DCIT 2(1), MUMBAI V. FAMY CARE LTD, MUMBAI

ITA 1798/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84343 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 26-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH RANAJAN PRASAD
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNALF BENCH, MUMB AI , , ,, , , ,, , ! ' BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARORA, AM ITA NO.1798/MUM/2013 ASSESSMENT YEARS-2009-10 DEPUTY COMMISSIONER OF INCOME-TAX-2(1), AAYAKAR BHAVAN, ROOM NO.561,5 TH FLOOR,M.K.ROAD MUMBAI-400020 # # # # / VS. FAMY CARE LTD. BRADY HOUSE 3 RD FLOOR, 12/14,VEER NARIMAN ROAD, FORT, MUMBAI-400001 $ ! ./ PAN :AAACU1670P ( / REVENUE ) .. ( %&$' / RESPONDENT ) ( ) / REVENUE BY: SHRI RAJESH RANAJAN PRASAD-CIT-DR %&$' ( ) / RESPONDENT BY : SHRI YOGESH THAR # ( *+! / DATE OF HEARING 26/11/2014 ,- ( *+! / DATE OF PRONOUNCEMENT : 26/11/2014 . / O R D E R PER JOGINDER SINGH, JM: THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 06/12/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, THE ONLY GROUND RAISED IN THIS APPEAL IS THAT THE L D. COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THAT THE ASSESSEE FAILED TO TAKE PERMISSION OF THE PRESCRIBED 2 M/S FAMY CARE LTD. AUTHORITY BEFORE INCURRING ANY EXPENDITURE U/S 34(2 AB) AND FURTHER UNABLE TO PROVE THAT THE PERMISSION OF THE PRESCRIBED AUTHORITY WAS OBTAINED BEFORE INCURRING EXPENDITURE U/S 35(2AB) OF THE ACT. 2. AT THE TIME OF HEARING, SHRI RAJESH RANJAN PRASA D, LD. CIT-DR DEFENDED THE CONCLUSION DRAWN IN THE ASSESSM ENT ORDER BY ADVANCING THE ARGUMENTS WHICH ARE IDENTICA L TO THE GROUND RAISED. ON THE OTHER HAND, SHRI YOGESH THAR , LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE CONCLUSION D RAWN IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT, IN BRIE F, ARE THAT THE ASSESSEE DECLARED LOSS OF RS.31,02,10,470/- IN ITS RETURN FILED ON 25/09/2009 WHICH WAS SUBSEQUENTLY REVISED ON 11/01/2011 DECLARING LOSS OF RS.30,80,33,675/-. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME-T AX ACT, 1961 (HEREINAFTER THE ACT) ON 27/12/2011, DETERMINI NG THE LOSS AT RS.17,40,77,314/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED RESEARCH AND DEVELOPMENT EXPENDITURE U/S 35(2AB) OF THE ACT, REL ATING TO ITS IN-HOUSE DIVISION, AMOUNTING TO RS.16,41,80,309 /-. THE ASSESSEE CLAIMED WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT @ 150% OF THE CAPITAL EXPENSES OF RS.3,76,48,919/- AND REVENUE EXPENSES OF RS.7,18,04,620/-. THE LD. ASSE SSING OFFICER DISALLOWED THE CLAIMED DEDUCTION ON THE PLE A THAT THE ASSESSEE DID NOT SUBMIT THE APPROVAL FROM THE PRESC RIBED 3 M/S FAMY CARE LTD. AUTHORITY. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ISSUE WAS DECIDED IN FAVO UR OF THE ASSESSEE. THE RELEVANT FINDING/CONCLUSION IS REPRO DUCED HEREUNDER FOR READY REFERENCE FROM THE IMPUGNED ORD ER. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISS ION OF THE ASSESSEE. IT WAS BEYOND THE CONTROL OF THE ASSESSEE TO FILE FORM NO.3CL, BECAUSE IT IS ISSUED BY THE SECRETARY, DSIR, GOVERNMENT OF INDIA AND IT WAS NOT ISSUED TILL THE TIME OF ASSESSMENT ORDER I.E. 30/12 /2011 BECAUSE FORM NO.3CL IS DATED 30/03/2012, A COPY OF WHICH HAS BEEN FILED AS PER FORM NO.3CL AND FORM NO.3CM, ASSESSEE IS ELIGIBLE FOR WEIGHTED DEDUCTION U/S 35(2AB). THEREFORE, A.O. IS DIRECTED TO VERIFY FOR M NO.3CM AND FORM NO.3CL AND ACCORDINGLY ALLOW WEIGHTED DEDUCTION TO THE ASSESSEE U/S 35(2AB) ON REVENUE EXPENDITURE AS WELL AS CAPITAL EXPENDITURE CLAIMED BY THE ASSESSEE. ASSESSEE IS DIRECTED TO F ILE A COPY OF FORM NO.3CL AND FORM NO.3CM BEFORE THE A.O. FOR GIVING NECESSARY EFFECT TO THIS ORDER. IN RESU LT, THE GROUND OF APPEAL IS TREATED AS ALLOWED. 2.2. WE NOTE THAT FOR GRANTING APPROVAL U/S 35(2AB) OF THE ACT, THE ASSESSEE MADE APPLICATION, WITH THE PRESCR IBED AUTHORITY, IN ACCORDANCE WITH SECTION 35(2AB)(3) R. W. RULE 6(4) OF THE INCOME-TAX RULES, 1962 (HEREINAFTER THE RULES), ON 11/12/2007. THE PRESCRIBED AUTHORITY APPROVED/G RANTED IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY U/S 35(2 AB) OF THE ACT ON 04/03/2009 FOR A PERIOD FROM OCTOBER 19, 2007 TO 31 ST MARCH 2010 IN FORM NO. 3CM, IN ACCORDANCE WITH RULE 6(5A) OF THE RULES. THIS APPROVAL WAS PRODUCE D BEFORE 4 M/S FAMY CARE LTD. THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS I.E. BEFORE FRAMING THE ASSESSMENT ON 30/12/2011. THE PRESCRIBED AUTHORITY SENT FORM NO. 3CL TO THE INCOM E-TAX DEPARTMENT ON 22 ND NOVEMBER 2010 (A.Y. 2008-09) IN ACCORDANCE WITH SECTION 35(2AB)(4) READ WITH RULE 6 (7A)(B) OF THE RULES. AS THE APPROVAL OF THE ENTIRE PERIOD WA S GIVEN ONCE I.E. BY WAY OF FORM NO. 3M, THUS, IN OUR VIEW, THE ASSESSEE COMPLIED WITH THE CONDITIONS FOR CLAIM OF DEDUCTION AS REQUIRED U/S 35(2AB) OF THE ACT. WE ARE REPROD UCING HEREUNDER THE RELEVANT PROVISION OF SECTION 35(2AB) OF THE ACT FOR READY REFERENCE. EXPENDITURE ON SCIENTIFIC RESEARCH 35(2AB)(1) WHERE A COMPANY ENGAGED IN THE BUSINESS OF BIO-TECHNOLOGY OR IN ANY BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, NOT BEING AN ARTICLE OR THING SPECIFIED IN T HE LIST OF THE ELEVENTH SCHEDULE INCURS ANY EXPENDITURE ON SCIENTIFIC RESEARCH (NOT BEING EXPENDITURE IN THE NATURE OF COST OF ANY LAND OR BUILDING) ON IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY, THEN, THERE SHALL BE ALLOWED A DEDUCTION OF A SUM EQUAL TO TWO TIMES OF THE EXPENDITURE SO INCURRED. (4) THE PRESCRIBED AUTHORITY SHALL SUBMIT ITS REPORT IN RELATION TO THE APPROVAL FOR THE SAID FACILITY TO THE DIRECTOR GENERAL IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. IF THE AFORESAID SECTION IS ANALYZED THEN THE DEDUC TION SHALL BE ALLOWED OF A SUM EQUAL TO TWO TIMES OF THE EXPEN DITURE SO INCURRED AND THE PRESCRIBED AUTHORITY IS TO SUBMIT ITS REPORT 5 M/S FAMY CARE LTD. OF SUCH APPROVAL/FACILITY TO THE DIRECTOR GENERAL O N A PRESCRIBED FORM WITHIN SPECIFIED TIME, MEANING THER EBY, THE AUTHORITY CONCERNED HAS TO SUBMIT THE REPORT TO THE DIRECTOR GENERAL. HOWEVER, IF THE TOTALITY OF FACTS ARE ANA LYZED, AS MENTIONED EARLIER, THE ASSESSEE MADE APPLICATION FO R SUCH APPROVAL ON 11/12/2007 WITH THE PRESCRIBED AUTHORIT Y AND SUCH APPROVAL WAS GRANTED ON 04/03/2009, THEREFORE, THE ASSESSEE CANNOT BE DENIED THE CLAIMED DEDUCTION U/S 35(2AB) OF THE ACT MERELY ON THE GROUND THAT THE PR ESCRIBED AUTHORITY DID NOT SUBMIT FORM NO. 3CL IN TIME TO TH E INCOME-TAX DEPARTMENT. THE ASSESSEE CANNOT BE PENA LIZED FOR THE FAULT, IF ANY, OF THE DEPARTMENT. THE ASSE SSING OFFICER CANNOT BE EXPECTED TO BE TOO TECHNICAL RATH ER IS TO TAKE PRACTICAL APPROACH UNDER THE FACTS NARRATED HEREINABOVE, BECAUSE, IT WAS BEYOND THE CONTROL OF THE ASSESSEE TO DIRECT THE AUTHORITY TO SUBMIT THE PRES CRIBED FORM ON FORM NO.3CL TO THE DEPARTMENT. SECTION 35(2 AB) OF THE ACT, NOWHERE SUGGEST THAT THE DATE OF APPROVAL OF RESEARCH AND DEVELOPMENT FACILITY WILL BE CUT OFF D ATE FOR ELIGIBILITY OF WEIGHTED DEDUCTION UNDER THIS SECTIO N ON EXPENSES INCURRED FROM THAT DATE ONWARDS; ONCE FACI LITY IS APPROVED, ENTIRE EXPENDITURE SO INCURRED ON DEVELOP MENT OF RESEARCH AND DEVELOPMENT FACILITY HAS TO BE ALLOWED FOR SUCH WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT AND THUS IT WOULD BE SUFFICIENT TO HOLD THAT ASSESSEE HAS FULFILLED T HE CONDITIONS AS LAID DOWN IN THE SECTION. EVEN OTHERW ISE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED T HE 6 M/S FAMY CARE LTD. ASSESSING OFFICER TO VERIFY THE FORM NO.3CM AND 3CL AND THEN ALLOWED WEIGHTED DEDUCTION, AS CLAIMED BY THE ASSESSEE. WE FIND NO INFIRMITY IN THE CONCLUSION AN D THE DIRECTION IN THE IMPUGNED ORDER. IT IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED, IN THE OPEN COURT, IN TH E PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING, ON 26 TH NOVEMBER, 2014. SD/- SD/- (SANJAY ARORA) ( JOGINDER SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI; /# DATED.- 26/11/2014 F{X~{T? P.S/. # . . . . . . ( (( ( %*0 %*0 %*0 %*0 1 0-* 1 0-* 1 0-* 1 0-* / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. %&$' / THE RESPONDENT. 3. 2 ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. 2 / CIT CONCERNED, MUMBAI 5. 03 %*# , , / DR, ITAT, MUMBAI E BENCH 6. 45 6 / GUARD FILE. .# .# .# .# / BY ORDER, &0* %* //TRUE COPY// 7 77 7 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI.