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Income Tax Appellate Tribunal, ‘B’ BENCH, BENGALURU
Before: SHRI J. SUDHAKAR REDDY & SMT. BEENA PILLAI
IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, BENGALURU BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA Nos.1057 to 1062/Bang/2019 (Assessment years:2007-08, 2010-11, 2012-13 to 2015-16) M/s. Kumar Organic Products Ltd., 819/C, Usha Krishan Centre, 13th Cross, 7th Block(West), JSS College Circle, Jayanagar, Bengaluru-560082. … Appellant PAN:AAACK6745P Vs. Deputy Commissioner of Income-tax, Circle 4(1)(1), Bengaluru. … Respondent
Appellant by : Shri H.N.Khincha, CA. Respondent by : Ms. Neera Malhotra, CIT(DR) Date of hearing: 18/07/2019 Date of pronouncement: 19/07/2019 O R D E R Per J. SUDHAKAR REDDY, AM: All these appeals are filed by the assessee and directed against separate but identical orders of the CIT(A)-4, Bengaluru, for the assessment years 2007-08, 2010-11, 2012-13 to 2015-16.
As the issues arising in all these appeals are common, for the sake of convenience, they are heard together and disposed of by way of this common order.
Facts in brief: The assessee is a company and is in the business of manufacture of chemicals and pharmaceuticals. It
ITA Nos.1057 to 1062/Bang/2019 Page 2 of 17 claimed deduction u/s 35(2AB) of the Income-tax Act,1961 ['the Act' for short] for inhouse research and development. It had received approval from Department of Scientific and Industrial Research. The Assessing Officer, in his order u/s 143(3) of the Act, rejected the claim of the assessee for deduction u/s 35(2AB), by holding as follows:
“3.2.8 The company was specifically asked whether it had entered into an agreement with the prescribed authority for co- operation in such research and development facility and for audit of accounts maintained for that facility. The company neither furnished the copy of the agreement entered into with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility. The company has only furnished the approval of the DSIR approving the the facility for the purpose of section 35(2AB) from 01.04.2004 to 31.03.2007. Th company has neither furnished the approval in form No 3CL from the DSIR a to the extent to which the expenditure is incurred on these activities. Hence, in the absence of an agreement being entered into with DSIR for co-operation in such research and development facility and for audit of the accounts maintained for that facility and in the absence of the approval in form No 3CL from the DSIR as to the extent to which the expenditure is incurred on these activities, the claim of weighted deduction u/s 35(2AB) is rejected. Reliance is placed on the decision of the Hyderabad ITAT 'B' Bench in the case of M/s Electronic Corporation of India Ltd Vs ACIT (in ITA No. 1106/Hyd/2011) reproduced above. However, the in-house R&D expenditure of Rs 30,88,007 is allowed as a revenue expenditure.”
Further disallowance was made u/s 14A of the Act. Aggrieved, assessee carried the matter in appeal. The first appellate authority confirmed both the disallowances. On the issue of deduction u/s 35(2AB) he held as follows:
ITA Nos.1057 to 1062/Bang/2019 Page 3 of 17 “6.2 have considered the above grounds of appeal, statement of facts and written submission filed by the appellant and also perused the assessment order. All the case laws relied on by the assessee have no here categorically said that "Form CL is not required". Most of the decision rallied around recognition, time of recognition of the prescribed authority. Though ITAT, Pune in the case of Bharat Forge Ltd. Vs Addl.CIT- Range-1, Pune (ITA No. 13/PUN/2017 for AY 2011-12) had tried to say that the amendment of Rule (6 is only prospective and not much decision went into it nor or the facts identical with our assessee. ITAT Bangalore, in the case of Mahindra Electric Mobility Ltd. (ITA No 641/Bang/2017 for AY 2012-13) expressed a similar opinion but the facts and circumstances are different when compared to the present case, Respectfully I differ from the ITAT, Pune Bench & ITAT Bangalore Bench 'B' on the issue as necessity for Form CL existed even earlier — as it is the fundamental document required to certify the 'quantum of amount' spent, which is eligible for deduction under Sec.35(2AB) — as per the prescribed Authority. In April 2016, the CBDT issued a notification amending Rule 6 of the Rules to provide that the DSIR shall furnish electronically its report in relation to the approval of in-house R & D facility, quantifying the expenditure incurred on in-house R & D facility by the company during the previous year and eligible for weighted deduction u/s. 35(2AB) of the Act in Form No.3CL. Amendment to the Rule is only clarificatory in nature which further specified the time and means of conveying the same to the Department. The issue with respect to whether DSIR has the authority to decide the quantum of R& D expenditure entitled to a weighted deduction u/s. 35(2AB) of the Act has been clearly decided in some of cases:- Electronics Corporation of India Ltd. V. ACIT (ITA No.1106/Hyd/2011). DCIT V. Mastek Limited (2013) 263
ITA Nos.1057 to 1062/Bang/2019 Page 4 of 17 CTR 671 (Guj), Tejas Networks Limited V. DCIT (2015) 60 taxmann.com 309 (Kar). Also, ECIL order has clearly stated that Form CL defines the amount which is eligible for deduction and the courts have held that DSIR has the authority to decide the quantum of R & D expenditure entitled to a weighted deduction u/s. 35(2AB) of the Act and that the AO/Appellate Authorities do not have the authority to modify viz. enhance or reduce the quantum of R & D expenditure as determined by DSIR which is eligible for deduction. Hence, in the absence of Form CL, the amount that is eligible is not known. Hence, allowing deduction u/s. 35(2AB) becomes ambiguous — as what is to be allowed is not certain. Hence, I agree with the view of the AO, and this ground of appeal is dismissed.” (emphasis own) Aggrieved, the assessee is in appeal before us.
The learned counsel for assessee submitted that the issue of grant of deduction u/s 35(2AB) of the Act and the issue of disallowance u/s 14A of the Act are common for all the appeals, except the appeal for the assessment year 2010-11 where the ground on disallowance u/s 14A has not been taken.
On the other grounds challenging the validity of reopening, the learned counsel for assessee submitted that he is not pressing the same. On the issue of disallowance u/s 35(2AB) of the Act, the learned counsel for assessee submitted that the issue is covered in favour of the assessee by the order of the ITAT, Bengaluru Bench in the case of M/s.Mahindra Electric Mobility Ltd. vs. Asst.CIT in ITA No.641/Bang/2017, order dated 14/09/2018, which in turn had
ITA Nos.1057 to 1062/Bang/2019 Page 5 of 17 followed the decision of Pune Bench of Tribunal in the case of Cummins India Ltd. vs. DCIT in ITA No.309/Pune/2014 for the assessment year 2009-10, order dated 15/5/2018 and the order in the case of Sri Biotech Laboratories India Ltd. vs. ACIT in ITA 385/Hyd/2014 for the assessment year 2009-10, order dated 24/9/2016 and other case-laws. He relied on number of other case- laws in support of his contention and submitted that deduction u/s 35(2AB) has to be allowed under the facts and circumstances of the case.
On the issue of disallowance u/s 14A, he submitted that the assessee has no exempt income from dividends on investments and that the only exempt income earned was agricultural income and under these circumstances, no disallowance can be made u/s 14A of the Act. For this proposition, he relied on the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (378 ITR 33)(Del) which was followed by the decisions of the ITAT, Bengaluru Bench in the case of Kailas Royal Premium Projects vs. ITO in ITA No.3316/Bang/2018, assessment year 2013-14 order dated 25/01/2019. He also relied on the decisions of the Hon’ble Supreme Court in the case of Principal CIT vs. State Bank of Patiala (259 Taxman.com 319) (SC) where SLP has been dismissed on the principle laid down that disallowance u/s 14A should be restricted to the amount of exempt income only, held by the Hon’ble Punjab & Haryana High Court.
ITA Nos.1057 to 1062/Bang/2019 Page 6 of 17 7. The learned CIT(DR), on the other hand, opposed the contentions of the learned counsel for assessee and submitted that there are factual differences between the case of M/s.Mahindra Electric Mobility Ltd.(supra) and the case of the assessee. She referred to the assessment order and submitted that the assessee has not furnished copy of the agreement entered into with the prescribed authority for carrying out inhouse research and development facility. She further submitted that in the case of M/s.Mahindra Electric Mobility Ltd. (supra), the Assessing Officer allowed deduction under the first limb of section 35(2AB) which was 100% of the claim and what was refused was weighted deduction u/s at the rate of 200% and whereas in the case of the assessee, 100% deduction was not granted by the Assessing Officer.
She relied on the decision of the jurisdictional High Court in the case of Tejas Networks Ltd. vs. DCIT (2015) 60 taxmann.com 309(Kar) and submitted that in para.27 of the order, the Hon’ble High Court held that the Assessing Officer is bound by the certificate issued by the prescribed authority in Form No.3CL and that the Assessing Officer cannot grant deduction in the absence of such certificate. She further relied on the decision of the constitutional Bench of the Hon’ble Supreme Court in the case of Commissioner of Customs vs. Dilip Kumar, judgment dated 30/07/2018 for the proposition that strict interpretation has to be given where assessee claims an exemption under the Act. With regard to disallowance u/s 14A, the learned CIT(DR) submitted that the Assessing Officer has
ITA Nos.1057 to 1062/Bang/2019 Page 7 of 17 recorded that the assessee had exempt income and under those circumstances, it would be appropriate to set aside the matter to the file of the Assessing Officer for fresh adjudication after verification of the facts.
The learned counsel for assessee, on the other hand, pointed out that the agreement in question has been placed before the CIT(A) and this is at pages 34 to 41 of th paper book and the CIT(A) has considered this agreement and recorded that the only ground of disallowance is the absence of Form No.3CL. On the issue of grant of 100% deduction under the first limb of section 35(2AB) of the Act, he referred to the assessment order and pointed out that 100% deduction has been given by the AO on R&D expenditure and depreciation was granted on R&D asset which means that there is the dispute on the cost of acquisition of the R&D assets and hence, the ld. CIT(DR) is factually incorrect on her submission. On the decision of the Hon’ble Karnataka High Court, in the case of Tejas Networks Ltd. (supra), he submitted that the Hon’ble Court laid down when the prescribed authority issues a certificate in Form 3CL, then the AO has no jurisdiction to deviate or tamper with that figure. He pointed out that nowhere in this case the situation of DISR not giving Form 3CL to the AO has been discussed. He argued that this issue was never before the Hon’ble Court. He also pointed out that the case-laws relied upon by the AO also pertained to similar proposition and whereas proposition canvassed by the assessee is covered in his favour on all fours by the orders of the jurisdictional Tribunal. On
ITA Nos.1057 to 1062/Bang/2019 Page 8 of 17 the issue of exemption u/s 14A, he submitted that the assessee has not earned any dividend income which is exempt under the Act and that it had only agricultural income which was exempt. He had no objection if the matter is set aside the file of the AO for verifying whether the assessee has any exempt income from dividend and requested that direction be given that the proposition of law laid down by the Hon’ble Delhi High Court in the case of Cheminvest Ltd. (supra) be applied.
On careful consideration of the rival contentions, we hold that the CIT(A) had in para.6.2 has recorded that he differs from the decisions of the Bangalore and Pune Benches of the Tribunal on this issue. This is not permissible. Judicial discipline mandats that the ld. CIT(A) should have followed the proposition of law laid down by the ITAT on this issue. This sentence also makes it clear that the issue is squarely covered in favour of the assessee by the decision of the jurisdictional Tribunal in the case of M/s.Mahindra Electric Mobility Ltd. (supra). We also find that the submission that the assessee has not furnished copy of the agreement with the prescribed authority is factually incorrect. It is also factually incorrect to submit that the Assessing Officer has not allowed deduction of R&B as revenue expenditure. Even on R&D expenditure on fixed asset, the quantum of expenditure, i.e. the cost of acquisition is not doubted by the Assessing Officer, as depreciation has been granted on the cost of acquisition. We also find that the decision of the jurisdictional High Court in the case of Tejas Networks Ltd. (supra) is not on the issue
ITA Nos.1057 to 1062/Bang/2019 Page 9 of 17 that arises in this appeal. It deals with a situation where the prescribed authority has allowed certain expenditure in Form 3CL and the Assessing Officer sought to tinker with it. The Court held that it is beyond the jurisdiction of the Assessing Officer change the figure of given by the prescribed authority in Form No.3CL.
The jurisdictional Tribunal in the case of M/s.Mahindra Electric Mobility Ltd. (supra) held as follows:
“We have heard the rival submissions. The learned DR relied on the order of the AO/CIT(A). The learned counsel for the Assessee reiterated submissions as were made before the revenue authorities and placed reliance on some judicial precedents on identical issue rendered by various benches of ITAT and Hon’ble High Courts.
For AY 2012-13, the previous year is FY 2011-12 i.e., the period from 1.4.2011 to 31.3.2012. The facts on record go to show that the Assessee’s in-house R & D facilities was approved by the DSIR, Govt. of India, Ministry of Science and Technology for AY 2012-13 vide their letter dated 20.5.2009, a copy of which is placed at Page-30 of the Assessee’s paper book. The approval is for the period 1.4.2009 upto to 31.3.2012. Therefore, the condition for allowing deduction u/s.35(2AB) of the Act has been fulfilled by the Assessee. The claim of the revenue, however, is that the approval by the prescribed authority in form No.3CM is not final and conclusive and the quantum of expenditure on which deduction is to be allowed is to be certified by DSIR in form No.3CL. There is no statutory provision in the Act which lays down such a condition. We shall therefore examine what is Form No.3CL. 15. DSIR has framed guidelines for approval u/s.35(2AB) of the Act. The guidelines as on May, 2010 which is relevant for AY 2012-13, in so far as it is relevant for the present appeal, was as given below. (i) As per guideline 5 (iv) of the guidelines so framed, every company which has obtained an approval from the prescribed authority should also submit an undertaking
ITA Nos.1057 to 1062/Bang/2019 Page 10 of 17 as per Part C of Form No. 3CK to maintain separate accounts for each R&D centre approved under Section 35(2AB) by the Prescribed Authority, and to get the accounts duly audited every year by an Auditor as defined in subsection (2) of section 288 of the IT Act 1961. (The statutory auditors of the Company should audit the R&D accounts. To facilitate this audit separate books of accounts for R&D should be maintained. Also, the statutory auditors should sign the auditors’ certificate in the details required to be submitted as per annexure-IV of the guidelines to facilitate submission of Report in Form 3CL). (ii) As per guideline 5(vi) of the guidelines, the audited accounts for each year maintained separately for each approved centre shall be furnished to the Secretary, Department of Scientific & Industrial Research by 31st day of October of the succeeding year, along with information as per Annexure-IV of the Guidelines. (iv) As per guideline 5(ix) Expenditures, which are directly identifiable with approved R&D facility only, shall be eligible for the weighted tax deduction. However, expenditure in R&D on utilities which are supplied from a common source which also services areas of the plant other than R&D may be admissible, provided they are metered/measured and subject to certification by a Chartered Accountant. (v) departments, other than R&D centre, such as manufacturing, quality control, tool room etc. incurred on such functions as attending meetings providing advice / directions, ascertaining customer choice/response to new products under development and other liaison work shall not qualify for deduction under section 35(2AB) of I.T. Act 1961. (vi) As per guideline 10 Documents required to be submitted by 31st October of each succeeding year of approved period to facilitate submission of Report in Form 3CL (2 sets) are Complete details as per annexure-IV of DSIR guidelines.
The Assessee applied for issue of Form No.3CL to the appropriate authority on 24.3.2017, after the order of the CIT(A). The application so made by the Assessee is at page 43 to 65 of the Assessee’s paper book. According to the Assessee, it has complied with all the requirements of the guidelines for issue of Form No.3CL, but the DSIR has issued Form No.3CL dated 5.4.2018 for AY 2014 & 15 & 2015-16 but
ITA Nos.1057 to 1062/Bang/2019 Page 11 of 17 no Form No.3CL was issued for AY 2012-13. Though there has been no communication to the Assessee in this regard, the learned counsel for the Assessee submitted that since the audited accounts were not submitted by 31st October of the succeeding AY, as is required under Guideline 5 (vi), the Assessee’s application would not have been considered by the DSIR. 17. Rule-6(7A)(b) of the Rules specifying the prescribed authority and conditions for claiming deduction u/s.35(2AB) of the Act has been amended by the Income Tax (10th Amendment) Rules, 2016 w.e.f. 1.7.2016, whereby it has been laid down that the prescribed authority, i.e., DSIR shall quantify the quantum of deduction to be allowed to an Assessee u/s.35(2AB) of the Act. Prior to such substitution, the above provisions merely 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 DGIT (Exemption) within 60days of granting approval. Therefore prior to 1.7.2016 there was legal sanctity for Form No.3CL in the context of allowing deduction u/s.35(2AB) of the Act. 18.The issue as to whether deduction u/s.35(2AB) of the Act can be denied for absence of Form No.3CL by the DSIR was subject matter of several judicial decisions rendered by various Benches of ITAT. (i) The Pune ITAT in the case of Cummins India Ltd. Vs. DCIT in ITA No.309/Pun/2014 for AY 2009-10 order dated 15.5.2018 had an occasion to consider a case where part of the claim for deduction u/s.35(2AB) of the Act was claimed supported by Form No.3CL but part of it was not supported by Form No.3CL. The Pune ITAT held as follows:- “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
ITA Nos.1057 to 1062/Bang/2019 Page 12 of 17 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 prescribed authority has only approved part of expenditure in form No.3CL. We find no merit in the said order of authorities below. 46. 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 ₹ 6,75,000/-. Thus, grounds of appeal No.10.1, 10.2 and 10.3 are allowed.” (ii) The Hyderabad ITAT in the case of M/S. Sri Biotech Laboratories India Ltd. Vs. ACIT ITA No.385/Hyd/2014 for AY 2009-10 order dated 24.9.2014 took the view (vide Paragraph-13 of the order) that when the Assessee’s R & D facility is approved the deduction u/s.35(2AB) of the Act cannot be denied merely on the ground that prescribed authority has not submitted report in Form 3CL.
The question of allowing deduction u/s.35(2AB) of the Act was considered by the Hon'ble Delhi High Court in the case of CIT vs. Sadan Vikas (India) Ltd. (2011) 335 ITR 117 (Del) where AO refused to accord the benefit of the weighted deduction to the assessee under s. 35(2AB) on the ground that recognition and approval was given by the DSIR in February/September, 2006, i.e., in the next assessment year
ITA Nos.1057 to 1062/Bang/2019 Page 13 of 17 and, therefore, the weighted deduction cannot be allowed. The CIT(A) confirmed the order of the AO. The Tribunal held that the assessee would be entitled to weighted deductions of the aforesaid expenditure incurred by the assessee in terms of the s. 35(2AB) of the Act and in coming to this conclusion, the Tribunal relied upon the judgment of Gujarat High Court in CIT vs. Claris Lifesciences Ltd. 326 ITR 251 (Guj). In its decision the Hon’ble Gujarat High Court held that the cut-off date mentioned in the certificate issued by the DSIR would be of no relevance. What is to be seen is that the assessee was in indulging in R&D activity and had incurred the expenditure thereupon. Once a certificate by DSIR is issued, that would be sufficient to hold that the assessee fulfils the conditions laid down in the aforesaid provisions. The Hon’ble Delhi High Court followed the decision of the Hon’ble Gujarat High Court and upheld the decision of the Tribunal. The Hon’ble Delhi High Court quoted the following observations of the Hon’ble Gujarat High Court and agreed with the said view:
"7. ... The lower authorities are reading more than what is provided by law. A plain and simple reading of the Act provides that on approval of the research and development facility, expenditure so incurred is eligible for weighted deduction. 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.
The provisions nowhere suggest or imply that research and development 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
ITA Nos.1057 to 1062/Bang/2019 Page 14 of 17 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 s. 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 research and development facility in India, the legislature has provided this provision to encourage the development of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted was development of facility, 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.” 20. From the above discussion it is clear that prior to 1.7.2016 Form 3CL had no legal sanctity and it is only w.e.f 1.7.2016 with the amendment to Rule 6(7A)(b) of the Rules, that the quantification of the weighted deduction u/s.35(2AB) of the Act has significance. In the present case there is no difficulty about the quantum of deduction u/s.35(2AB) of the Act, because the AO allowed 100% of the expenditure as deduction u/s.35(2AB)(1)(i) of the Act, as expenditure on scientific research. Deduction u/s.35(1)(i) and Sec.35(2AB) of the Act are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) of the Act and under Sec.35(2AB) of the Act are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) of the Act should be engaged in manufacture of certain articles or things. It is not in dispute that the Assessee is engaged in business to which Sec.35(2AB) of the Act applied. The other condition required to be fulfilled for claiming deduction u/s.35(2AB) of the Act is that the research and development facility should be approved by the prescribed authority. The prescribed authority is the Secretary, Department of Scientific Industrial Research, Govt. Of India (DSIR). It is not in dispute that the Assessee in the present case obtained approval in Form No.3CM as
ITA Nos.1057 to 1062/Bang/2019 Page 15 of 17 required by Rule 6 (5A) of the Rules. In these facts and circumstances and in the light of the judicial precedents on the issue, we are of the view that the deduction u/s.35(2AB) of the Act ought to have been allowed as weighted deduction at 200% of the expenditure as claimed by the Assessee and ought not to have been restricted to 100% of the expenditure incurred on scientific research. We hold and direct accordingly and allow the appeal of the Assessee.
We find that the proposition of law laid down in this order of the ITAT applies on all fours to the facts of the case on hand. Hence, we respectfully follow the order of the co-ordinate bench of the ITAT on this issue.
The Ahmedabad ‘A’ bench of Tribunal in the case of DCIT vs. M/s. Sun Pharmaceutical Industries Ltd. (order dated 10/4/2019 in ITA No.2504/AHD/2017) at para 7 held as follows:
“7. We have heard the rival submissions and perused the relevant material on record. We find that the issue of disallowance of weighted deduction amounting to Rs. 237,77,05,310 stands allowed by the Ld. CIT (A) , Tribunal , Hon’ble High Court and Hon`ble Supreme Court in above mentioned citation by holding that merely because the prescribed authority failed to send intimation In Form No. 3CL, would not be reason enough to deprive the assessee`s claim of deduction under section 35(2AB) of the Act. In view of this matter, respectively following the order of above mentioned authorities, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. Ex- consequenti, the Ground No. 1.1 to 1.5 of the Revenue are therefore, dismissed.”
It followed the judgment of the Hon’ble Gujarat High Court in the case reported in (2019) 103 taxman.com 86, SLP against which was dismissed by the Hon’ble Supreme Court. Consistent with the view
ITA Nos.1057 to 1062/Bang/2019 Page 16 of 17 in all these case-laws, we uphold the contentions of the assessee and direct the AO to grant deduction u/s 35(2AB) of the Act. This ground of the assessee is allowed for all the assessment years.
On the issue of disallowance u/s 14A of the Act, learned counsel for assessee submitted that the assessee has earned exempt agricultural income but has no exempt income by way of dividend from shares and investments. As agreed by both the parties, we set aside this issue to the file of the Assessing Officer for fresh adjudication in accordance with law after verifying the fact. The Assessing Officer is directed to apply proposition of law laid down by the Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (378 ITR 33)(Del) and not to disallow any expenditure in excess of exempt income earned by the assessee. These grounds are allowed for statistical purposes.
All other grounds of the assessee are dismissed as not pressed.
In the result, all the appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open court on 19th July, 2019.
Sd/- Sd/- (BEENA PILLAI) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER Place : Bengaluru Dated : 19/07/2019 srinivasulu, sps
ITA Nos.1057 to 1062/Bang/2019 Page 17 of 17 Copy to : 1 Appellant 2 Respondent 3 CIT(A)- 4 CIT 5 DR, ITAT, Bangalore. 6 Guard file By order
Assistant Registrar Income-tax Appellate Tribunal Bangalore