K.N.Bio Sciences India Private Limited , Hyderabad V. Asst. Commissioner of Income Tax, Circle-2(1), Hyderabad

ITA 1344/Hyd/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0555 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2016-2017
• Appeal Filed On: 27-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 35AB

Judgement Text

ITA NO 1344 OF 2019 KN BIO SCIENCES INDIA P LTD H YDERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.1344/HYD/2019 ASSESSMENT YEAR: 2016-17 KN BIOSCIENCES INDIA P LTD HYDERABAD PAN:AACCK3104G VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 2(1) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI C. SURESH REVENUE BY : SRI M. MAHIDHAR,DR DATE OF HEARING: 25/02/2021 DATE OF PRONOUNCEMENT: 03/03/2021 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2016-17 AGAIN ST THE ORDER OF THE CIT (A)-2, HYDERABAD, DATED 14.6.2 019. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE OF FERTILIZ ERS, CHEMICALS AND PAINTS, ETC., FILED ITS RETURN OF INCOME FOR TH E A.Y 2016-17 ON 23.11.2016 ADMITTING TOTAL INCOME OF RS.42,09,818/- . THE CASE WAS SELECTED FOR LIMITED SCRUTINY THROUGH CASS. DUR ING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A O OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 35 OF T HE ACT, AMOUNTING TO RS.62,61,298/- (REVENUE EXPENDITURE) A ND RS.9,22,965/- (CAPITAL EXPENDITURE). THE AO WAS THE REFORE, REQUIRED THE ASSESSEE TO FURNISH FORMS 3CL/3CM IN S UPPORT OF ITA NO 1344 OF 2019 KN BIO SCIENCES INDIA P LTD H YDERABAD PAGE 2 OF 5 THE CLAIM OF DEDUCTION, BUT THE SAME NOT SUBMITTED BY THE ASSESSEE. THEREAFTER, THE ASSESSEE WAS GIVEN A FINA L OPPORTUNITY TO SHOW CAUSE WHY THE DEDUCTION OF RS.31,30,649/- AND RS.9,22,965/- SHOULD NOT DISALLOWED U/S 35 OF THE I .T. ACT. THE ASSESSEE FURNISHED A LETTER DATED 20.09.2018 STATIN G THAT IT HAS THE DSIR CERTIFICATE WHICH IS VALID UPTO 31.3.2021. HOWEVER, ON PERUSAL OF THE CERTIFICATE THE AO OBSERVED THAT THE CERTIFICATE IS ISSUED FOR THE PURPOSE OF CUSTOM DUTY EXEMPTION WHI CH CANNOT BE CONSIDERED FOR THE PURPOSE OF DEDUCTION U/S 35 OF T HE I.T. ACT. OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED FORMS 3CL/3CM IN THE PRESCRIBED FORM BEFORE THE PRESCRIBED AUTHORITY , THE AO DISALLOWED THE CLAIM U/S 35 OF THE I.T. ACT. AGGRIE VED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY DELETING THE ADDI TION OF RS.9,22,965/- AND CONFIRMED THE DISALLOWANCE OF WEI GHTED DEDUCTION U/S 35(2AB) OF THE ACT. AGGRIEVED, THE AS SESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL BY RAISING THE FO LLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-2 HAS ERRED IN LAW AND FACT BY CONFIRMING THE DISALLOWANC E OF WEIGHTED DEDUCTION U/S 35(2AB) OF THE INCOME TAX AC T,1961 (HEREINAFTER REFERRED TO AS 