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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI S. JAYARAMAN
आदेश/ O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-6, Chennai in dated 29.09.2016 for the assessment year 2012-13.
M/s. India Pistons Limited, the assessee, is engaged in the business of manufacturing of piston and piston assemblies. While making the assessment for the assessment year 2012-13, the AO found that against the total R&D expenditure of Rs.3,48,82,068/-, the assessee was eligible for deduction of Rs.1,74,76,000/- only as per Form No.3CL. Therefore, he disallowed the excess claim of Rs.1,74,06,068/-. Aggrieved against that order, the assessee filed appeal before the CIT(A) and the ld.CIT(A) dismissed the appeal. Aggrieved against that order, the assessee filed this appeal.
The ld.AR submitted that the ld.CIT(A) failed to appreciate that the assessee claimed Rs.1,74,41,034/- as R&D expenditure which is qualified for weighted deduction U/s.35(2AB) which included Rs.1,00,63,946/- as revenue expenditure and Rs.13,61,755/- as tangible assets and Rs.60,15,333/- as intangible assets. The ld.CIT(A) failed to appreciate that the DSIR vide its approval dated 08.07.2014, while approving expenses, new product expenses have been disallowed by them stating that it was not classified properly in the books of account without appreciating that the claim was in line with earlier years and there was no change in the presentation. When this analogy was brought to the knowledge
:-3-: DSIR, the DSIR refused to rectify its order and advised the assessee to take up the claim of weighted deduction for intangible assets with the AO. Therefore, the ld.CIT(A) ought to have granted deduction U/s.35(2AB) as claimed by the assessee and hence pleaded to allow the assessee’s appeal.
Per contra, the ld.DR submitted that the claim of deduction U/s.35(2AB) is governed by the expenditure approved in this regard by the Statutory Authority, i.e., the prescribed authority, being the Department of Scientific and Industrial Research, Government of India. Therefore, the AO can allow the deduction U/s.35(2AB) only when the expenditure is approved in this regard by the DSIR. Since, the assessee has not furnished any evidence of approval either before the ld.AO or before the ld.CIT(A), the orders of the lower authorities are in order and hence the ld.DR pleaded to dismiss the assessee’s appeal.
We heard the rival submissions and gone through the relevant material. Section 35(2AB) provides that when the specified assessee incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house
:-4-: research and development facility as approved by the prescribed authority, i.e., the Secretary, Department of Scientific Research & Development Facility, Government of India, then there shall be allowed a deduction of sum equal to 1 and 1½ times of the expenditure so incurred. Therefore, unless otherwise the prescribed authority approved the expenditure, the AO cannot grant any deduction U/s.35(2AB) as claimed by the assessee. In this case, since, the assessee had not produced the approval of the prescribed authority either before the ld.AO nor before the ld.CIT(A) or before us, we do not find any infirmity in the order of the ld.CIT(A) and hence the assessee’s appeal is dismissed.
In the result, the assessee’s appeal is dismissed.
Order pronounced in the court on 29th October, 2019 at Chennai.