.Y.2010- 11 to F.Y.2013-14.
3. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in admitting the additional evidence of the assessee during appellate proceedings, without giving Assessing officer an opportunity of examining/cross examining of the additional evidence.
On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in quashing the entire assessment order treating the same against non-existing entity without considering the facts that in the assessment order passed u/s.143(3) r.w.s.147 of the Act, both the names were mentioned as "M/s. High Technology Transmission System India Pvt. Ltd (Now merged with Endurance Technologies Ltd) P. No. K-226/1, MIDC, Waluj, Aurangabad-431136"
5. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in quashing the entire assessment order without considering that the mistake in name of the assessee company is curable u/s.292B of Income Tax Act.
6. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated.
7. The appellant craves leave to add, amend or alter ail or any of the grounds of appeal.
43. After hearing both sides, we find the grounds raised by the Revenue in for assessment year 2012-13 and for assessment year 2013-14 are identical to the grounds raised by the Revenue in for assessment year 2011-12. We have already decided the issues and dismissed the appeal of the Revenue. Following similar reasonings, we dismiss the grounds raised by the Revenue in ITA No.1659/PUN/2024 for assessment year 2012-13 and ITA No.1683/PUN/2024 for assessment year 2013-
14. The above 2 appeals filed by the Revenue are accordingly dismissed.
ITA No.1660/PUN/2024 (A.Y.2014-15)
Facts of the case, in brief, are that the assessee filed its original return of income declaring total income of Rs.155,40,57,180/-. The Assessing Officer completed the assessment u/s 143(3) on 28.12.2016 determining the taxable income at Rs.155,66,27,455/-. Subsequently the PCIT set aside the order u/s 263 of the I.T. Act to the file of the Assessing Officer. During the proceedings subsequent to order u/s 263 the Assessing Officer noted that the assessee company had received incentive from the government of Maharashtra under the package scheme Incentive-2007 amounting to Rs.3,08,80,000/-. However, it had reduced the same amount from computation of total income for income tax purpose. As the Incentive was only for fixed assets, therefore, the assessee was required to reduce the same from the cost of assets for the purpose of calculating depreciation in the fight of provisions of section 43(1) [explanation 10]. In appeal, the Ld. CIT(A) / NFAC deleted the addition and the Revenue is not in appeal before the Tribunal. Therefore, we are not concerned with the same.
Further, on perusal of return of income the Assessing Officer noted that the assessee had claimed deduction u/s.35(2AB) of the income Tax Act, 1961 of Rs.50,48,37,056/- towards Revenue and Capital expenditure related to R&D activity. However, no prescribed report i.e. Form No.3CL was issued to the assessee for claiming the said deduction. Hence, in absence of the same, he held that the assessee is entitled for claiming deduction on actual incurred basis only.
Thus, the company had wrongly claimed weighted deduction. He, therefore, disallowed the amount of Rs.5,15,77,309/- on account of excess deduction u/s 35(2AB) of the Act.
46. In appeal, the Ld. CIT(A) / NFAC deleted the addition made by the Assessing Officer by observing as under: “Decision I have carefully gone through the facts of the case, grounds of appeal
and submission of the appellant I find from the submission of the appellant that the quantification of expenditure has been prescribed vide IT (Tenth Amendment) Rules, 2016 w.e.f. 1st July 2016 amendment, no such power was with DSIR i.e. after approval of facility. As rightly contended by the assessee in the case of Omni Active Health Technologies Ltd vs ACIT (ITA/7284/Mum/2018) where hon'ble ITAT hold that "the issue is squarely covered in assessee's favor by the decision of Pune Tribunal in Cummins India Ltd. V/s DCIT (96 Taxmann.com 576 15/05/2018) wherein the coordinate bench has observed as under:-
38. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against the claim of deduction under section 35(2AB) of the Act ie expenditure incurred on Research & Development activity For computation of business income under section 35 of the Act, expenditure on scientific research is to be allowed on fulfillment of certain conditions which are enlisted in the said section Under various sub-sections of section 35 of the Act, the conditions and the allowability of expenditure vary. Sub-section (1) to section 35 of the Act deals with expenditure on scientific research, not being in the nature of capital expenditure, is to be allowed to research association, university, college or other institution, for which an application in the prescribed form and manner is to be made to the Central Government for the purpose of grant of approval or continuation thereto. Before granting the approval, the prescribed authority has to satisfy itself about the genuineness of activities and make enquiries in this regard. Under sub-section (28) to section 35 of the Act, a company engaged in the specified business as laid there on, if it incurs expenditure on scientific research or in-house Research & Development facility also needs to be approved by the prescribed authority, is entitled to deduction, provided the same is approved by the prescribed authority.
39. Now, coming to sub-section (2AA) to section 35 of the Act, it talks about granting of approval by the prescribed authority but the approval to the expenditure being incurred is missing under the said section. Similar is the position in sub-section (2A) Further in sub-section (2AB), it is provided that facility has to be approved by the prescribed authority, then there shall be allowed deduction of expenditure incurred whether 100%, 150% or 200% as prescribed from time to time. Clause (2) to section 35 of the Act provides that no deduction shall be allowed in respect of expenditure mentioned in clause (1) under any provisions of the Act. Clause (3) further lays down that no company shall be entitled for deduction under clause (1) unless it enters into agreement with prescribed authority for co-operation in such R & D facility The Finance Act, 2015 w.ef. 01.04.2016 has substituted and provided that facility has to fulfill such condition with regard to maintenance of accounts and audit thereof and for audit of accounts maintained for that facility.
Under Rule 6 of Income Tax Rules, 1962 (in short 'the Rules’), the prescribed authority for expenditure on scientific research under various sub- clauses has been identified. As per Rule 6(1B) of the Rules for the purpose of sub- section 2AB of section 35 of the Act, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research i.e. DSIR. Under sub- rule (4), application for obtaining approval under section 35(2AB) of the Act is to be made in form No.3CK. Under sub-rule (5A) of rule 6 of the Rules, the prescribed authority shall, if satisfied that the conditions provided in the rule and in sub-section (2AB) being fulfilled, pass an order in writing in form No.3CM. The proviso however lays down that reasonable opportunity of being heard is to be granted to the company before rejecting an application. So, the application has to be made under sub-rule (4) in form No.3CK and the prescribed authority has to pass an order in writing in form No 3CM. Sub-rule (7A) provides that the approval of expenditure under sub-section (2AB) of section 35 of the Act, shall be subject to the conditions that the facilities do not relate purely to market research, sales promotion, etc. Clause (b) to sub-rule (7A) at the relevant time provided that the prescribed authority shall submit its report in relation to the approval of in- house R & D facility in form No. 3CL to the DG (Income-tax Exemption) within sixty days of its granting approval. Under clause (c), the company at the relevant time had to maintain separate accounts for each approved facility, which had to be audited annually. Clause (b) to sub-rule (7A) has been substituted by IT (Tenth Amendment) Rules, 2016 w.e.f. 01.07.2016, under which the prescribed authority has to furnish electronically its report (1) in relation to approval of in-house R&D facility in part A of form No.3CL and (ii) quantifying the expenditure incurred on in-house R & D facility by the company during the previous year and eligible for weighted deduction under sub-section 2AB of section 35 of the Act in part B of form No.3CL In other words the quantification of expenditure has been prescribed vide IT (Tenth Amendment) Rules, 2016 w.e.f. 01.07 2016. Prior to this amendment, no such power was with DSIR ie. after approval of facility.
Under the amended provisions, beside maintaining separate accounts of R & D facility, copy of audited accounts have to be submitted to the prescribed authority. These amendments to rules 6 and 7a are w.e.f. 01.07.2016 re under the amended rules, the prescribed authority as in part A give approval of the facility and in part B quantify the Act. The first issue which arises is the recognition of facility by the prescribed authority as provided in section 35(2AB) of the Act.
The issue which is raised before us relates to pre-amended provisions and question is where the facility has been approved by the prescribed authority, can the deduction be denied to the assessee under section 35(2AB) of the Act for non issue of form No 3CL by the said prescribed authority or the power is with the Assessing Officer to look into the nature of expenditure to be allowed as weighted deduction under section 35(2AB) of the Act. The first issue which arises is the recognition of facility by the prescribed authority as provided in section 35(2AB) of the Act.
The Hon'ble High Court of Gujarat in CIT v. Claris Lifesciences Ltd. [2008] 174 Taxman 113/[2010] 326 ITR 251 have held that weighted deduction is to be allowed under section 35(2AB) of the Act after the establishment of facility. However, section does not mention any cutoff date or particular date for eligibility to claim deduction. The Hon'ble High Court held as under "8 The Tribunal has considered the submissions made on behalf of the assessee and took the view that section speaks of (i) development of facility, (ii) incurring of expenditure by the assessee for development of such facility: (iii) approval of the facility by the prescribed authority, which is DSIR and (iv) allowance of weighted deduction on the expenditure so incurred by the assessee. 9. The provisions nowhere suggest or imply that R&D facility is to be approved from a particular date and, in other words, it is nowhere suggested that date of approval only will be 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 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 plain reading of 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 r. 6(5A) and Form No 3CM and come to the conclusion that a plain and harmonious reading of Rule and Form clearly suggests that once facility is approved, the entire expenditure so incurred on development of R&D facility has to be allowed for weighted deduction as provided by s. 35(2AB). The Tribunal has also considered the legislative intention behind above enactment and observed that to boost up R&D 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, intention of the legislature by making 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.
We are in full agreement with the reasoning given by the Tribunal and we are of the view that there is no scope for any other interpretation and since the approval is granted during the previous year relevant to the assessment year in question, we are of the view that the assessee is entitled to claim weighted deduction in respect of the entire expenditure incurred under s. 35(2AB) of the Act by the assessee." 44. The Hon'ble High Court of Delhi in CIT v. Sandan Vikas (India) Ltd [2012] 22 taxmann.com 19/207 Taxman 216/[2011] 335 ITR 117 (Del) on similar issue of weighted deduction under section 35(2AB) of the Act held that the condition precedent was the certificate from DSIR, but the date of certificate was not important, where the objective was to encourage research and development by the business enterprises in India. In the facts before the Hon'ble High Court of Delhi, the assessee had approached DSIR vide application dated 10.01.2015. The DSIR vide letter dated 23.02.2006 granted recognition to in-house research and development facility of assessee. Further, vide letter dated 18.09.2006, DSIR granted approval for the expenses incurred by the company on in-house research and development facility in the prescribed form No.3CM. The Assessing Officer in that case refused to accord the benefit of aforesaid provision on the ground that recognition and approval was given by DSIR in the next assessment year. The Tribunal allowed the claim of assessee relying on the decision of the Hon'ble High Court of Gujarat in Claris Lifesciences Ltd.'s case (supra). The Hon'ble High Court of Delhi taking note of the decision of the Hon'ble High Court of Gujarat observed that it has been held that cutoff date mentioned in the certificate issued by DSIR would be of no relevance where once the certificate was issued by DSIR, then that would be sufficient to hold that the assessee had fulfilled the conditions laid down in the aforesaid provisions. 45. The issue which is raised in the present appeal is that whether where the facility has been recognized and necessary certification is issued by the prescribed authority, the assessee can avail the deduction in respect of expenditure incurred on in-house R&D facility, for which the adjudicating authority is the Assessing Officer and whether the prescribed authority is to approve expenditure in form No.3CL from year to year. Looking into the provisions of rules, it stipulates the filing of audit report before the prescribed authority by the persons availing the deduction under section 35(2AB) of the Act but the provisions of the Act do not prescribe any methodology of approval to be granted by the prescribed authority vis-à-vis expenditure from year to year. The amendment brought in by the IT (Tenth Amendment) Rules w.e.f. 01.07.2016, wherein separate part has been inserted for certifying the amount of expenditure from year to year and the amended form No. 3CL thus, lays down the procedure to be followed by the prescribed authority. Prior to the aforesaid amendment in 2016, no such procedure / methodology was prescribed. In the absence of the same, there is no merit in the order of Assessing Officer in curtailing the expenditure and consequent weighted deduction claim under section 35(2AB) of the Act on the surmise that prescribed authority has only approved part of expenditure in form No 30 We find no merit in the said order of authorities below.
The Courts have held that for deduction under section 35(2AB) of the Act, first step was the recognition of facility by the prescribed authority and entering an agreement between the facility and the prescribed authority. Once such an agreement has been executed, under which recognition has been given to the facility, then thereafter the role of Assessing Officer is to look into and allow the expenditure incurred on in-house R&D facility as weighted deduction under section 35(2AB) of the Act. Accordingly, we hold so. Thus, we reverse the order of Assessing Officer in curtailing the deduction claimed under section 35(2AB) of the Act by Rs.6,75,000/-. Thus, grounds of appeal
No 10.1, 10.2 and 10.3 are allowed.
47. In the result, appeal of assessee is partly allowed The Appellant filed the additional evidence basis on which it is noted that the Form 3CM was issued for the R&D Centre at K226/1 MIDC Industrial Area Waluj Aurangabad. It is also confirmed by DSIR, that Form 3CL was also generated and issued to the Appellant Company however being the old record, the copy of the same is not available with DSIR. It is noted that the appellant company is having form 3CM, the approval for claiming the deduction u/s 35(2AB) of the Act for the year under consideration. It is also noted that to claim the weighted deduction, form 3CM is required. Respectfully following the same we hold that Ld. AO was not justified in curtailing the deduction u/s 35(2AB) in the pre-amended period. Therefore, by deleting the impugned additions, allow ground on the basis of Form 3CM available
6. In the result, appeal of the assessee is allowed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.5,15,77,309/- claimed as excess deduction u/s.35(2AB) of the I.T. Act, 1961.
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the excess claim of deduction at Rs.5,15,77,309/- without considering the fact that the disallowed claim was not in accordance with the DSIR's Corrigendum letter dated 16/08/2017 wherein the DSIR has quantified the eligible expenditure to the extent of Rs.22,37,98,000/- whereas the assessee in its return of Income had claimed total expenditure u/s.35(2AB) at Rs.25,24,18,528/-.
3. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated.
