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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI DUVVURU R.L. REDDY & SHRI S. JAYARAMAN
आदेश / O R D E R PER SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER:
The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-7, Chennai, in dated 22.10.2018 for the AY 2015-16.
The only grievance of the assessee is that the Ld.CIT(A) confirmed the disallowance made by the AO in relating to the research & development expenses u/s.35(2AB) of Income Tax Act, 1961. The assessee has raised the following grounds:
1. The Appellant humbly submits that the Learned Commissioner (Appeals) has failed to appreciate the facts and has misapplied the law in not permitting the deduction of scientific research expenditure not approved by DSIR.
2. The Learned Commissioner (Appeals) has erred in not entertaining the alternative claim u/s.35(1), despite the matter being covered by the Hon'ble ITAT Order dated 29/8/2017 in the Appellant's own case for the AY 2012-13 & AY 2013-14. 3. The Learned Commissioner (Appeals) has erred in assuming that the alternative claim cannot be granted for the reason that the Assessing Officer had not passed any order in pursuance of the ITAT Order, as on the date of hearing. 4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the disallowed Research & Development expenses u/s.35(2AB) be allowed u/s.35(1). 5. The Appellant craves leave to add, amend, alter, vary and / or withdraw any of the above grounds of appeal.
3. The brief facts of the case of the assessee are that the assessee filed its return of income for the AY 2015-16 on 29.10.2015 admitting a total loss of Rs.1,09,930/-. The return was selected for scrutiny and after issuance of notice, the assessment came to be completed u/s.143(3) on 21.09.2017 and the following additions were made:
1. Disallowance u/s.35(2AB) for Rs.2,17,014/- 2. Disallowance u/s.40A(3) for Rs.6,47,700/-
The assessee claimed Rs.49,18,507/- as Research & Development expenses eligible for weighted deduction u/s.35(2AB). The DSIR, the prescribed authority certified an expenditure of Rs.48,10,000/- only. The assessee agreed that the difference is not eligible for weighted deduction but claimed that it to be allowed as expenditure u/s.35(1) or u/s.37. The AO did not agree and disallowed the same.
On being aggrieved, the assessee filed an appeal before the Ld.CIT(A). After considering the submissions made by the assessee, the Ld.CIT(A) dismissed the appeal filed by the assessee. The Ld.AR submitted that the similar issue has been taken up by the Hon’ble ITAT in the assessee’s own case for the AYs 2012-13 & 2013-14. He further submitted that after considering the arguments of the assessee, the Hon’ble ITAT remitted the issue back to the file of the AO to examine this issue afresh. The assessee further submitted that this issue also may go back to the file of the AO for fresh consideration as directed by the Hon’ble ITAT in the earlier years. On the other hand, the Ld.DR supported the orders passed by the Ld.CIT(A).
We have heard both the parties, perused the materials available on record and gone through the orders of authorities below.
There is no dispute that the Tribunal in the assessee’s own case for the AYs 2012-13 & 2013-14 in & in ITA No.1173/Mds/2017 vide its order dated 29.08.2017 remitted the issue back to the file of the AO, with the following directions:
“……….We, accordingly, only consider it proper that the matter is restored for adjudication on merits, i.e., as to validity of the assessee’s claim u/s. 35(1), to 5 & 1173/Mds/2017 (AYs 2012-13 & 2013-14 ) VI Micro Systems Pvt. Ltd. v. Asst. CIT/ITO the file of the AO, making it clear that the onus to substantiate its claim/s is only on the assessee. Further, the copy of Form 3CL, i.e., the form in which the report is submitted by DSIR to the Director General of Income Tax (Exemptions) u/s. 35(2AB)(4) of the Act (PB pgs.2-3) as well as the audited accounts (as at PB pgs. 18-19/AY 2013-14), bear the breakup of the said expenditure. The same is classified under the heads ‘capital expenditure’ and ‘recurring expenditure’. The other grouping of the said expenditure is that debited to the profit and loss account and that carried over in the balance sheet. Surely, these are relevant aspects of the claim, both u/s. 35(2AB) and u/s. 35(1), which need to be examined in the matter. We include s. 35(2AB) as well, as, without doubt, there is no question, therefore, of the capital cost allowed u/s. 35(2A) being claimed under any other provision of the Act, including u/s. 32, a capital allowance in respect of capital expenditure. The AO shall examine the relevant aspects and decide per a speaking order upon allowing due opportunity of hearing to the assessee”.
Considering the above said findings, we are of the firm view that this issue also may go back to the file of the AO for examination as directed by the Tribunal in the earlier years. Consequently, the grounds raised by the assessee are partly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on the 26th day of August, 2019, in Chennai.