'ACT') TO THE EXTENT OF RS.31,30,649 WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HA S AN IN HOUSE R&D FACILITY WHICH HAS BEEN GIVEN RECOGNITION BY PRESCRIBED AUTHORITY AND HAS FULFILLED ALL THE COND ITIONS PROVIDED IN SECTION 35(2AB) OF THE ACT READ WITH RU LE 6 OF THE INCOME TAX RULES, 1962 (HEREINAFTER REFERRED TO AS 'RULES') FROM IT SIDE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -2 HAS ERRED IN LAW AND FACT BY CONFIRMING THE DISALLOWANC E OF WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT BY FAILIN G TO NOTE THAT THE APPELLANT HAS APPROVAL FROM THE PRESCRIBED AUTHORITY IN FORM 3CM FOR THE BLOCK PERIOD PRIOR TO THE YEAR UNDER APPEAL (01.04.2010 TO 31.03.2015) AND THE BLOCK PER IOD SUBSEQUENT TO THE YEAR UNDER APPEAL (01.04.2018 TO 31.03.2021) AND THE ABSENCE OF FORM 3CM FOR THE INT ERIM PERIOD IN WHICH THE YEAR. UNDER APPEAL IS INCLUDED WAS DUE TO A CLERICAL LAPSE ON PART OF THE PRESCRIBED AUTHO RITY (DSIR). ITA NO 1344 OF 2019 KN BIO SCIENCES INDIA P LTD H YDERABAD PAGE 3 OF 5 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -2 HAS ERRED IN LAW AND FACT BY CONFIRMING THE DISALLOWANC E OF WEIGHTED DEDUCTION U/S 35(2AB) BY FAILING TO NOTE T HAT THE LEGAL MAXIM 'LEX NON COGIT IMPOSSIBILA' (LAW DOES N OT COMPEL A MAN TO DO THAT WHICH HE CANNOT POSSIBLY PERFORM) IS APPLICABLE TO THE CASE OF YOUR APPELLANT SINCE YOUR APPELLANT HAS DULY FILED APPLICATION IN FORM 3CK AFTER WHICH THE ISSUE OF FORM 3CM IS VESTED WITH THE PRESCRIBED AUTHORITY AND WHOLLY OUT OF THE SCOPE OF YOUR APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -2 HAS ERRED IN LAW AND FACT BY CONFIRMING THE DISALLOWANC E OF WEIGHTED DEDUCTION U/S 35(2AB) BY FAILING TO NOTE T HAT: - A) THE IN-HOUSE R&D FACILITY OF THE APPELLANT HAS B EEN RECOGNIZED UP TO 31.03.2021 B) THE APPELLANT HAS RECEIVED APPROVAL IN FORM 3CM FOR THE PERIOD 01.04.2010 TO 31.03.2015. C) THE APPELLANT HAS FILED FORM 3CK FOR THE SUBJECT AY, MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR THE FACIL ITY AND FILED AUDIT REPORT WITHIN PRESCRIBED TIME WITH THE DSIR. D) AFTER FILING FORM 3CK, APPELLANT WAS UNDER A BON AFIDE BELIEF THAT THE FORM 3CM WOULD BE RECEIVED. E) ON FOLLOW UP WITH DSIR FOR FORM 3CM, IT WAS ORAL LY INFORMED THAT FORM 3CK WAS NOT TRACEABLE AND THAT A NY FURTHER REMINDERS WOULD BE CONSIDERED AS FRESH APPL ICATION I.E. CONSIDERED PROSPECTIVELY. F) APPELLANT HAS RECEIVED FORM 3CM FOR THE PERIOD SUBSEQUENT TO SUBJECT AY I.E 01.04.2018 TO 31.03.20 21. G) APPELLANT HAS FULFILLED ALL THE CONDITIONS CAST ON IT UNDER SECTION 35(2AB) OF THE ACT AND UNDER RULE 6 OF THE RULES. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -2 HAS ERRED IN LAW AND FACT BY CONFIRMING THE DISALLOWANC E OF WEIGHTED DEDUCTION U/S 35(2AB) AND HAS FAILED TO NO TE THAT THE EXISTENCE OF RECOGNITION OF THE IN HOUSE R&D FA CILITY IS SUFFICIENT FOR CLAIMING DEDUCTION U/S 35(2AB) AND T HE NON- RECEIPT' OF FORM 3CM FOR A PARTICULAR YEAR DUE TO C LERICAL ERROR IS ONLY A TECHNICAL LAPSE. 6. ANY OTHER GROUND/GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS BEEN GRANTED CERTIFICATE BY DSIR F OR THE EARLIER AS WELL AS SUBSEQUENT A.YS AND IT IS ONLY FOR THE R ELEVANT A.Y, THAT ITA NO 1344 OF 2019 KN BIO SCIENCES INDIA P LTD H YDERABAD PAGE 4 OF 5 FORMS 3CL/3CM WERE NOT ISSUED BY THE DSIR. HE SUBMI TTED THAT THE ASSESSEE HAS SUBMITTED FORM 3CK TO THE PRESCRIB ED AUTHORITY I.E. DSIR BUT HAS NOT RECEIVED ANY COMMUNICATION FR OM THEM AND ON ORAL INQUIRY BY THE ASSESSEE, THE ASSESSEE WAS I NFORMED THAT THE ASSESSEES APPLICATION HAS NOT REACHED THE PRES CRIBED AUTHORITY AND THE ASSESSEE WAS DIRECTED TO SUBMIT A NOTHER FORM. HE SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL TH E MATERIAL BEFORE THE DSIR AND THE ASSESSEE CANNOT BE FOUND T O BE AT FAULT AS THE ASSESSEE CANNOT BE EXPECTED TO DO THE IMPOSS IBLE, AND THEREFORE, THE ASSESSEE SHOULD BE GRANTED WT. DEDUC TION U/S 35(2AB) OF THE ACT AS CLAIMED BY THE ASSESSEE. FOR THIS PROPOSITION, THE LEARNED COUNSEL FOR THE ASSESSEE P LACED RELIANCE UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. TVS ELECTRONICS LTD (2019) 419 ITR 187 (MAD .). 4. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T FORM 3CM/3CL ARE NOT MERE PROCEDURAL FORMS BUT HAVE TO BE ISSUED BY THE PRESCRIBED AUTHORITY I.E. DSIR QUANTI FYING THE AMOUNT ELIGIBLE FOR DEDUCTION U/S 35 (2AB) OF THE A CT, AND THEREFORE, WITHOUT SUCH FORM, THE ASSESSEE CANNOT B E GRANTED WT. DEDUCTION U/S 35AB OF THE ACT. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED FORM 3CK BEFORE THE PRESCRIBED AUTHORITY AND THE POSTAL ACKNOWLEDGEMENT IS ALSO PLACED BEFORE US AS PROOF OF THE SAID SUBMISSION. I N VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE ASSESSEE SHOUL D PURSUE AND SEEK INFORMATION FROM THE PRESCRIBED AUTHORITY FOR ISSUANCE OF FORMS 3CL/3CM AND THE AO IS ALSO DIRECTED TO SEEK I NFORMATION FROM THE DSIR ABOUT THE OUTCOME OF THE APPLICATION MADE BY THE ASSESSEE I.E. FORM 3CK. ON THE BASIS OF SUCH INFORM ATION RECEIVED ITA NO 1344 OF 2019 KN BIO SCIENCES INDIA P LTD H YDERABAD PAGE 5 OF 5 ASSESSEE I.E., FROM DSIR, THE AO SHALL GRANT DEDUCT ION U/S 35(2AB) OF THE ACT IN ACCORDANCE WITH LAW. 6. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD MARCH, 2021. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 3 RD MARCH, 2021. VINODAN/SPS COPY TO: 1 KN BIOSCIENCES INDIA P LTD C/O M/S SEKHAR & SURES H, 133/4 RP ROAD, SECUNDERABAD 500003 2 ACIT, CIRCLE 2(1) SIGNATURE TOWERS, KONDAPUR, HYD ERABAD 3 CIT (A)-2 HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER