RCC Laboratories India Private Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-3(1), Hyderabad

ITA 1800/Hyd/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8451 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 10-06-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 06-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P.MURALI MOHANA RAO
• Keywords: Deduction Disallowance

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 1800/HYD/18 2015-16 M/S.RCC LABORATORIES INDIA PVT. LTD., HYDERABAD [PAN: AADCR1813J] DCIT, CIRCLE-3(1), HYDERABAD 484/HYD/20 2016-17 ASST.COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDERABAD 1434/HYD/19 2016-17 BIOLOGICAL E LIMITED, HYDERABAD [PAN: AAACB7873P] DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD FOR ASSESSEE : SHRI P.MURALI MOHANA RAO, AR (ITA NOS.1800/HYD/18 & 484/HYD/20) SHRI V.SIVA KUMAR, AR (ITA NO.1434/HYD/19) FOR REVENUE : SHRI ROHIT MUJUMDAR, DR DATE OF HEARING : 10-06-2021 (ITA NO.1800/H/18) 01-07-2021 (ITA NO.484/H/20) 15-06-2021 (ITA NO.1434/H/19) DATE OF PRONOUNCEMENT : 18-08-2021 O R D E R PER S.S.GODARA, J.M. : THE INSTANT BATCH OF THREE APPEALS PERTAINS TO TWIN ASSESSEES HEREIN NAMELY M/S.RCC LABORATORIES INDIA P VT. LTD. AND BIOLOGICAL E LIMITED. THE FORMER ASSESSEES APP EALS ITA NOS.1800/HYD/2018 & 484/HYD/2020 FOR AYS.2015-16 & ITA NOS. 1800/HYD/18 484/HYD/20 & 1434/HYD/19 :- 2 -: 2016-17 FOLLOWED BY THE LATTER TAXPAYERS APPEAL ITA NO.1434/HYD/2019 ARISE AGAINST CIT(A)-3, HYDERABAD S ORDER(S) DT.20-06-2018, 24-03-2020, PASSED IN CASE NOS.0198, 10162/DCIT-3(1)/CIT(A)-3/2017-18, 2018-19/A-3/CIT(A )-3 AND CIT(A)-1, HYDERABADS ORDER DT.28-06-2019 (ITA NO.1434/H/19), PASSED IN CASE NO.10398/2018-19/DCIT 1(2)/CIT(A)-1/HYD/2019-20, INVOLVING PROCEEDINGS U/ S.143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]; RESPE CTIVELY. HEARD BOTH THE PARTIES. CASE FILES PERUSED. 2. IT TRANSPIRES AT THE OUTSET THAT ITA NO.484/HYD/2020 (AY.2016-17) SUFFERS FROM 03 DAYS DELAY IN FILING, STATED TO BE ATTRIBUTABLE TO THE REASON(S) BEYOND ITS CONTROL AS PER CONDONATION PETITION/AFFIDAVIT. NO REBUTTAL HAS COME FROM THE DEPARTMENTAL SIDE. THE IMPUGNED DELAY IS CONDONED THEREFORE. 3. IT EMERGES AT THE OUTSET THAT ALL THESE THREE APPEALS R AISE FORMER ISSUE IN ITA NO.1800/HYD/2018 AND SOLE SUBSTA NTIVE GRIEVANCE IN LATTER TWIN CASES; SEEKS TO CHALLENGE BOTH THE LOWER AUTHORITIES ACTION DENYING SECTION 35(2AB) WEI GHTED DEDUCTION CLAIM(S) OF RS.2,61,32,524/-, RS.86,01,037 /- AND RS.4,81,64,481/-; RESPECTIVELY FOR THE SOLE REASON T HAT THE CORRESPONDING FORM-3CL ISSUED BY THE PRESCRIBED AUTHO RITY I.E., DSIR WAS NOWHERE PLACED ON RECORD. WE THEREFOR E PROPOSE TO DECIDE THE INSTANT COMMON ISSUE TOGETHER AND TREAT THE FIRST ASSESSEES APPEAL, ITA NO.1800/HYD/2018 (AY.2015-16 ) AS THE LEAD CASE. ITA NOS. 1800/HYD/18 484/HYD/20 & 1434/HYD/19 :- 3 -: 4. WE NEXT NOTE THAT THE CIT(A)S DETAILED DISCUSSION AFFIRMING THE ASSESSING OFFICERS ACTION DECLINING TH E IMPUGNED WEIGHTED DEDUCTION TO THE ASSESSEE READS AS UNDER: VII) GROUND NOS.2, 3, 4, 5 AND 6 IN APPEAL RELATES TO DISALLOWANCE OF CLAIM U/S.35(2AB) OF THE ACT. FACTS OF THE CASE, GR OUNDS OF APPEAL AND ASSESSMENT ORDER WERE PERUSED. IT IS SEEN THAT THE APPELLANT SOUGHT DEDUCTION U/S.35(2AB) WITHOUT THE REQUISITE FORM NO.3CM AND FORM NO.3CL. THIS CLAIM MADE BY THE APPELLANT IS NO T CORRECT AS SECTION 35(2AB)(4) SPEAKS ABOUT SUCH APPROVAL. IN T HE ABSENCE OF SUCH APPROVAL, THE CONDITIONS LAID DOWN U/S.35(2AB) ARE NOT COMPLIED WITH AND HENCE APPROVAL U/S.35(2AB) IS NOT ALLOWED. THE APPELLANT'S CONTENTION THAT THIS IS A MERE PROCEDUR AL DEFECT IS NOT CORRECT AS THE DEDUCTION U/S.35(2AB) UNDER THE INCO ME TAX ACT ARE PROVISIONS OF STATUTE PASSED BY THE UNION PARLIAMEN T. IN THIS CONTEXT, IT WOULD BE PERTINENT TO SAY THAT PLAIN WORDS NEED NO EXPLANATION OR ELUCIDATION. IN THIS CASE THE OBSERVATIONS OF ROWLA TT, J IN THE CASE OF CAPE BRANDY SYNDICATE VS INDIAN REVENUE COMMISSION ARE RELEVANT. 'IN A TAXING STATUTE ONE HAS TO LOOK AT WHAT IS CLE ARLY SAID. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ON LY LOOK FAIRLY ON THE LANGUAGE USED. 'THE SUPREME COURT IN THE CASE OF CI T VS. AJAX PRODUCTS LTD., (55 LTR 741) REFERS TO THIS JUDGMENT . AFTER EXAMINATION OF THE MATRIX OF ISSUES IT IS NOTED THAT SO LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETA TIVE PROCESS TO UNFOLD THE LEGISLATIVE INTENT BECOMES IMPERMISSIBLE . THE SUPPOSED INTENTION OF THE LEGISLATURE CANNOT THEN BE' APPEAL ED TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE CLEAR. IN THE CASE OF CIT VS TV SUNDARAM IYENGAR [101 ITR 764] (SC), THE APEX COURT OBSERVED THAT ..... IF THE LANGUAGE OF THE STATUE IS CLEAR AND UNAMBIGUOUS, AND IF TWO INTERPRETATION AR E REASONABLY POSSIBLE, IT WOULD BE WRONG TO DISCARD THE PLAIN ME ANING OF THE WORDS USED IN ORDER TO MEET A POSSIBLE INJUSTICE. FURTHER, IN THE CASE OF KESHAVJI RAVJI & CO. VS CIT [49 TAXMAN- 87] [SC], THE APEX CURT OBSERVED THAT '..... AS LON G AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PROCESS TO UNFOLD THE LEGISLATIVE' INTENT BECOMES I MPERMISSIBLE. THE SUPPOSED INTENTION OF THE LEGISLATURE CANNOT BE APP EALED TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE UNAM BIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS USED, IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE ST ATUTE ARE, ON THEIR OWN TERMS, AMBIVALENT AND DO MANIFEST THE INTENTION OF THE LEGISLATURE. CONSIDERING THE FACTS, ISSUES AND CIRCUMSTANCES OF THE INSTANT CASE, GROUND NOS.2,3,4,5 AND 6 IN APPEAL ARE DISMIS SED. ITA NOS. 1800/HYD/18 484/HYD/20 & 1434/HYD/19 :- 4 -: 4.1. IT IS AN ADMITTED FACT THAT THE ASSESSEES ALLEGED RE SEARCH AND DEVELOPMENT BUSINESS IS ALREADY AN APPROVED ONE BY THE DSIR. THE LEARNED LOWER AUTHORITIES SOLE SUBSTANTIVE REASON FOR REJECTING THE ASSESSEES WEIGHTED AVERAGE DEDUCTI ON CLAIM IS THAT IT HAD FAILED TO FILE FORM-3CM AND FORM-3CI APPROV ED FROM THE DSIR AS PER SECTION 35(2AB)(4) OF THE ACT. 5. LEARNED DEPARTMENTAL REPRESENTATIVES VEHEMENT CONTENTION IS THAT THE IMPUGNED DEDUCTION PROVISION IS TO BE CONSTRUED STRICTLY IN LIGHT OF CASE LAW, COMMISSIONER OF CUSTOMS VS. DILIP KUMAR (2018) 9 SCC 1 (FB)(SC). HE NEXT TOOK US TO RULE-6(7A)(B) OF THE INCOME TAX RULES MAKIN G IT CLEAR THAT SUCH A FORM-3CL IS VERY MUCH MANDATORY BEFO RE GRANTING IMPUGNED SECTION 35(2AB) WEIGHTED DEDUCTION. 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL CONTENTIONS AGAINST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE AND FIND NO REASON TO AGREE WITH THE REV ENUES STAND. THIS IS FOR THE REASON THAT WE ARE DEALING WITH AYS.2015-16 AND 2016-17, WHEREAS THE FOREGOING AMEND MENT IN THE INCOME TAX RULES CAME VIDE IT (10 TH AMENDMENT) RULES, 2016 W.E.F.01-06-2016 PRESCRIBING THE RELEVANT CONDITI ON TO THIS EFFECT. 6.1. WE FURTHER NOTE THAT THIS TRIBUNALS RECENT CO-ORDIN ATE BENCH DECISION IN (2021) [187 ITD 214] PROVIMI ANIM AL NUTRITION INDIA PVT. LTD., VS. PCIT FOR AY.2015-16 ITSE LF HAS REJECTED THE REVENUES IDENTICAL STAND BASED ON THE AMENDMENT IN THE INCOME TAX RULES AS UNDER: 9. THE PROVISIONS NOWHERE SUGGEST OR IMPLY THAT RE SEARCH AND DEVELOPMENT FACILITY IS TO BE APPROVED FROM A PARTI CULAR DATE AND, IN OTHER WORDS, IT IS NOWHERE SUGGESTED THAT DATE OF A PPROVAL ONLY WILL ITA NOS. 1800/HYD/18 484/HYD/20 & 1434/HYD/19 :- 5 -: BE CUT-OFF DATE FOR ELIGIBILITY OF WEIGHTED DEDUCTI ON ON THE EXPENSES INCURRED FROM THAT DATE ONWARDS. A PLAIN READING CL EARLY MANIFESTS THAT THE ASSESSEE HAS TO DEVELOP FACILITY, WHICH PR ESUPPOSES INCURRING EXPENDITURE IN THIS BEHALF, APPLICATION T O PRESCRIBED AUTHORITY, WHO AFTER FOLLOWING PROPER PROCEDURE WIL L APPROVE THE FACILITY OR OTHERWISE AND THE ASSESSEE WILL BE ENTI TLED TO WEIGHTED DEDUCTION OF ANY AND ALL EXPENDITURE SO INCURRED. T HE TRIBUNAL HAS, THEREFORE, COME TO THE CONCLUSION THAT ON PLAIN REA DING OF S. ITSELF, THE ASSESSEE IS ENTITLED TO WEIGHTED DEDUCTION ON EXPEN DITURE SO INCURRED BY THE ASSESSEE FOR DEVELOPMENT OF FACILITY. THE TR IBUNAL HAS ALSO CONSIDERED R. 6(5A) AND FORM NO. 3CM AND COME TO TH E CONCLUSION THAT A PLAIN AND HARMONIOUS READING OF RULE AND FOR M CLEARLY SUGGESTS THAT ONCE FACILITY IS APPROVED, THE ENTIRE EXPENDITURE SO INCURRED ON DEVELOPMENT OF R&D FACILITY HAS TO BE A LLOWED FOR WEIGHTED DEDUCTION AS PROVIDED BY S. 35(2AB). THE T RIBUNAL HAS ALSO CONSIDERED THE LEGISLATIVE INTENTION BEHIND ABOVE E NACTMENT AND OBSERVED THAT TO BOOST UP RESEARCH AND DEVELOPMENT FACILITY IN INDIA, THE LEGISLATURE HAS PROVIDED THIS PROVISION TO ENCO URAGE THE DEVELOPMENT OF THE FACILITY BY PROVIDING DEDUCTION OF WEIGHTED EXPENDITURE. SINCE WHAT IS STATED TO BE PROMOTED WA S DEVELOPMENT OF FACILITY, INTENTION OF THE LEGISLATURE BY MAKING AB OVE AMENDMENT IS VERY CLEAR THAT THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE ON DEVELOPMENT OF FACILITY, IF APPROVED, HAS TO BE ALL OWED FOR THE PURPOSE OF WEIGHTED DEDUCTION.' 20. FROM THE ABOVE DISCUSSION IT IS CLEAR THAT PRIO R TO 1.7.2016 FORM 3CL HAD NO LEGAL SANCTITY AND IT IS ONLY W.E.F 1.7. 2016 WITH THE AMENDMENT TO RULE 6(7A)(B) OF THE RULES, THAT THE Q UANTIFICATION OF THE WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT HAS SIGNI FICANCE. IN THE PRESENT CASE THERE IS NO DIFFICULTY ABOUT THE QUANT UM OF DEDUCTION U/S.35(2AB) OF THE ACT, BECAUSE THE AO ALLOWED 100% OF THE EXPENDITURE AS DEDUCTION U/S.35(2AB)(1)(I) OF THE A CT, AS EXPENDITURE ON SCIENTIFIC RESEARCH. DEDUCTION U/S.35(1)(I) AND SEC.35(2AB) OF THE ACT ARE SIMILAR EXCEPT THAT THE DEDUCTION U/S.35(2A B) IS ALLOWED AS WEIGHTED DEDUCTION AT 200% OF THE EXPENDITURE WHILE DEDUCTION U/S.35(1)(I) IS ALLOWED ONLY AT 100%. THE CONDITION S FOR ALLOWING DEDUCTION U/S.35(1)(I) OF THE ACT AND UNDER SEC.35( 2AB) OF THE ACT ARE IDENTICAL WITH THE ONLY DIFFERENCE BEING THAT THE A SSESSEE CLAIMING DEDUCTION U/S.35(2AB) OF THE ACT SHOULD BE ENGAGED IN MANUFACTURE OF CERTAIN ARTICLES OR THINGS. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ENGAGED IN BUSINESS TO WHICH SEC.35(2AB) OF THE ACT APPLIED. THE OTHER CONDITION REQUIRED TO BE FULFILLED FOR CLAIMI NG DEDUCTION U/S.35(2AB) OF THE ACT IS THAT THE RESEARCH AND DEV ELOPMENT FACILITY SHOULD BE APPROVED BY THE PRESCRIBED AUTHORITY. THE PRESCRIBED AUTHORITY IS THE SECRETARY, DEPARTMENT OF SCIENTIFI C INDUSTRIAL RESEARCH, GOVT. OF INDIA (DSIR). IT IS NOT IN DISPU TE THAT THE ASSESSEE IN THE PRESENT CASE OBTAINED APPROVAL IN FORM NO.3C M AS REQUIRED BY ITA NOS. 1800/HYD/18 484/HYD/20 & 1434/HYD/19 :- 6 -: RULE 6 (5A) OF THE RULES. IN THESE FACTS AND CIRCUM STANCES AND IN THE LIGHT OF THE JUDICIAL PRECEDENTS ON THE ISSUE, WE A RE OF THE VIEW THAT THE DEDUCTION U/S.35(2AB) OF THE ACT OUGHT TO HAVE BEEN ALLOWED AS WEIGHTED DEDUCTION AT 200% OF THE EXPENDITURE AS CL AIMED BY THE ASSESSEE AND OUGHT NOT TO HAVE BEEN RESTRICTED TO 1 00% OF THE EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. WE HOL D AND DIRECT ACCORDINGLY AND ALLOW THE APPEAL OF THE ASSESSEE. 6.2. WE ADOPT THE FOREGOING DETAILED DISCUSSION MUTATIS MUTANDIS HEREIN AS WELL TO DELETE THE IMPUGNED SECTION 35(2AB) WEIGHTED DEDUCTION DISALLOWANCE OF RS.2,61,32 ,523/- FORMING SUBJECT MATTER OF THE LEAD APPEAL ITA NO.1800/HYD/2018. THE INSTANT LEAD APPEAL IS ACCEPTED THEREFORE. 7. SAME ORDER TO FOLLOW IN REMAINING TWIN APPEALS IT A NOS.484/HYD/2020 AND 1434/HYD/2019 SINCE INVOLVING THE VERY QUESTION OF SECTION 35(2AB) IDENTICAL BACKDROP O F FACTS. NO OTHER GROUND IN ANY OF THESE APPEALS HAS BEEN PRESSED BEFORE US. 8. THESE TWIN ASSESSEES THREE APPEALS ARE ALLOWED I N ABOVE TERMS. A COPY OF THIS COMMON ORDER BE PLACED IN THE R ESPECTIVE CASE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 18-08-2021 TNMM ITA NOS. 1800/HYD/18 484/HYD/20 & 1434/HYD/19 :- 7 -: COPY TO : 1.M/S.RCC LABORATORIES INDIA PVT. LTD., C/O. P.MURA LI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2.BIOLOGICAL E LIMITED, 18/1 & 3, RAM NAGAR ROAD, AZAMABAD, HYDERABAD. 3.THE DY.COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDERABAD. 4.THE DY.COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD. 5.THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HYDERABAD. 6.CIT(APPEALS)-3, HYDERABAD. 7.CIT(APPEALS)-1, HYDERABAD. 8.PR.CIT-3, HYDERABAD. 9.PR.CIT-1, HYDERABAD. 10.D.R. ITAT, HYDERABAD. 11.GUARD FILE.