4. The appellant craves leave to add, amend or alter all or any of the grounds of appeal.
The Ld. DR submitted that the DSIR has issued Form No.3CL vide letter dated 20th January, 2017 and thereby quantified total expenditure (Revenue and Capital) at Rs.2167.66 lacs for weighted deduction. Later, the DSIR had passed corrigendum letter on 16th of August, 2017 wherein quantified amount of expenditure (Revenue and Capital) was revised as Rs.2237.98 lakhs for weighted deduction for the AY 2014-15 i.e. Rs.16,13,70,000/- as Revenue expenditure + Rs.6,24,28,000/- as Capital expenditure. The revised allowable deduction as per DSIR revised corrigendum letter dated 16.08.2017 was rightly allowed to the assessee company. Considering the above facts, the assessee is eligible for weighted deduction u/s 35(2AB) on the quantifying expenditure to the extent of expenditure certified by DSIR vide its revised corrigendum letter on 16th of August, 2017. DSIR is the competent authority which has confirmed the expenditure Incurred by the assessee company during the year under consideration after examining the details of the expenses furnished by the assessee. The assessee's claim that DSIR confirmation on generation and issuance of 3CL is not acceptable as no rectification was done and reported by DSIR till date. Therefore, it infers that there is no mistake on the part of DSIR on account of approving expenses in Form 3CL and the form 3CL issued by the DSIR vide corrigendum letter dated 16.08.207 is the final Form 3CL issued by the DSIR wherein the amount of allowable deduction has been mentioned. Therefore, the excess deduction claimed at Rs.56,63,747/- and Rs.4,59,13,562/- is not allowable to the assessee for weighted deduction u/s 35(2AB) and the then Assessing officer was correct in disallowing the excess claim.
The Ld. Counsel for the assessee while supporting the order of the Ld. CIT(A) / NFAC submitted that since the order of Ld. CIT(A) / NFAC is in accordance with law, therefore, the same should be upheld and the grounds raised by the Revenue on this issue be dismissed.
After hearing both sides, we find the grounds raised by the Revenue on this in this appeal are identical to the grounds raised by the Revenue in for assessment year 2011-12. We have already decided the issue raised and dismissed the appeal of the Revenue in ITA No.1657/PUN/2024. Following similar reasonings, we dismiss the grounds raised by the Revenue.
Facts of the case, in brief, are that the assessee filed its original return of income declaring total income of Rs.204,00,74,610/-. The Assessing Officer completed the assessment vide order dated 29.12.2017 assessing the total income at Rs.207,71,69,610/- by making two additions i.e. Rs.1,67,10,834/- and Rs.5,74,79,168/- on account of excess weighted deduction and disallowance of weighted deduction claimed u/s.35(2AB) respectively. During the assessment proceedings, it was noticed that the DSIR had issued Form No.3CL only in respect of 3 R&D units considering the amount of Rs.19,97,92,000/- as eligible for expenses under R&D on which allowable deduction was Rs.39,95,84,000/- however, assessee had claimed Rs.41,62,94,834/- as deduction u/s.35(2AB) of the Act. Hence, the difference of Rs.1,67,10,834/- i.e. excess weighted deduction was disallowed and agreed addition was made to the total income of the assessee company.
During the assessment proceedings, it was also noticed that the assessee company had claimed R&D expenses and accordingly claimed weighted deduction u/s.35(2AB) of the Act @200% to the extent of Rs.47,53,74,120/- in respect of 4 R&D units. However, the DSIR had issued Form No.3CL only in respect of 3 R&D units only and Form No.3CL was not issued in respect of the 4th R&D unit located at K-226/1, MIDC, Industrial Area, Waluj, Aurangabad. In this regard, the DSIR vide its letter had clarified and intimated that Form No.3CL in respect of forth unit was not approved u/s.35(2AB) during the F.Y.2014-15 and the same was later approved w.e.f. 01.04.2015 to 31.03.2017. Accordingly, the deduction claimed u/s 35(2AB) at Rs.5,74,79,168/- was disallowed.
In appeal, the Ld. CIT(A) / NFAC deleted the addition made by the Assessing Officer.
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.7,41,90,002/- claimed as deduction u/s.35(2AB) of the I.T. Act, 1961.
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the excess claim of deduction at Rs.1,67,10,834/- without considering the fact that the disallowed excess claim was not in accordance with the Form No.3CL issued by the DSIR for the financial year under consideration.
3. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in giving relief in respect of disallowance of deduction of Rs.5,74,79,168/- u/s.35(2AB) of the I.T. Act, without considering that the fourth unit, in respect of which deduction was claimed, was not approved by the DSIR for financial year 2014-15 as clarified and intimated by the DSIR vide its letter dated 27/12/2017.
4. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated.
5. The appellant craves leave to add, amend or alter all or any of the grounds of appeal.
The Ld. DR submitted that the DSIR had issued Form No.3CL only in respect of 3 R&D units of assessee company considering the amount of Rs.19,97,92,000/- as eligible for expenses under R&D on which allowable deduction was Rs.39,95,84,000/- however, it was noticed that the assessee company had claimed Rs.41,62,94,834/- as deduction u/s.35(2AB) of the Act. Therefore, the difference of Rs.1,67,10,834/- i.e. excess weighted deduction claimed by the assessee company was rightly disallowed and added back.
The Ld. DR further submitted that the Ld. CIT(A) / NFAC has erred in giving relief in respect of disallowance of deduction of Rs.5,74,79,168/-, as during the assessment proceedings, the DSIR vide its letter had clarified and intimated that Form No.3CL in respect of forth unit was not approved u/s.35(2AB) during the F.Y.2014-15 and the same was later approved w.e.f. 01.04.2015 to 31.03.2017. Accordingly, the deduction claimed u/s.35(2AB) of the I.T. Act, at Rs.5,74,79,168/- was rightly disallowed during assessment proceedings.
The Ld. Counsel for the assessee on the other hand while supporting the order of the Ld. CIT(A) / NFAC submitted that since the order of Ld. CIT(A) / NFAC is in accordance with law, the same should be upheld and the grounds raised by the Revenue on this issue be dismissed.
After hearing both sides, we find the grounds raised by the Revenue on this issue in this appeal are identical to the grounds raised by the Revenue in for assessment year 2011-12. We have already decided the issue and dismissed the appeal of the Revenue in ITA No.1657/PUN/2024. Following similar reasonings, we dismiss the grounds raised by the Revenue.
ITA No.1661/PUN/2024 (A.Y. 2016-17)
Facts of the case, in brief, are that the assessee filed the return of income for the impugned assessment year on 30.11.2016 declaring total income of Rs.206,24,22,180/-. The Assessing Officer completed the assessment u/s 143(3) on 30.12.2018 determining the total income of the assessee at Rs.263,18,34,695/- by disallowing the claim of deduction u/s 35(2AB) of the Act of Rs.56,49,66,955/- on account of absence of report in Form 3CL from the prescribed authority. Similarly, he made addition of Rs.30 lakhs on the ground that the assessee company, during the impugned assessment year, has received an amount of Rs.30 lakhs from the Directorate of Industries, Uttarakhand as incentive / subsidy which is related to the unit at Pantnagar, Uttaranchal for which the assessee claimed deduction u/s 80-IC of the Act. Since the assessee has revised the claim of deduction u/s 80-IC outside the return of income, therefore, the deduction @ 30% of the same i.e. subsidy amount is not allowable. The explanation of the assessee that the amount of Rs.30 lakhs was credited to ‘Reserves & Surplus’ as consistent practice, therefore, deduction u/s 80-IC should be allowed on this was rejected by the Assessing Officer on the ground that the assessee had not made the claim in the original return or by filing revised return, the Assessing Officer rejected the claim of the assessee.
In appeal, the Ld. CIT(A) / NFAC directed the Assessing Officer to examine the genuineness of both the claims and accordingly allow the deduction. The relevant observations of the Ld. CIT(A) / NFAC on the issue of 35(2AB) read as under: “Decision Considering the above, it had submitted that appellant received the form 3CL post the assessment completed. I therefore direct the AO to examine the genuineness of form 3CL dated 5 March 2020 and accordingly, allow the deduction to the appellant. It is settled law that the assessee can claim & submit the evidences for deduction even at the appellate stage.”
60.1 Similarly he allowed the claim of deduction u/s 80-IC by relying on the decision of CIT vs. Prithvi Brokers & Shareholders (P) Ltd. (supra).
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds: 1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the claim of deduction u/s.35(2AB) of the assessee by admitting evidence i.e. Form 3CL during appellate proceedings without giving opportunity to AO to examine the same as evidence submitted before appellate proceedings was not submitted by the assessee during assessment proceedings.
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition made on account of disallowance of deduction claimed u/s.35(2AB) at Rs.56,49,66,955/- without appreciating the fact that the total expenditure claimed in assessee's return of income u/s.35(2AB) and eligible expenditure mentioned in Form 3CL later issued by the DSIR has substantial difference and needs further verification.
3. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition made on account of amount of Rs.30,00,000/- received as Subsidy, however same was credited to Reserve and surplus and had not offered to tax in its return of income.
4. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.30,00,000/- received as subsidy, without appreciating the fact that the same was claimed u/s.80IC of the I.T. Act, during assessment proceeding and without revising its return of income and in contravention of decision of Apex Court in the case of Goetze (India) Ltd. Vs. CIT(2006) CTR (SC) 182: (2006) 284 ITR 323 (SC).
5. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated.
6. The appellant craves leave to add, amend or alter all or any of the grounds of appeal.
Grounds of appeal No.1 and 2 relate to the order of the Ld. CIT(A) / NFAC in allowing the claim of deduction u/s 35(2AB) of the Act.
63. After hearing both sides, we find the Assessing Officer disallowed the claim of deduction u/s 35(2AB) on the ground that Form 3CM was not available and the assessee has not produced Form 3CL. We find before the Ld. CIT(A) / NFAC the assessee submitted that Form 3CL was issued by DSIR after completion of assessment. The Ld. CIT(A) / NFAC therefore, directed the Assessing Officer to examine the genuineness of Form 3CL and allow the deduction as per law. We, therefore, do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. Accordingly, the grounds raised by the Revenue are dismissed.
Grounds of appeal No.3 and 4 relate to the order of the Ld. CIT(A) / NFAC in deleting Rs.30 lakhs made by the Assessing Officer.
65. After hearing both sides, we find the assessee had received subsidy of Rs.30 lakhs from the Directorate of Estate, Uttarakhand. In the original return the said subsidy received was not offered to tax. Thereafter, during the course of assessment proceedings the assessee offered the subsidy to tax and also submitted that the deduction u/s 80-IC should be granted. We find the Assessing Officer rejected the claim of the assessee on the ground that the assessee had not made the claim in original return or by filing revised return. We find the Ld. CIT(A) / NFAC allowed the claim of the assessee by stating that the Ld. CIT(A) / NFAC can entertain the claim of the assessee at the appellate stage. He further directed the Assessing Officer to examine the genuineness of the claim and accordingly allow the same. We do not find any infirmity in the order of the Ld. CIT(A) / NFAC. We find the Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. (2012) 23 taxmann.com 23 (Bom) has held that the assessee can make a claim during appellate proceedings and it is not necessary that the claim should be made either in the original return or in the revised return, therefore, in absence of any contrary decision brought to our notice by the Ld. DR against the decision of Hon’ble Jurisdictional High Court cited (supra), we do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. The grounds raised by the Revenue on this issue are accordingly dismissed.
ITA No.1662/PUN/2024 (A.Y. 2017-18)
Facts of the case, in brief, are that the assesse filed its return of income on 29.11.2017 declaring total income of Rs.212,32,31,600/-. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144B of the Act on 21.04.2021 determining the total income of the assessee at Rs.217,35,94,243/- by making the following additions: i) addition on account of 80G Rs.91,50,000/- ii) Disallowance of deduction claimed u/s 35(2AB) Rs.3,47,56,824/- iii) addition on account of foreign payment without deduction of TDS Rs.4,53,134/- iv) addition on account of deduction claimed u/s 35DDA Rs.60,02,685/-
In appeal, the Ld. CIT(A) / NFAC deleted all the additions made by the Assessing Officer.
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.91,50,000/- claimed by the assessee company under 80G of the I.T. Act, 1961.
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the deduction of Rs.91,50,000/- claimed by assessee on its CSR expenditure at Rs.1,83,00,000/- without appreciating the fact that CSR expenditure is not an allowable as deduction as per the Explanation 2 to section 37 of Income Tax Act, 1961.
3. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the deduction of Rs.91,50,000/- claimed by assessee on its CSR expenditure at Rs.1,83,00,000/- without appreciating the fact that the motive of introduction of CSR as envisaged in Finance (No. 2) Bill, 2014 has come to existence with the objective to share burden of the Government in providing social services by companies having and if such expenses are allowed as tax deduction, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure.
4. On the facts and in the circumstances of the case, the CIT(A), NFAC. Delhi has erred in deleting the disallowance and allowing excess deduction of Rs.3,47,56,824/- claimed u/s.35(2AB) by admitting additional evidence i.e. revised 3CL dated 15/07/2021 without giving opportunity to the A.O to examine/verify the additional evidence which was not submitted by the assessee during the course of assessment proceedings.
5. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in concluding that the assessee company in its return had claimed deduction u/s.35(2AB) as per the Form 3CL. Issued by the DSIR, whereas amount claimed by the assessee was in excess by Rs.3,47,56,824/- from the amount eligible to be claimed as deduction as per Form 3CL issued by DSIR. 6. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the claim of aggregate deductions of Rs.3,88,20,198/- without appreciating the fact that the same was claimed by the assessee during assessment proceeding without revising its return of income and in contravention of decision of Apex Court in the case of Goetze (India) Ltd. Vs. CIT(2006) CTR (SC) 182: (2006) 284 ITR 323 (SC). 7. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated. 8. The appellant craves leave to add, amend or alter all or any of the grounds of appeal.
Grounds of appeal No.1 to 3 relate to the order of the Ld. CIT(A) / NFAC in allowing the deduction u/s 80G of the Act amounting to Rs.91,50,000/-.
Facts of the case, in brief, are that the Assessing Officer, on perusal of record noticed that during the year under consideration the assessee had incurred Rs.1,83,00,000/- on account of CSR expenditure. Further he noticed that the assessee has claimed deduction of Rs.91,50,000/- under section 80G of the Income Tax Act, 1961 on account of Corporate Social Responsibility (CSR) expenditure of Rs.1,83,00,000/- whereas, as per section 37 of the Act, CSR expenditure is not an allowable expenditure and cannot be allowed as deduction. He, therefore, disallowed the same and added to the total income of the assessee.
In appeal, the Ld. CIT(A) / NFAC allowed the claim of the assessee. While doing so he noted that a perusal of the provisions of Section 37(1) as well as Section 80G of the Income Tax Act, 1961 would show that there is no specific restriction for claiming the deduction u/s 80G of the Income Tax Act, 1961. Therefore, no disallowance of deduction claimed u/s 80G is warranted. While adjudicating the issue, he relied on the decision of the Bangalore Bench of the Tribunal in case of Goldman Sachs Services Pvt Ltd V JCIT IT(TP)A No 2355/Bang/2019.
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal.
The Ld. DR submitted that the claim of the assessee made u/s.80G was rightly disallowed and added to the total income of the assessee by the Assessing Officer. He submitted that the CSR expenditure was brought in statute with the motive to share burden of the government in providing social services by companies. If CSR expenditure is allowed as tax deductible expense, then it would result in subsidizing of one third of CSR expenditure by the government. The intent of Parliament in bringing the said provision is given in the Explanatory Memorandum to the Finance (No.2) Bill, 2014. From the memorandum explaining the budget it is clear that the expenditure was not to be allowed as deduction in any form to avoid subsidizing of CSR expenditure by government. Therefore, the claim of the assessee regarding allowability of CSR expenditure under section 80G is against the basic nature of such amendment.
The Ld. Counsel for the assessee on the other hand submitted that the Ld. CIT(A) / NFAC is justified in allowing the claim of deduction made by the assessee. He submitted that the Co-ordinate Benches of the Tribunal under identical circumstances have allowed such claim of deduction u/s 80G of the Act in respect of donations given out of CSR. For the above proposition, he relied on the decision of the Pune Bench of the Tribunal in the cases of DCIT vs. Credit Suisse Services (India) Pvt. Ltd. vide Advik Hi Tech Pvt. Ltd. vide and various other decisions.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has incurred CSR expenditure of Rs.1,83,00,000/- and has claimed deduction u/s 80G of the Act amounting to Rs.91,50,000/- out of such CSR expenditure which was disallowed by the Assessing Officer. We find the Ld. CIT(A) / NFAC allowed the claim of the assessee by relying on various decisions. The relevant para of the order of the Ld. CIT(A)/NFAC reads as under:
“Decision I have carefully gone through the facts of the case, assessment order, grounds of appeal and submission of the appellant. In this Ground of appeal, the Appellant has agitated the disallowance of deduction U/s 80G of the Income Tax Act, 1961, of Rs.91,50,000/- which as per the appellant has been expended in compliance with the provisions of Companies Act, 2013 under head CSR expenditure. On perusal of the submission of appellant, it has been found that the A.O has disallowed the deduction claimed u/s 80G amounting to Rs.91,50,000/- by holding that the CSR is a mandatory expenditure specified in Companies Act whereas deduction claimed u/s 80G of donation is voluntary in nature. The AO's contention is that the nature and character of CSR expenditure mandated u/s 135 of the Companies Act read with provision of Section 37 of the Income Tax Act, 1961 and donation prescribed in Section 80G are totally different, distinct and independent from each other. On the other hand, it has been found that the Appellant has disallowed the CSR expenses amounting to Rs.1,83,00,000/- u/s 37(1) of the Income Tax Act, 1961 and claimed the deduction u/s 80G of Rs.91,50,000/- for the year under consideration. On perusal of the provision of Section 37(1) as well as Section 80G of the Income Tax Act, 1961, the contention of the appellant is found to be correct as there is no specific restriction for claiming the deduction u/s 80G of the Income Tax Act 1961 and therefore, no disallowance of deduction claimed u/s 80G is warranted in this case. The appellant has relied upon the following judgements applicable to the facts of the case: Goldman Sachs Services Pvt Ltd V JCIT IT(TP)A No 2355/Bang/2019. Allegis Services (India) (P.) Ltd. v. Asstt. CIT (IT Appeal No. 1693 (Bang) of 2019, dated 29-4-2020] FNF India (P.) Ltd. v. Asstt. CIT [IT Appeal No. 1565 (Bang) of 2019, dated 5.1.2021] JMS Mining (P) Ltd. v. Principal Commissioner of Income Tax Kolkata
2. (2021) 130 com 118 (Kolkata Tribunal) The Hon'ble ITAT Bangalore Bench decision in case of Goldman Sachs Services Pvt Ltd V JCIT IT(TP)A No 2355/Bang/2019 while adjudicating on the issue of CSR contributions which have not been paid by the appellant on voluntary basis and hence the same being not eligible for deduction u/s 80G of the Act, adjudicated the issue as follows. But the assessing officer has rejected the assesses claim without verifying the nature of contributions and observed that it is not a donation, and was not spent voluntarily for the eligibility of claim u/s 80G of the Act but due to legal obligation prescribed u/s 135 r.w. Schedule VII of companies Act, 2013. We find that the A.O has allowed deduction u/s 80G of the Act in respect of contribution made to PM Relief Fund which is not disputed. We are of the opinion that he A.O. has not made his observations clear that no CSR expenses are eligible for deduction u/s 80G of the IT(TP) A No.2355/Bang/2019 Act. We consider it appropriate to refer to the Clauses (iiihk) & (iiihl) of sub-section 2 of Section 80G of the Act which are read as under (iiihk) the Swachh Bharat Kost, set up by the Central Government, other than the sum spent by the assessee in pursuance of corporate social responsibility under sub-section (5) of section 135 of the companies Act, 2013 (18 of 2013); or (iiihl) the clean ganga fund, set up the Central Government, where such assessee is a resident and such sum is other than the sum spent by the assesse in pursuance of corporate social responsibility under sub-section (5) of section 135 of the companies Act, 2013) (18 of 2013). Where these two exceptions are provided in section 80G of the Act, it can be inferred that the other contributions made u/s 135(5) of the companies Act are also eligible for deduction u/s 80G of Income Tax Act subject to assessee satisfying the requisite conditions prescribed for deduction u/s 80G of the Act. In the present case the AO has not dealt on these aspects, prima facie, considered the contributions as not voluntary but a legal obligation and has accepted the genuineness of the contributions. Hence, on the facts of the case it is to be examined that the conditions are satisfying the requirements of claim u/s 80G of the Act. The appellant has also disallowed the CSR expenses amounting to Rs.1,83,00,000/- u/s 37(1) of the Income Tax Act, 1961. Accordingly, the disallowance made by the A.O of Rs.91,50,000/- is deleted. Accordingly, this Ground of Appeal is allowed.”
We do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. The Co-ordinate Bench of the Tribunal in the case of Advik Hi Tech Pvt. Ltd. vs. DCIT (supra) and DCIT vs. Credit Suisse Services (India) Pvt. Ltd. (supra) has decided an identical issue and has allowed the claim of deduction u/s 80G of the Act out of CSR expenses which was otherwise disallowed u/s 37(1) of the Act. Therefore, in absence of any contrary material brought to our notice by the Ld. DR, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. Grounds of appeal No.1 to 3 raised by the Revenue are accordingly dismissed.
Grounds of appeal No.4 and 5 relate to the order of the Ld. CIT(A) / NFAC in allowing the deduction u/s 35(2AB) of the Act amounting to Rs.3,47,56,824/-.
After hearing both sides we find the above grounds are identical to the grounds of appeal No.1 and 2 in for assessment year 2016-17. We have already decided the issue and the grounds raised by the Revenue have been dismissed. Following similar reasonings the above grounds raised by the Revenue are dismissed.
Ground of appeal No.6 raised by the Revenue relates to the order of the Ld. CIT(A) / NFAC in allowing the claim of deduction of Rs.3,88,20,198/- which was not claimed earlier.
Facts of the case, in brief, are that during the assessment proceedings, the assessee requested the Assessing Officer to allow the following deductions: a. Deduction of Education Cess and Secondary Higher Education Cess at Rs.2,23,84,684/-. b. Deduction of ROC Fee and stamp duty paid for issuance of Bonus Share Education Cess and Secondary Higher Education Cess at Rs.84,98,300/-. c. Deduction of payment of listing fee paid to recognized stock exchange at Rs.55,27,300/-.
The Assessing Officer disallowed the above-mentioned claim of deductions on the ground that the same were neither claimed in original return of income nor the claims were made by filing a revised return of income. Therefore, the deductions cannot be allowed at assessment stage. While rejecting the claim of assessee, the AO placed reliance on the judgement of Hon'ble Supreme court in the case of Goetze (India) Ltd. vs CIT (2006) 204 CTR SC 182.
In appeal, the Ld. CIT(A) / NFAC allowed the grounds of the assessee holding that "the issue of allowability of deduction even without its claim in the return has now been settled based on various judicial pronouncements. He referred to the decision of Hon'ble Madras High Court in the case of M/s. Abhinitha Foundation Pvt. Ltd. 249 Taxman p 37 at para 18." He further noted that the expenditure on account of Listing fee, ROC Fee & stamp duty are revenue in nature and squarely covered by the decision of Hon'ble ITAT in the case of DCIT Vs Great Eastern Energy Corporation Ltd and Empower India Ltd vs DCIT (supra) and thus the addition made by the AO ought to be deleted.
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal.
The Ld. DR while opposing the order of the Ld. CIT(A) / NFAC submitted that in view of the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (2006) 204 CTR (SC) 182: (2006) 284 ITR 323 (SC) the assessee can make a claim for deduction, which has not been claimed in the return, only by filing a revised return within the time allowed. Therefore, the decision of the Ld. CIT(A) / NFAC be reversed.
The Ld. Counsel for the assessee on the other hand submitted that the amounts mentioned in grounds are not correct. He submitted that in the course of assessment proceedings the assessee has claimed the following expenses:
Sr. No. Particulars Amount (Rs.) 1 Deduction on account of education cess 2,23,84,684/- 2 ROC fee and stamp duty for bonus issue 84,98,300/- 3 Listing fees 55,27,300/- ------------ 3,64,10,284/-
He submitted that the Ld. CIT(A) / NFAC did not allow the claim of Education cess. So far as the other expenses are concerned, he submitted that these were not claimed in the return of income filed by the assessee. The AO relying on the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. Vs. CIT (supra) held that the claim of the assessee cannot be allowed since it was not made in the original return. He submitted that the Ld. CIT(A) / NFAC relying on various decisions allowed the claim of ROC fee and stamp duty for bonus issue where it has been held that the expenditure incurred on issue of bonus shares is allowable expenditure. Similarly, relying on the decision of Delhi Bench of the Tribunal in the case of Great Eastern Energy Corporation Ltd. (supra), he allowed the claim of expenditure on listing fee. He submitted that the Ld. CIT(A) / NFAC has rightly allowed the claim of the assessee. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Neuzen Finance Pvt. Ltd. reported in 175 taxmann.com 582, he submitted that under identical circumstances the Mumbai Bench of the Tribunal has allowed the claim of the assessee. Similarly, the expenditure on listing fee is also an allowable deduction in light of the decision of Hon’ble Karnataka High Court in the case of Motor Industries Co. Ltd. reported in 26 Taxmann 483 (Kar). He accordingly submitted that the grounds raised by the Revenue should be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee had not claimed the following expenses in the return of income:
Sr. No. Particulars Amount (Rs.) 1 Deduction on account of education cess 2,23,84,684/- 2 ROC fee and stamp duty for bonus issue 84,98,300/- 3 Listing fees 55,27,300/- ------------ 3,64,10,284/-
When the assessee claimed the above expenses during the course of assessment proceedings the AO rejected the same by following the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC). We find when the assessee challenged the action of the AO in rejecting its claim not made in the form of revised return, the Ld.CIT(A) / NFAC following the decision of Hon'ble Madras High Court in the case of M/s. Abhinitha Foundation Pvt. Ltd. (supra) allowed the claim on the ground that a claim of deduction can be entertained even at the level of appellate authority.
So far as the claim of deduction on account of listing fee, ROC fee and stamp duty for bonus issue are concerned, he held the same to be revenue in nature by following the decisions in the cases of DCIT Vs Great Eastern Energy Corporation Ltd and Empower India Ltd vs DCIT (supra). We do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue.
So far as the order of the Ld. CIT(A) / NFAC in allowing the claim not made in the return of income or during the revised return of income is concerned, the Hon’ble Supreme Court in the case of Goetz India Ltd. Vs. CIT (supra) has held that the decision was limited to power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. We find the Hon’ble Madras High Court in the case of M/s. Abhinitha Foundation Pvt. Ltd. (supra), which has been reproduced by the Ld. CIT(A) / NFAC in the body of the order has held as under: “Decision I have carefully considered the facts of the case, and written submission of the appellant, discussion of the AO in the assessment order and material available on record. The appellant averred that the learned AO has incorrectly applied the principle laid down by the Apex Court in the case of Goetze (India) Ltd vs. CIT reported in 284 ITR 323 I find that the issue of allowability of deduction even without its claim in the return has now settled based on various judicial pronouncements Hon'ble Madras High Court summed up this issue in the case of M/s. Abhinitha Foundation Pvt. Ltd 249 Taxman p 37 at para 18 which read as under: "In sum, what emerges from a perusal of the ratio of the judgments cited above, in particular, the judgments rendered by the Supreme Court in GOETZE's case and National Thermal Power Co. Ltd.'s case, and those, rendered by the Division Bench of this Court in Ramco Cements Ltd. and CIT vs Malind Laboratories P. Ltd., as also the judgments of the Delhi High Court in Sam Global Securities Ltd. 's case and Jai Parabolic Springs Ltd.'s case, that, even if, the claim made by the assessee company does not form part of the original return or even the revised return, it could still be considered, if, the relevant material was available on record, either by the appellate authorities, (which includes both the CIT (A) and the Tribunal) by themselves, or on remand, by the Assessing Officer." It flows from the above decision that the claim of deduction can be entertained at the level of CIT (A) and higher appellate authorities. Accordingly, the claim of deduction under section 37(1) of the act cannot be disallowed only on the ground that the same was not claimed in I.T return. In regards to the fact of the ground, it is noted that the Appellant has claim the expenditure Listing fee and ROC Fee & stamp duty which is revenue in nature
and squarely covered by the decision of Hon'ble ITAT in the case of DCIT Vs Great Eastern Energy Corporation Ltd and Empower India Ltd vs DCIT (supra) and thus the addition made by the learned AO ought to be deleted."
We further find Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers & Shareholders - [(2012) 349 ITR 336 (Bom)] has held that the appellate authorities have the power to consider the claim not made in the return. In view of the above discussion and following the decisions of Hon’ble Supreme Court in the case of Goetz India Ltd. (supra), Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders (supra) and the decision of Hon’ble Madras High Court in the case of M/s. Abhinitha Foundation Pvt. Ltd. (supra), we do not find any infirmity in the order of the Ld. CIT(A) / NFAC in entertaining the claim made by the assessee otherwise than by filing a revised return.
So far as the allowability of expenditure on account of ROC fee and stamp duty for bonus issue are concerned, we find the Mumbai Bench of the Tribunal in the case of ACIT vs. Neuzen Finance Pvt. Ltd. (supra) has held that the expenses incurred by the assessee company on filing fees for increase in authorized share capital to issue bonus shares was to be allowed as revenue expenditure. The relevant observations of the Tribunal read as under: “6. After hearing both the parties and on perusal of the relevant finding given in the impugned order as well as material placed on record, we find that assessee company has incurred ROC fees of Rs.14,25,180/- towards increase in authorised share capital to issue bonus shares. The authorised capital was increased from Rs.20 Crores in March 2019 to Rs.40 Crores in March 2020. Consequently, share capital has been increased from Rs.18.43 Crores to 36.88 Crores. The additional share capital was raised by issue of bonus shares in the ratio of 1.1. Once authorised share capital has been increased to issue bonus shares which have been issued by capitalizing free reserves, it tantamount to re-allocation of the company's funds. There is no inflow of fresh funds or increase in the capital, as it
remained the same. The issue of bonus shares has not resulted in extension of capital base of the company. The aforesaid observation and the principle laid down by the Hon'ble High Court in the case of General Insurance Corporation (supra) as highlighted above by the ld. CIT(A) is clearly applicable on these facts and therefore, order of the ld. CIT(A) following judgments of the Hon'ble Supreme Court is upheld. Accordingly, ground Nos. 1 & 2 raised by the Revenue are dismissed.”
So far as the listing fee is concerned, we find Hon’ble Karnataka High Court in the case of Motor Industries Co. Ltd. Vs. CIT (supra) has held that the expenses incurred on listing of shares was to be allowed as revenue in nature in view of the CBDT Circular F.No.10/44/64-IT(A-I), dated 14.01.1965. The relevant observations of Hon’ble High Court read as under:
“6. We have perused the orders of the Tribunal, the AAC and the ITO. We find that all of them have decided the question urged before them without reference to Circular P. No. 10/44/64-IT (A-I), dated 14-1-1965 issued by the Board noticed and extracted in the treatise Income-tax Law by Chaturvedi and Pithisaria, Third edn., Vol. 2, which reads thus: "Annual listing fee paid to a stock exchange - 'Attention is invited to Board's letter [F. No. 10/44/64-IT (A-1)] dated 14-1-1965, on the above subject. The matter has been reconsidered by the Board. As the advantages accruing to a company as a result of getting its shares listed on a stock exchange contain substantial advantages pertaining to its day-to-day business, it has been decided that such expenses should be considered as laid out wholly and exclusively for the purposes of the business and, therefore, admissible as business expenditure, under section 37(1). In view of the above, the instructions issued under Board's earlier letter referred to above may be treated as withdrawn." [F. No. 10/67/65-IT (A-1) dated 26-8- 1965). (p. 1426) We need hardly say that this circular, at any rate, binding on the AAO and the ITO, though not on the Tribunal, was relevant to the determination of the question that arose before them. We have no doubt that if this circular had been brought to the notice of the Tribunal, it would have directed the ITO to examine the question afresh and redetermine the same in the light of that circular. We are therefore, of the view that we should decline to answer the question referred to us.”
In view of the above decisions, we hold that the Ld. CIT(A) / NFAC has rightly allowed the claim of ROC fee, stamp duty for bonus issue of shares and listing fee as an allowable expenditure. Accordingly, the ground of appeal No.6 raised by the Revenue is dismissed.
In the result, the appeal of the Revenue for assessment year 2017-18 is dismissed.
ITA No.1663/PUN/2024 (A.Y. 2018-19)
Facts of the case, in brief, are that the assessee filed its return of income for the impugned assessment year on 31.10.2018 declaring total income of Rs.3,67,79,13,200/-. The AO completed the assessment u/s 143(3) r.w.s. 144B of the Act on 23.04.2021 determining the total income of the assessee at Rs.377,79,87,952/- by making the following additions: a) addition on account of deduction u/s 80G Rs.2,80,50,000/- b) disallowance of deduction claimed u/s 35(2AB) Rs.6,91,63,419/- c) addition on account of duty drawback Rs.24,06,617/- d) addition on account of deduction claimed u/s 35(1)(iv) Rs.4,24,156/-
In appeal, the Ld. CIT(A) / NFAC allowed the claim of the assessee.
Aggrieved with such order of the Ld. CIT(A) / NFAC the Revenue is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.2,80,50,000/- claimed by the assessee company under 80G of the I.T. Act, 1961.
2. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the deduction of Rs.2,80,50,000/- claimed by assessee on its CSR expenditure at Rs.5,61,00,000/- without appreciating the fact that CSR expenditure is not an allowable as deduction as per the Explanation 2 to section 37 of Income Tax Act, 1961.
3. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in allowing the deduction of Rs.2,80,00,000/- claimed by assessee on its CSR expenditure at Rs.5,61,00,000/- without appreciating the fact that the introduction of CSR as envisaged in Finance (No. 2) Bill, 2014 has come to existence with the motive to share burden of the Government in providing social services by companies having and if such expenses are allowed as tax deduction, this would result in subsidizing of around one- third of such expenses by the Government by way of tax expenditure.
4. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the disallowance and allowing excess deduction of Rs.6,91,63,419/- claimed u/s.35(2AB) by admitting additional evidence i.e. revised 3CL dated 15/07/2021 without giving opportunity to the A.O to examine/verify the additional evidence which was not submitted by the assessee during the course of assessment proceedings.
5. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in concluding that the assessee company in its return had claimed deduction u/s 35(2AB) as per the Form 3CL issued by the DSIR, whereas amount claimed by the assessee was in excess by Rs.6,91,63,419/- from the amount eligible to be claimed as deduction as per Form 3CL issued by DSIR.
6. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition on account of duty drawback at Rs.24,06,617/- without appreciating the fact that the assessee was following mercantile system of accounting, and it must not have reported the lessor income to the tune of Rs.24,06,617/- accrued as duty drawback, when it was sanctioned by the respective authority.
7. On the facts and in the circumstances of the case, the CIT(A), NFAC, Delhi has erred in deleting the addition of Rs.4,24,156/- made on account of excess deduction claimed by the assessee u/s.35(1)(iv) of the I.T. Act, 1961 without appreciating the fact that addition was made on failure on the part of assessee in submitting corroboratory evidence i.e. reconciliation of difference in invoices raised and claimed.
8. The order of the Assessing Officer may be restored and that of the CIT(A), NFAC, Delhi be vacated.
9. The appellant craves leave to add, amend or alter all or any of the grounds of appeal.
Grounds of appeal No.1 to3 raised by the Revenue relate to the order of the Ld. CIT(A) / NFAC in allowing the claim of deduction u/s 80G of the Act.
After hearing both the sides, we find the assessee has spent an amount of Rs.5,61,000/- on account of CSR which was not an allowable expenditure. However, the assessee claimed deduction u/s 80G of the Act of Rs.2,80,50,000/- which was disallowed by the Assessing Officer but allowed by the Ld. CIT(A) / NFAC. We find these grounds are identical to the grounds of appeal No.1 to 3 raised in for assessment year 2017-18. We have already decided this issue in and dismissed the grounds raised by the Revenue on this issue. Following similar reasonings, we dismiss the grounds of appeal No.1 to 3 raised by the Revenue.
Grounds of appeal No.4 and 5 relate to the order of the Ld. CIT(A) / NFAC in allowing the claim of deduction u/s 35(2AB) of the Act.
After hearing both the sides, we find the Assessing Officer rejected the claim of deduction u/s 35(2AB) of the Act on the ground that the amount claimed by the assessee u/s 35(2AB) was in excess of the amount eligible to claim as deduction as per Form 3CL issued by DSIR. We find in appeal the Ld. CIT(A) / NFAC allowed the claim on the ground that the assessee obtained the revised Form 3CL issued by DSIR. It is the grievance of the Ld. DR that the Assessing Officer was not given any opportunity. We find the above grounds are identical to the grounds of appeal No.1 & 2 in for assessment year 2016-17. We have already decided the said grounds and dismissed the appeal of the Revenue. Following similar reasonings, the above grounds raised by the Revenue are dismissed.
Ground of appeal No.6 raised by the Revenue relates to the order of the Ld. CIT(A) / NFAC in deleting the addition of Rs.24,06,617/-.
Facts of the case, in brief, are that the Assessing Officer on perusal of office records noticed that during the year under consideration the assessee had received claim of Duty Drawback of Rs.3,75,43,545/-, whereas the assessee company had claimed income from Duty Drawback at Rs.3,51,35,928/ only. Considering the same, the Assessing Officer asked the assessee to explain the reason for discrepancy in income earned and income reported. In its reply the assessee submitted that the company follows mercantile system of accounting according to which duty drawback is recognized on accrual basis in the year in which the export sale is recognized. According to the Assessing Officer as per mercantile system the revenue is to be recognized as and when certainty arises regarding receipt of income. In this case the assessee had applied for duty drawback of Rs.3,75,43,545/- during the year under consideration and the same was sanctioned by the respective authority, therefore the same should have been treated as income because in case of duty drawback certainty arises as soon as duty drawback is sanctioned by the authority. Therefore, in absence of any valid explanation regarding the treatment of Duty Drawback on cash basis instead of mercantile basis, the actual amount claimed during the year as duty drawback of Rs.3,75,43,545 /- was treated as the correct income of the assessee from Duty drawback and difference amount of Rs.24,06,617/- was added to the total income of the assessee as well as book profit of the assessee u/s 115JB of the Income Tax Act, 1961.
Before the Ld. CIT(A) / NFAC it was submitted that the assessee is following mercantile system of accounting where duty drawback is recognized on the basis of export recognized during the year. If the duty drawback received for the export in transit, the same has been considered as income in the year when the export income is recognized which is the general acceptance accounting policy. It was accordingly argued that the addition made by the Assessing Officer be deleted.
Based on the arguments advanced by the assessee, the Ld. CIT(A) / NFAC directed the Assessing Officer to delete the addition by observing as under: “Decision The appellant had submitted that the duty drawback is recognized as per the mercantile basis of accounting. It cannot be consider as taxable on the receipt basis if the assessee following the mercantile basis of accounting. Accordingly, the addition made of Rs.24,07,617/- on the receipt basis. Accordingly, the Ground is allowed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal.
The Ld. DR submitted that the assessee had applied for duty drawback of Rs.3,75,43,545/- during the year under consideration and same was sanctioned by the respective authority. As per mercantile system the revenue is to be recognized as and when certainty arises regarding receipt of income. Therefore, in the instant case, same should have been treated as income, hence, the decision of CIT(A) / NAFC, Delhi be set aside.
The Ld. Counsel for the assessee on the other hand while supporting the order of the Ld. CIT(A) / NFAC submitted that the assessee is consistently following the practice of recognizing duty drawback income on the basis of exports during the year. Referring to page 18 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the following reconciliation statement:
He accordingly submitted that the order of the Ld. CIT(A) / NFAC being in accordance with law should be upheld.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.24,07,617/- on the ground that the assessee has received duty drawback of Rs.3,75,43,545/- but has offered income of Rs.3,51,35,928/- only. We find the Ld. CIT(A) / NFAC deleted the addition on the ground that the assessee is consistently offering duty drawback income when the export is complete and consistently following the same method. We do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue. The assessee has filed a reconciliation statement and proved that it is consistently offering the duty drawback income when the export is complete. In absence of any contrary material brought to our notice by the Ld. DR against the order of the Ld. CIT(A) / NFAC on this issue and following the rule of consistency, we do not find any infirmity in his order. Accordingly, the order of the Ld. CIT(A) / NFAC deleting the addition of Rs.24,07,617/- is upheld and the grounds raised by the Revenue on this issue are dismissed.
Ground of appeal No.7 raised by the Revenue relates to the order of the Ld. CIT(A) / NFAC in deleting the addition of Rs.4,24,156/-.
Facts of the case, in brief, are that on perusal of records, the Assessing Officer noticed that during the year under consideration the assessee had claimed deduction u/s 35(1)(iv) of Rs.20,61,24,810/-. He therefore asked the assessee to submit documentary evidence in support of its claim of deduction. The assessee submitted a detailed table of the amount claimed as deduction along with bills and invoices in support of each claim. The Assessing Officer noticed that the assessee had claimed deduction of Rs.12,70,44,380/- on account of construction done by Radhika construction. As per the final bill raised by Radhika Construction, the assessee was eligible to claim deduction u/s 35(1)(iv) of Rs.12,66,20,224/- (including GST) but the assessee had claimed a deduction of Rs.12,70,44,380/- resulting in excess deduction u/s 35(1)(iv) of Rs.4,24,156/. Since the assessee failed to submit reconciliation of difference by providing any documentary evidence in support of its contention, the excess deduction claimed by the assessee of Rs.4,24,156/- was disallowed and added back to the total income of the assessee.
In appeal the Ld. CIT(A) / NFAC deleted the addition made by the Assessing Officer by observing as under: “I have carefully considered the facts of the case, and written submission of the appellant, discussion of the AO in the assessment order and material available on record. With all the above facts and documents on record, it is submitted that the assessee is following the mercantile basis of accounting and capitalized the assets on the basis of put to use accordingly there should not be any disallowance on the basis of invoice reconciliation. The invoice could have been raised in subsequent years however basis of accounting method, the assessee is right to capitalize the transaction on the basis of accrual. Accordingly, there is no excess deduction claimed by the appellant as it claimed as per the provision of Section 35(1)(iv) of the Act as per accounting in the books. Accordingly, the addition made of Rs.4,24,156/-on the receipt basis Accordingly, the Ground is allowed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal.
The Ld. DR submitted that the Assessing Officer had rightly disallowed the excess deduction claimed u/s 35(1)(iv) of Rs.4,24,156/- which is not in accordance with the provisions of section 35(1)(iv). Therefore, the decision of the Ld. CIT(A)/ NFAC is not acceptable.
The Ld. Counsel for the assessee while supporting the order of the Ld. CIT(A) / NFAC submitted that the assessee during the course of assessment proceedings had submitted all the details for which deduction was claimed. He submitted that the Assessing Officer alleged that the capitalized amount is higher than the invoice value and ignored the fact that the assessee capitalized the assets on the basis of put to use and claimed the deduction u/s 35(1)(iv) as per provisions of the Act. He further submitted that since the order of the Ld. CIT(A) / NFAC is in accordance with law, the same should be upheld and the grounds raised by the Revenue on this issue be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. It is an admitted fact the assessee is following mercantile system of accounting and capitalized the assets on the basis of put to use. The assessee had filed all the invoices during the course of assessment proceedings along with the details for which deduction was claimed. The findings of the Ld. CIT(A) / NFAC that the assessee is following mercantile system of accounting and capitalized the assets on the basis of put to use could not be controverted by the Revenue. Further there is no excess deduction claimed by the assessee as it claimed the deduction as per the provisions of section 35(1)(iv) of the Act as per accounting in the books. We, therefore, do not find any infirmity in the order of the Ld. CIT(A) / NFAC on this issue and the grounds raised by the Revenue are accordingly dismissed. The appeal of the Revenue is accordingly partly allowed for statistical purposes.
In the result, all the appeals filed by the Revenue are dismissed.
Order pronounced in the open Court on 25th August, 2025.
Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 25th August, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपीलार्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on Sr. PS/PS 2 Draft placed before author Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Head 9 Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order