FLAMINGO PHARMACEUTICALS LTD,MUMBAI vs. ACIT-14, MUMBAI

The dispute in the present appeal is confined to the disallowance of deduction claimed under section 35(2AB) of the Income Tax Act, 1961 (for short "the Act").

Brief fact are, the assessee company is engaged in the business of manufacture and export of pharmaceutical formulations in various dosage forms. For the assessment year under dispute, the assessee filed its return of income on 29th September 2012 declaring total income of ` 15,27,38,623. During the assessment proceedings, the Assessing Officer noticed that the assessee has claimed weighted deducted under section 35(2AB) of the Income Tax Act, 1961 (for short "the Act") in respect of capital expenditure towards Research and Development (R & D) called upon the assessee to furnish approval of the competent authority of the Department of Science and Industrial Research (DSIR) and Ministry of Science and Technology, Government of India. Alleging that the assessee could not furnish approval of the competent authority in the prescribed form and further, it did not furnish the details of loans and fluctuation loss on such loans, disallowed the deduction claimed u/s 35(2AB) of the Act.

Though, the assessee challenged the aforesaid disallowance before learned Commissioner (Appeals), however, he also sustained the disallowance on the reasoning that the assessee failed to furnish the approval of the competent authority in the prescribed form.

When the appeal was called for hearing, no one was present to represent the case on behalf of the assessee in spite of the notice of hearing having been issue through registered post with A/D. Even, no 3 Flamingo Pharmaceuticals Ltd. application has been filed by the assessee seeking adjournment of hearing. In such circumstances, we consider it appropriate to dispose of the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record.

The learned Departmental Representative submitted, in absence of approval of the competent authority in the prescribed manner, assessee’s claim of deduction under section 35(2AB) of the Act is not allowable. On a perusal of the facts on record, it appears that the assessee has not furnished approval of the competent authority certifying the expenditure incurred. However, in the grounds raised before us, the assessee has stated that the competent authority from DSIR has granted approval for R & D facility at its factory at Taloja. It further appears that the assessee has applied before the competent authority for approval of the expenditure incurred towards R & D. In such circumstances, we are inclined to restore the issue to the Assessing Officer for fresh adjudication keeping in view the relevant statutory provisions as well as the judicial precedents governing the issue. We further make it clear, the Assessing Officer shall provide reasonable opportunity of being heard to the assessee before deciding the issue.

In the result, appeal is allowed for statistical purposes. Order pronounced in the open Court on 30.08.2019