Sandan Vikas (India) Ltd, New Delhi V. ACIT, New Delhi

ITA 1105/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5664 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 25-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAJANAND MEENA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 1105(DEL)2009 ASSESSMENT YEAR: 2005-06 SANDAN VIKAS (INDIA)LTD., ASSISTANT C OMMISSIONER OF INCOME TAX, 12-A, SHIVAJI MARG, N. DELHI.. V. CO.CIR. 7(1), NEW DELHI. (APPELLANT) (RESPONDEN T) APPELLANT BY: SHRI K. SAMPATH, ADVOCATE RESPONDENT BY: SHRI GAJ ANAND MEENA, CIT/DR ORDER PER A.D. JAIN, J.M . THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 005-06, TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN UPHOLDING THE ASSE SSMENT MADE BY THE AO IN CASE OF EXPENSES RELATING TO RESEARCH AND DEVELOPMENT U/S 35(2AB) AMOUNTING TO RS. 3,83,62,003/- AND CORRESPO NDINGLY DISALLOWING THE CLAIM. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E CIT(A) ERRED IN DISALLOWING CLAIM OF RESEARCH AND DEVELOPMENT EXPE NSES MADE ON THE GROUND THAT THE ASSESSEE HAS NOT FILED FORM 3 CL. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E CIT(A) ERRED NOT FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. CLARIS LIFESCIENCES LTD., IN ITA NO. 383 OF 2008. ITA NO. 1105(DEL)09 2 2. DURING THE YEAR, THE ASSESSEE COMPANY WAS IN THE BUSINESS OF MANUFACTURE OF AUTOMOTIVE AIR-CONDITIONING SYSTEM S, COMPRESSORS AND PARTS RELATED TO AUTOMOBILE INDUSTRY. THE ASSESSEE CLAI MED DEDUCTION OF RS. 3,83,62,003/- U/S 35 (2AB) OF THE I.T. ACT AND ALSO CLAIMED REVENUE EXPENSES OF RS.50,02,156/- ON ACCOUNT OF RESEARCH AND DEVELOPMENT, BY DEBITING IT TO ITS PROFIT AND LOSS ACCOUNT. THE A O DISALLOWED THE CLAIM OF RS.3,83,62,003/- FOR ABSENCE OF FORM NO. 3 CL, HOLD ING THAT THE ASSESSEE WAS NOT ENTITLED TO WEIGHTED DEDUCTION OF 150%, U/S 35 (2AB) OF THE ACT ON THE EXPENSES CLAIMED. 3. THE LEARNED CIT(A), BY VIRTUE OF THE IMPUGNED OR DER, UPHELD THE DISALLOWANCE. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 5. CHALLENGING THE IMPUGNED ORDER, THE LEARNED COUN SEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN UPHO LDING THE ASSESSMENT ORDER DISALLOWING THE EXPENSES RELATING TO RESEARCH AND DEVELOPMENT U/S 35 (2AB) OF THE ACT FOR THE REASON THAT THE ASSESSEE H AD NOT FILED FORM 3 CL. IT HAS BEEN CONTENDED THAT THE CONCERNED CERTIFICATE W AS RECEIVED ONLY IN THE LATER YEAR AND THEREFORE, AT THE RELEVANT TIME, IT WAS NOT POSSIBLE FOR THE ASSESSEE TO SUBMIT THE SAME BEFORE EITHER OF THE AU THORITIES BELOW. IT HAS ALSO BEEN CONTENDED THAT THE LD. CIT(A) HAS WRONGLY DISTINGUISHED THE ITA NO. 1105(DEL)09 3 DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT V. CLARIS LIFESCIENCES LTD., RELIED ON BY THE ASSESSEE. 6. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE LD. CIT(A), IT IS SEEN, HAS CONFIRMED THE DISAL LOWANCE, OBSERVING, INTER ALIA, THAT THE FINANCIAL PERIOD INVOLVED WAS FROM 1 .4.2004 TO 31.3.2005, WHEREAS THE APPLICATION FOR RECOGNITION OF IN-HOUSE R&D FACILITY WAS MADE ONLY ON 10.1.2005, I.E., AT THE FAG END OF THE FINA NCIAL YEAR; THAT AS ADMITTED BY THE ASSESSEE ITSELF VIDE ITS LETTER DATED 13.1.2 009, THE PRESCRIBED FORM NO. 3 CL HAD NOT BEEN ISSUED BY THE DEPARTMENT OF SCIEN CE; THAT CIT V. CLARIS LIFESCIENCES LTD.(SUPRA), WAS NOT APPLICABLE IN TH AT CASE, THE APPLICATION HAD BEEN MADE AND APPROVAL HAD BEEN MADE IN THE SAM E FINANCIAL YEAR, WHEREAS IN THE ASSESSEES CASE THERE WAS A GAP OF T WO FINANCIAL YEARS BETWEEN THE MAKING OF THE APPLICATION AND THE GRANT OF THE APPROVAL. 8. THE DECISION IN CIT V. CLARIS LIFESCIENCES LTD. (SUPRA), HAS BEEN REPORTED IN 221 CTR 301(GUJ). THEREIN, THE HONBL E GUJARAT HIGH COURT HAS HELD THE PROVISIONS OF SECTION 35(2AB) DO NOT S TATE OR IMPLY THAT THE R&D FACILITY IS TO BE APPROVED FROM A PARTICULAR DA TE, OR THAT IT IS ONLY THE DATE OF APPROVAL THAT WOULD BE THE CUT OFF DATE FOR ELIGIBILITY OF WEIGHTED ITA NO. 1105(DEL)09 4 DEDUCTION ON THE EXPENSES INCURRED FROM THAT DATE ONWARDS; THAT A PLAIN READING OF THE SECTION SHOWS THAT THE ASSESSEE HAS TO DEVELOP THE FACILITY, WHICH PRE-SUPPOSES INCURRING THE EXPENDITURE IN THI S BEHALF, APPLICATION TO THE PRESCRIBED AUTHORITY, WHO, AFTER FOLLOWING THE PROPER PROCEDURE, WILL APPROVE THE FACILITY, OR OTHERWISE, AND THE ASSESSE E WILL BE ENTITLED TO WEIGHTED DEDUCTION OF ANY AND ALL EXPENDITURE SO IN CURRED. 9. THIS DECISION, IN OUR CONSIDERED OPINION, HAS WR ONGLY BEEN DISTINGUISHED BY THE LD. CIT(A). IT DOES NOT MATT ER THAT IN THAT CASE, THE MAKING OF THE APPLICATION AND THE GRANT OF APPROVAL CAME ABOUT IN THE SAME FINANCIAL YEAR, WHEREAS IN THE ASSESSEES CASE, THE RE WAS A GAP OF TWO FINANCIAL YEARS BETWEEN THE TWO ACTS. WHAT IS PER TINENT IS THAT THE ASSESSEE DID MAKE AN APPLICATION, WHICH HAS BEEN OBSERVED IN THE IMPUGNED ORDER ALSO. IT IS ALSO A FACT THAT THE FORM 3 CL WAS GI VEN BY THE AUTHORITY IN THE SUBSEQUENT YEAR. THE LD. CIT(A) HAS BEEN OF THE O PINION THAT IT WAS AT THE FAG END OF THE ASSESSEE THAT THE ASSESSEE MADE THE APPLICATION. THIS, HOWEVER, DOES NOT ACT PREJUDICIALLY TO THE ASSESSEE . 10. IN VIEW OF CIT V. CLARIS LIFESCIENCES LTD. (S UPRA), THEREFORE, THE ASSESSEE IS ENTITLED TO WEIGHTED DEDUCTION CLAIMED U/S 35(2AB) OF THE ACT AND WE HOLD SO. THE GRIEVANCE OF THE ASSESSEE IS, AS SUCH, FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. ITA NO. 1105(DEL)09 5 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.2010. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 .03.2010 *RM COPY FORWARDED TO: 1. SANDAN VIKAS (INDIA)LTD., 12-A, SHIVAJI MA RG, N. DELHI.. 2. ASSISTANT COMMISSIONER OF INCOME TAX, CO.CI R. 7(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR