Sundaram Brake Linings Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1982/CHNY/2013

• Counselvise Citation: 198221714 RSA 2013
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 08-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 11-11-2013
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: M BALASUBRAMANIYAM
• Keywords: Opportunity of being heard; Competent authority

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1982/MDS/2013 / ASSESSMENT YEAR : 2005-06 M/S SUNDARAM BRAKE LININGS LTD B-1 MTH ROAD PADI, CHENNAI 600 050 VS. THE DY COMMISSIONER OF INCOME-TAX COMPANY CIRCLE VI(4) CHENNAI [PAN AADCS 4888 E ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI M. BALASUBRAMANIYAM, CA /RESPONDENT BY : DR. B NISCHAL, JCIT / DATE OF HEARING : 08 - 09 - 2015 ! / DATE OF PRONOUNCEMENT : 13 - 11 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VI, CHENNA I, DATED 30.8.2013 AND PERTAINS TO ASSESSMENT YEAR 2005-06. 2. SHRI M. BALASUBRAMANIYAM, LD. REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED DEDUC TION U/S 35(2AB) OF THE ACT TO THE EXTENT OF ` 1,25,32,197/-. ACCORDING TO THE LD. ITA NO.1982/13 :- 2 -: REPRESENTATIVE, THE ASSESSEE OWNS AN IN-HOUSE RESEA RCH & DEVELOPMENT FACILITY. REFERRING TO THE ASSESSMENT ORDER, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE H AS NOT OBTAINED THE APPROVAL OF THE PRESCRIBED AUTHORITY, I.E DEPARTMEN T OF SCIENTIFIC & INDUSTRIAL RESEARCH (DSIR) AS REQUIRED U/S 35(2AB) OF THE ACT. REFERRING TO PAGE 50 OF THE PAPER BOOK, THE LD. RE PRESENTATIVE SUBMITTED THAT THE ASSESSEE REQUESTED THE DSIR TO ISSUE A CERTIFICATE ON THE EXPENDITURE INCURRED ON RESEARCH & DEVELOPME NT FACILITY AS REQUIRED U/S 35(2AB) OF THE ACT. HOWEVER, THE DSI R CLARIFIED THAT APPROVAL U/S 25(2AB) WAS GRANTED FROM 1.4.2007 TO 3 1.3.2012 IN FORM 3CM. THE DEPARTMENT HAS ALSO ISSUED FORM 3CL FOR F INANCIAL YEAR 2007-08. THE DEPARTMENT FURTHER CLARIFIED THAT THE APPROVAL WAS GRANTED FROM THE DATE WHEN THE COMPANY APPLIED FOR THE FIRST TIME. THE DEPARTMENT FURTHER CLARIFIED THAT THE CLAIM OF THE ASSESSEE WITH REGARD TO EXPENDITURE INCURRED ON RESEARCH & DEVEL OPMENT FACILITY BEFORE 1.4.2007 I.E BEFORE THE DATE OF FILING OF AP PLICATION FOR APPROVAL, CANNOT BE CONSIDERED FOR ISSUE OF FORM 3CL AS REQUI RED U/S 35(2AB) OF THE ACT. REFERRING TO PAGE 94 OF THE PAPER BOOK , THE LD. REPRESENTATIVE SUBMITTED THAT DSIR RENEWED THE RECO GNITION FOR IN- HOUSE RESEARCH & DEVELOPMENT FACILITY BEYOND 31.3.2 003. IN FACT, THE DSIR ACCORDED RENEWAL OF RECOGNITION UPTO 31.3.2006 . BY A ITA NO.1982/13 :- 3 -: SUBSEQUENT ORDER DATED 11.5.2006, THE DSIR EXTENDED RENEWAL OF RECOGNITION UPTO 31.3.2009. REFERRING TO THE DECIS ION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN M/S SRI BIOTECH LABORATORIES INDIA LTD. VS ACIT, IN I.T.A.NO.385/HYD/2004, DATED 24.9. 2014, A COPY OF WHICH IS AVAILABLE AT PAGE 122 OF THE PAPER BOOK, T HE LD. REPRESENTATIVE SUBMITTED THAT LIKE IN THE PRESENT C ASE, THE ASSESSEE BEFORE THE HYDERABAD BENCH OF THIS TRIBUNAL HAS NOT OBTAINED ANY APPROVAL AS REQUIRED U/S 35(2AB) OF THE ACT FROM T HE PRESCRIBED AUTHORITY. THE HYDERABAD BENCH FOUND THAT THE ASS ESSEE CANNOT BE DENIED DEDUCTION CLAIMED U/S 35(2AB) OF THE ACT ME RELY ON THE GROUND THAT THE PRESCRIBED AUTHORITY HAS NOT SUBMIT TED REPORT IN FORM 3CL. ON A QUERY FROM THE BENCH FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 35(2AB) OF THE ACT, THE ASSESSEE HAS TO OBTAIN APPROVAL IN FORM 3CM FROM THE SECRETARY TO THE GOVERNMENT OF INDIA, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH, WHETHER SUCH APPR OVAL WAS OBTAINED IN WRITING IN FORM 3CB OR NOT, THE LD. REPRESENTATI VE CLARIFIED THAT NO SUCH APPROVAL WAS OBTAINED FROM THE SECRETARY TO TH E GOVERNMENT OF INDIA, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEAR CH IN FORM 3CM. HOWEVER, THE LD. REPRESENTATIVE SUBMITTED THAT IN V IEW OF THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN M/S SRI BIOTECH LABORATORIES INDIA LTD.(SUPRA) AND THE DECISION OF THE MUMBAI BE NCH OF THIS TRIBUNAL IN ACIT VS MECO INSTRUMENTS P. LTD IN I.T. A.NO. ITA NO.1982/13 :- 4 -: 4246/MUM/2009, DATED 20.8.2010, A COPY OF WHICH IS PLACED AT PAGE 114 OF THE PAPER BOOK, THE ASSESSEE IS ELIGIBLE FO R DEDUCTION U/S 35(2AB) OF THE ACT. 3. ON THE CONTRARY, DR. B. NISCHAL, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE PRESCRIBED AUTHOR ITY FOR GRANTING APPROVAL U/S 35(2AB) OF THE ACT IS SECRETARY TO GO VERNMENT OF INDIA, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH. RE FERRING TO RULE 6 OF THE INCOME-TAX RULES, 1962, THE LD. DR POINTED OUT THAT THE ASSESSEE HAS TO FILE AN APPLICATION U/S 35(2AB) IN FORM 3CK AS PROVIDED IN RULE 6(4) OF THE INCOME-TAX RULES. THE PRESCRIBED AUTHO RITY NAMELY, SECRETARY TO GOVERNMENT OF INDIA, DEPARTMENT OF SCI ENTIFIC & INDUSTRIAL RESEARCH HAS TO GRANT APPROVAL IN FORM 3CM. ADMITT EDLY, NO SUCH APPROVAL WAS GRANTED BY THE SECRETARY TO GOVERNMENT OF INDIA FOR THE YEAR UNDER CONSIDERATION. REFERRING TO SEC. 35(2AB ) OF THE ACT, THE LD. DR SUBMITTED THAT FOR CLAIMING DEDUCTION U/S 35(2A B) OF THE ACT, THE APPROVAL OF THE SECRETARY TO THE GOVERNMENT OF INDI A, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH IS A PRE-CONDITION . IN THE ABSENCE OF ANY SUCH APPROVAL AS REQUIRED IN RULE 6(5A) R.W.S 3 5(2AB) OF THE ACT, ACCORDING TO THE LD. DR, THE ASSESSEE IS NOT ELIGI BLE FOR DEDUCTION U/S 35(2AB) OF THE ACT. ITA NO.1982/13 :- 5 -: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SEC. 35(2AB) OF THE ACT WHICH READS AS FOLLOWS: EXPENDITURE ON SCIENTIFIC RESEARCH. 35. (1) IN RESPECT OF EXPENDITURE ON SCIENTIFIC RESEARCH , THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED [(2AB) ( 1 ) WHERE A COMPANY ENGAGED IN THE BUSINESS OF BIO- TECHNOLOGY OR IN ANY BUSINESS OF MANUFACTURE OR PRO DUCTION OF ANY ARTICLE OR THING, NOT BEING AN ARTICLE OR THING SPECIFIED IN THE LIST OF THE ELEVENTH SCHEDULE INCURS ANY EXPENDI TURE ON SCIENTIFIC RESEARCH (NOT BEING EXPENDITURE IN THE NA TURE 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 E QUAL TO TWO TIMES OF THE EXPENDITURE SO INCURRED. 5. IN VIEW OF THE ABOVE PROVISION, APPROVAL OF THE PRE SCRIBED AUTHORITY IS A MANDATORY PRE-CONDITION FOR CLAIMING DEDUCTION U/S 35(2AB) OF THE ACT. RULE 6 CLEARLY SAYS THAT THE P RESCRIBED AUTHORITY IS SECRETARY TO GOVERNMENT OF INDIA, DEPARTMENT OF SCI ENTIFIC & INDUSTRIAL RESEARCH. THIS IS VERY CLEAR FROM RULE 6(1B). THE ASSESSEE IS EXPECTED TO MAKE AN APPLICATION TO THE SECRETARY TO GOVERNMENT OF INDIA, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEAR CH IN FORM 3CK. THE SECRETARY TO GOVERNMENT OF INDIA, HAS TO PASS A N ORDER IN WRITING GRANTING APPROVAL IN FORM 3CM. THESE ARE THE MANDA TORY PRE- CONDITIONS FOR CLAIMING DEDUCTION U/S 35(2AB) OF T HE ACT. ITA NO.1982/13 :- 6 -: 6. WE HAVE ALSO CAREFULLY GONE THROUGH THE COPY OF THE APPROVAL SAID TO BE GRANTED BY GOVERNMENT OF INDIA UPTO 31.3.2006 WHICH WAS FURTHER EXTENDED UPTO 31.3.2009. THIS IS A LETTER RECEIVED FROM SCIENTIST F ATTACHED WITH MINISTRY OF SCIENC E & TECHNOLOGY. THIS LETTER DOES NOT REFER ANY PROVISIONS OF THE INCOME- TAX ACT, 1961. RULE 6 OF THE INCOME-TAX RULES CLEARLY SAYS THAT IN CASE OF A NATIONAL LABORATORY OR A UNIVERSITY THE SPECIFIED PERSONS AU THORIZED TO GRANT APPROVAL IS THE PRINCIPAL SCIENTIFIC ADVISER TO THE GOVERNMENT OF INDIA. HOWEVER, FOR THE PURPOSE OF DEDUCTION U/S 35(2AB) OF THE ACT, THE PRESCRIBED AUTHORITY IS SECRETARY TO GOVERNMENT OF INDIA, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH. SINCE THE LET TER WAS SIGNED BY A SCIENTIST, THIS MAY BE FROM THE OFFICE OF THE PRINC IPAL SCIENTIFIC ADVISER FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 35(2AA) OF THE ACT. THEREFORE, THE SO CALLED APPROVAL WHICH IS AVAILABL E AT PAGES 94 AND 95 OF THE PAPER BOOK, CANNOT BE CONSTRUED AS APPROVAL GRANTED U/S 35(2AB) OF THE ACT BY THE SECRETARY TO THE GOVERNM ENT OF INDIA. FORM 3CM CLEARLY INDICATES THAT THE APPROVAL HAS TO BE SIGNED BY THE SECRETARY TO GOVERNMENT OF INDIA, DEPARTMENT OF SCI ENTIFIC & INDUSTRIAL RESEARCH. THE POWER WAS NOT DELEGATED TO ANY OTHER AUTHORITY IN THE DEPARTMENT TO ISSUE THE CERTIFICATE. HOWEVER, IN R ESPECT OF CLAIMING DEDUCTION U/S 35(2AA) AFTER THE APPROVAL WAS GRAN TED BY THE PRINCIPAL SCIENTIFIC ADVISER TO GOVERNMENT OF INDIA , THE AUTHORIZATION ITA NO.1982/13 :- 7 -: CAN BE ISSUED BY AN OFFICER NOT BELOW THE LANK OF T HE DEPUTY SECRETARY TO THE GOVERNMENT OF INDIA. HOWEVER, IN CASE OF DE DUCTION U/S 35(2AB) OF THE ACT, NO ONE ELSE OTHER THAN THE SECR ETARY TO THE GOVERNMENT OF INDIA IS AUTHORIZED TO ISSUE APPROVAL . THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SO C ALLED RENEWAL OF RECOGNITION AVAILABLE AT PAGES 94 & 95 OF THE PAPER BOOK IS NOT THE APPROVAL GRANTED FOR THE PURPOSE OF CLAIMING DEDUCT ION U/S 35(2AB) OF THE ACT. 7. THE LD. REPRESENTATIVE FOR THE ASSESSEE HIMSELF CL ARIFIED VERY FAIRLY THAT NO APPROVAL U/S 35(2AB) OF THE ACT WAS OBTAINED IN FORM 3CM AS REQUIRED UNDER RULE 6(5A) OF THE INCOME-TAX RULES. 8. WE HAVE GONE THROUGH THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN M/S SRI BIOTECH LABORATORIES IN DIA LTD.(SUPRA). THE SCIENTIFIC RESEARCH FACILITY WAS APPROVED BY DSIR T ILL 31.3.2015. HOWEVER, THE CERTIFICATION OF EXPENDITURE INCURRED BY THE ASSESSEE WAS NOT ISSUED IN FORM 3CL. THEREFORE, THE HYDERAB AD BENCH FOUND THAT MERELY BECAUSE FORM 3CL WAS NOT ISSUED BY THE PRESCRIBED AUTHORITY THAT CANNOT BE A REASON TO DENY DEDUCTION U/S 35(2AB) OF THE ACT. THE TRIBUNAL FURTHER CLARIFIED THAT SUBSE QUENTLY IF THE PRESCRIBED AUTHORITY DOES NOT APPROVE THE EXPENDITU RE CLAIMED BY THE ASSESSEE OR QUANTIFIES AT A LESSER AMOUNT, THEN THE DEDUCTION CLAIMED ITA NO.1982/13 :- 8 -: BY THE ASSESSEE SHOULD BE MODIFIED ACCORDINGLY. T HEREFORE, THE ISSUE BEFORE THE HYDERABAD BENCH OF THIS TRIBUNAL IS NOT APPROVAL GRANTED BY THE COMPETENT AUTHORITY BUT THE ISSUE OF CERTIFI CATION IN FORM 3CL. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IS NOT APPL ICABLE TO THE FACTS OF THIS CASE. SIMILARLY, IN THE CASE BEFORE THE MU MBAI BENCH OF THIS TRIBUNAL IN MECO INSTRUMENTS P. LTD (SUPRA), THE AP PROVAL IN FORM 3CM WAS GRANTED WITH EFFECT FROM 1.4.2007 TO 31.3.2011. THE TRIBUNAL FURTHER FOUND THAT THE APPLICATION OF THE ASSESSEE FOR EARLIER ASSESSMENT YEAR WAS PROCESSED, HOWEVER, NO ORDER WA S PASSED. REFERRING TO PROVISO TO RULE 6(5A)OF THE INCOME-TAX RULES, THE TRIBUNAL FOUND THAT THE APPLICATION OF THE ASSESSEE CANNOT BE REJECTED WITHOUT GIVING A REASONABLE OPPORTUNITY OF BEING HEARD. SI NCE SUCH AN OPPORTUNITY WAS NOT GIVEN, THE TRIBUNAL FOUND THAT FOR EARLIER ASSESSMENT YEAR ALSO THE APPROVAL WAS DEEMED TO BE GRANTED. IN THE CASE BEFORE US NO MATERIAL IS AVAILABLE ON RECORD T O SUGGEST THAT APPLICATION OF THE ASSESSEE FOR EARLIER ASSESSMENT YEAR WAS CONSIDERED. IN FACT, APPLICATION MADE BY THE AS SESSEE FOR APPROVAL WAS DATED 31.1.2008. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THE MUMBAI BENCH OF TH IS TRIBUNAL IN MECO INSTRUMENTS P. LTD (SUPRA) IS ALSO NOT APPLICA BLE TO THE FACTS OF THIS CASE. SINCE THE APPROVAL AS REQUIRED U/S 35( 2AB) OF THE ACT ITA NO.1982/13 :- 9 -: R.W.RULE 6 WAS NOT OBTAINED FROM THE PRESCRIBED AUT HORITY, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASS ESSEE IS NOT ENTITLED FOR ANY DEDUCTION U/S 35(2AB) OF THE ACT. THEREFO RE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) A ND ACCORDINGLY THE SAME IS CONFIRMED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 13 TH NOVEMBER, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF