M/s. Provimi Animal Nutrition India Private Limited, Bengaluru V. Principal Commissioner Of Income Tax, Bengaluru

ITA 2215/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2226 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-12-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 14-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Principle of natural justice; Assessment record; Set aside
• Section: 263; 143(3); 251; 43; 13

Judgement Text

ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.2215/BANG/2019 ASSESSMENT YEAR: 2015-16 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD. IS 40, KHB INDUSTRIAL AREA YELAHANKA NEW TOWN BANGALORE-560 058 PAN NO : AAACT4909N VS. PRINCIPAL CIT-5 BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI CHAVALI NARAYAN, A.R. RESPONDENT BY : SHRI PRADEEP KUMAR, D.R. DATE OF HEARING : 02.12.2020 DATE OF PRONOUNCEMENT : 03.12.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE REVISION ORDER DATED 14.08.2019 PASSED BY LD PR. CIT-5, BANG ALORE U/S 263 OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] FO R THE ASSESSMENT YEAR 2015-16. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF M ANUFACTURE AND SALE OF ANIMAL FEED SUPPLEMENTS AND VETERINARY DRUG S. THE AO COMPLETED THE ASSESSMENT OF THE YEAR UNDER CONSIDER ATION U/S 143(3) OF THE ACT ON 27.12.2017. THE LD PR. CIT, UPON EXA MINATION OF ASSESSMENT RECORDS, NOTICED THAT THE ASSESSEE HAS C LAIMED DEDUCTION ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 2 OF 16 OF RS.2,65,43,330/- U/S 35(2AB) OF THE ACT (BEING W EIGHTED DEDUCTION @ 200% OF EXPENDITURE INCURRED BY IT) AND IT HAS BE EN ALLOWED BY THE AO. THE LD PR. CIT NOTICED THAT THE ASSESSEE HAS S PECIFICALLY STATED BEFORE THE AO THAT IT HAS FILED REQUISITE DOCUMENTS FOR APPROVAL AND CERTIFICATION OF THE EXPENDITURE BY THE DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH (DSIR) IN FORM 3CL AND IS AWAIT ING APPROVAL AND CERTIFICATION. THE LD PR. CIT NOTICED THAT THE ASS ESSEE DID NOT FURNISH APPROVAL GRANTED BY DSIR IN FORM 3CL BEFORE THE AO IN SUPPORT OF ITS CLAIM MADE U/S 35(2AB) OF THE ACT TILL THE DATE OF COMPLETION OF ASSESSMENT. THE LD PR. CIT NOTICED THAT THE AO HAS ALLOWED THE DEDUCTION WITHOUT ASCERTAINING FACTUAL ASPECTS RELA TING TO APPROVAL OF EXPENDITURE. ACCORDINGLY, THE LD PR. CIT TOOK T HE VIEW THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDINGLY, HE INITIATED RE VISION PROCEEDINGS U/S 263 OF THE ACT. 3. THE ASSESSEE CONTENDED BEFORE THE LD PR. CIT THAT THE DSIR IS REQUIRED TO SUBMIT FORM 3CL TO THE DIRECTOR GENERAL OF INCOME TAX WITHIN 120 DAYS OF GRANTING APPROVAL. IT WAS CONTE NDED THAT THE IS MERELY IN THE FORM OF INTIMATION TO BE SENT BY DSIR TO THE INCOME TAX DEPARTMENT. ACCORDINGLY, IT WAS SUBMITTED THAT THE FURNISHING OF FORM 3CL IS NOT THE OBLIGATION OF THE COMPANY. TH E ASSESSEE ALSO MADE CERTAIN ALTERNATIVE PRAYERS BEFORE LD PR. CIT. 4. THE LD PR. CIT DID NOT ACCEPT THE CONTENTION S OF THE ASSESSEE. HE TOOK THE VIEW THAT THE AO HAS FAILED TO MAKE NEC ESSARY ENQUIRIES IN RESPECT OF THE CLAIM MADE U/S 35(2AB) OF THE ACT . THE LD PR. CIT ALSO TOOK SUPPORT OF THE DECISION RENDERED BY HONB LE KARNATAKA HIGH COURT IN THE CASE OF TEJAS NETWORK LIMITED (2015)(2 33 TAXMANN 426), WHEREIN THE HONBLE HIGH COURT HELD THAT THE AO IS BOUND TO ALLOW THE DEDUCTION ON THE BASIS OF EXPENDITURE APPROVED BY DSIR IN FORM 3CL. ACCORDINGLY, THE LD PR. CIT SET ASIDE THE ASS ESSMENT ORDER AND ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 3 OF 16 RESTORED THE MATTER OF CLAIM OF DEDUCTION U/S 35(2A B) OF THE ACT TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING IT AFRESH. HE ALSO HELD THAT THE ASSESSEE IS BOUND TO PRODUCE CERTIFIED COP IES OF FORM 3CL BEFORE THE AO. THE ASSESSEE IS AGGRIEVED BY THE OR DER PASSED BY LD PR. CIT. 5. THE LD A.R SUBMITTED THAT THE AO HAS TAKEN U P THE RETURN OF INCOME OF THE ASSESSEE UNDER LIMITED SCRUTINY, IN TER ALIA, TO EXAMINE THE CLAIM FOR DEDUCTION U/S 35(2AB) OF THE ACT. HE SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE RELEVANT DETAILS BEFORE THE AO AND ALSO STATED BEFORE THE AO THAT THE APPROVAL FROM DS IR IN FORM 3CL IS AWAITED. THE AO ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND ACCORDINGLY ALLOWED THE CLAIM. HE SUBMITTED THAT THE QUESTION AS TO WHETHER THE APPROVAL IN FORM 3CL IS MANDATORY TO AL LOW THE CLAIM IS A DEBATABLE ISSUE. HE SUBMITTED THAT THE CO-ORDINA TE BENCH OF TRIBUNAL HAS ALLOWED SIMILAR CLAIM MADE BY THE ASSE SSEE IN AY 2013- 14 AND 2014- 15 IN ITA NO. 26 & 27/BANG/2018, VIDE ITS ORDER DATED 12 TH SEPTEMBER, 2019 HOLDING THAT FURNISHING OF FORM 3C L HAS BECOME MANDATORY WITH EFFECT FROM 1.4.2016 ONLY (SI C. 1.7.2016) AND THE AUTHORITIES ARE NOT JUSTIFIED IN INSISTING ON P RODUCTION OF FORM 3CL FOR ALLOWING DEDUCTION U/S 35(2AB) OF THE ACT P RIOR TO THAT. ACCORDINGLY, HE SUBMITTED THAT THE AO HAS TAKEN A P OSSIBLE VIEW IN THIS MATTER AND HENCE THE LD PR. CIT IS NOT JUSTIFI ED IN REVISING THE ASSESSMENT ORDER. 6. ON THE CONTRARY, THE LD D.R SUPPORTED THE OR DER PASSED BY LD PR. CIT. 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. BEFORE PROCEEDING FURTHER, WE MAY REFER TO THE CELEBRATED DECISION OF HONBLE SUPREME COURT RENDERED IN THE CASE OF MALABAR INDUSTRIAL CO . LTD VS. CIT (2000) (109 TAXMAN 66)(SC), WHEREIN THE SCOPE OF RE VISION ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 4 OF 16 PROCEEDINGS U/S 263 HAS BEEN EXPLAINED SUCCINCTLY B Y HONBLE SUPREME COURT AS UNDER:- 5. TO CONSIDER THE FIRST CONTENTION, IT WILL BE APT TO QUOTE SECTION 263(1) WHICH IS RELEVANT FOR OUR PURPOSE:- 263. REVISION OF ORDERS PREJUDICIAL TO REVENUE - (1 ) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ER RONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BE ING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH I NQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS T HE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLIN G THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. 6. A BARE READING OF THIS PROVISION MAKES IT CLEAR THAT THE PREREQUISITE TO EXERCISE OF JURISDICTION BY THE COM MISSIONER SUO MOTO UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TW IN CONDITIONS, NAMELY, (I). THE ORDER OF THE ASSESSING OFFICER SOU GHT TO BE REVISED IS ERRONEOUS; AND(II) IT IS PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT -- IF THE ORDER O F THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE-- R ECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. 7. THERE CAN BE NO DOUBT THAT THE PROVISION CANNO T BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER; IT IS ONLY WHEN AN ORDER IS ERRO NEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL OR DERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFI NED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IM PORT AND IS NOT CONFINED TO LOSS OF TAX. THE HIGH COURT OF CALCUTTA IN DAWJEE DADABHOY & CO. VS. S.P. JAIN AND ANOTHER [31 ITR 87 2], THE ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 5 OF 16 HIGH COURT OF KARNATAKA IN COMMISSIONER OF INCOME- TAX, MYSORE VS. T. NARAYANA PAI [98 ITR 422], THE HIGH C OURT OF BOMBAY IN COMMISSIONER OF INCOME-TAX VS. GABRIEL IN DIA LTD. [203 ITR 108] AND THE HIGH COURT OF GUJARAT IN COMM ISSIONER OF INCOME-TAX VS. SMT. MINALBEN S. PARIKH [215 ITR 81] TREATED LOSS OF TAX AS PREJUDICIAL TO THE INTERESTS OF THE REVEN UE. . 9. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASS ED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSE QUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PRE JUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCO ME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH TH E COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTA INABLE IN LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. RAMPYARI DEVI SARAOGI VS. COMMISSIONER OF INCOME-TA X [67 ITR 84] AND IN SMT. TARA DEVI AGGARWAL VS. COMMISSIONER OF INCOME-TAX, WEST BENGAL [88 ITR 323]. 8. THE HONBLE SUPREME COURT HAS HELD THAT BOT H THE CONDITIONS, VIZ., THE ASSESSMENT ORDER IS ERRONEOUS AND FURTHER IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE ARE REQUIRED TO BE SATI SFIED. IT WAS FURTHER HELD THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER AD OPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFF ICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 6 OF 16 AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTA INABLE IN LAW. 9. NOW ADVERTING TO THE FACTS OF THE PRESENT CASE , WE NOTICE THAT THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF M/S MA HINDRA ELECTRIC MOBILITY LTD VS. ACIT (ITA NO.641/BANG/2017 DATED 1 4-09-2018) HAS EXPRESSED THE VIEW THAT PRIOR TO 1.7.2016, FORM 3CL HAD NO LEGAL SANCTITY AND IT IS ONLY W.E.F. 1.7.2016 WITH THE AM ENDMENT TO RULE 6(7A)(B) OF THE RULES THAT THE QUANTIFICATION OF WE IGHTED DEDUCTION U/S 35(2AB) OF THE ACT HAS SIGNIFICANCE. FOR THE SA KE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY THE TRIBUNAL IN THE ABOVE SAID CASE:- 13. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARN ED DR RELIED ON THE ORDER OF THE AO/CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS AS WERE MADE BEFORE THE REVENUE AUTHORITIES AND PLACED RELIANCE ON SOME JUDICIAL PR ECEDENTS ON IDENTICAL ISSUE RENDERED BY VARIOUS BENCHES OF ITAT AND HONBLE HIGH COURTS. 14. FOR AY 2012-13, THE PREVIOUS YEAR IS FY 2011-12 I.E., THE PERIOD FROM 1.4.2011 TO 31.3.2012. THE FACTS ON REC ORD GO TO SHOW THAT THE ASSESSEES IN-HOUSE R & D FACILITIES WAS A PPROVED BY THE DSIR, GOVT. OF INDIA, MINISTRY OF SCIENCE AND TECHN OLOGY FOR AY 2012-13 VIDE THEIR LETTER DATED 20.5.2009, A COPY O F WHICH IS PLACED AT PAGE-30 OF THE ASSESSEES ITA NO. 641/BAN G/2017 PAGE 10 OF 17 PAPER BOOK. THE APPROVAL IS FOR THE PERIOD 1.4.2009 UPTO TO 31.3.2012. THEREFORE, THE CONDITION FOR ALLOWING DEDUCTION U/S.35(2AB) OF THE ACT HAS BEEN FULFILLED BY THE AS SESSEE. THE CLAIM OF THE REVENUE, HOWEVER, IS THAT THE APPROVAL BY THE PRESCRIBED AUTHORITY IN FORM NO.3CM IS NOT FINAL AN D CONCLUSIVE ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 7 OF 16 AND THE QUANTUM OF EXPENDITURE ON WHICH DEDUCTION I S TO BE ALLOWED IS TO BE CERTIFIED BY DSIR IN FORM NO.3CL. THERE IS NO STATUTORY PROVISION IN THE ACT WHICH LAYS DOWN SUCH A CONDITION. WE SHALL THEREFORE EXAMINE WHAT IS FORM NO.3CL. 15. DSIR HAS FRAMED GUIDELINES FOR APPROVAL U/S.35( 2AB) OF THE ACT. THE GUIDELINES AS ON MAY, 2010 WHICH IS RELEVA NT FOR AY 2012-13, IN SO FAR AS IT IS RELEVANT FOR THE PRESEN T APPEAL, WAS AS GIVEN BELOW. (I) AS PER GUIDELINE 5 (IV) OF THE GUIDELINES SO FR AMED, EVERY COMPANY WHICH HAS OBTAINED AN APPROVAL FROM THE PRE SCRIBED AUTHORITY SHOULD ALSO SUBMIT AN UNDERTAKING AS PER PART C OF FORM NO. 3CK TO MAINTAIN SEPARATE ACCOUNTS FOR EACH R&D CENTRE APPROVED UNDER SECTION 35(2AB) BY THE PRESCRIBED AU THORITY, AND TO GET THE ACCOUNTS DULY AUDITED EVERY YEAR BY AN AUDITOR AS DEFINED IN SUB- SECTION (2) OF SECTION 288 OF THE I T ACT 1961. (THE STATUTORY AUDITORS OF THE COMPANY SHOULD AUDIT THE R&D ACCOUNTS. TO FACILITATE THIS AUDIT SEPARATE BOOKS O F ACCOUNTS FOR R&D SHOULD BE MAINTAINED. ALSO, THE STATUTORY AUDIT ORS SHOULD SIGN THE AUDITORS CERTIFICATE IN THE DETAILS REQUI RED TO BE SUBMITTED AS PER ANNEXURE- IV OF THE GUIDELINES TO FACILITATE SUBMISSION OF REPORT IN FORM 3CL). (II) AS PER GUIDELINE 5(VI) OF THE GUIDELINES, THE AUDITED ACCOUNTS FOR EACH YEAR MAINTAINED SEPARATELY FOR EACH APPROV ED CENTRE SHALL BE FURNISHED TO THE SECRETARY, DEPARTMENT OF SCIENT IFIC & INDUSTRIAL RESEARCH BY 31ST DAY OF OCTOBER OF THE S UCCEEDING YEAR, ALONG WITH INFORMATION AS PER ANNEXURE-IV OF THE GU IDELINES. (III) AS PER GUIDELINE 5(IX) EXPENDITURES, WHICH AR E DIRECTLY IDENTIFIABLE WITH APPROVED R&D FACILITY ONLY, SHALL BE ELIGIBLE FOR ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 8 OF 16 THE WEIGHTED TAX DEDUCTION. HOWEVER, EXPENDITURE IN R&D ON UTILITIES WHICH ARE SUPPLIED FROM A COMMON SOURCE W HICH ALSO SERVICES AREAS OF THE PLANT OTHER THAN R&D MAY BE A DMISSIBLE, PROVIDED THEY ARE METERED/MEASURED AND SUBJECT TO C ERTIFICATION BY A CHARTERED ACCOUNTANT. (IV) AS PER GUIDELINE 5 (X) EXPENDITURE ON MANPOWER FROM DEPARTMENTS, OTHER THAN R&D CENTRE, SUCH AS MANUFAC TURING, QUALITY CONTROL, TOOL ROOM ETC. INCURRED ON SUCH FU NCTIONS AS ATTENDING MEETINGS PROVIDING ADVICE / DIRECTIONS, A SCERTAINING CUSTOMER CHOICE/RESPONSE TO NEW PRODUCTS UNDER DEVE LOPMENT AND OTHER LIAISON WORK SHALL NOT QUALIFY FOR DEDUCT ION UNDER SECTION 35(2AB) OF I.T. ACT 1961. (V) AS PER GUIDELINE 10 DOCUMENTS REQUIRED TO BE SU BMITTED BY 31 ST OCTOBER OF EACH SUCCEEDING YEAR OF APPROVED P ERIOD TO FACILITATE SUBMISSION OF REPORT IN FORM 3CL (2 SETS ) ARE COMPLETE DETAILS AS PER ANNEXURE-IV OF DSIR GUIDELINES. 16. THE ASSESSEE APPLIED FOR ISSUE OF FORM NO.3CL T O THE APPROPRIATE AUTHORITY ON 24.3.2017, AFTER THE ORDER OF THE CIT(A). THE APPLICATION SO MADE BY THE ASSESSEE IS AT PAGE 43 TO 65 OF THE ASSESSEES PAPER BOOK. ACCORDING TO THE ASSESSEE, I T HAS COMPLIED WITH ALL THE REQUIREMENTS OF THE GUIDELINE S FOR ISSUE OF FORM NO.3CL, BUT THE DSIR HAS ISSUED FORM NO.3CL DA TED 5.4.2018 FOR AY 2014 & 15 & 2015-16 BUT NO FORM NO. 3CL WAS ISSUED FOR AY 2012-13. THOUGH THERE HAS BEEN NO COM MUNICATION TO THE ASSESSEE IN THIS REGARD, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE AUDITED ACCOUNTS WERE NOT SUBMITTED BY 31 ST OCTOBER OF THE SUCCEEDING AY, AS IS REQUIRED UNDER ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 9 OF 16 GUIDELINE 5 (VI), THE ASSESSEES APPLICATION WOULD NOT HAVE BEEN CONSIDERED BY THE DSIR. 17. RULE-6(7A)(B) OF THE RULES SPECIFYING THE PRESC RIBED AUTHORITY AND CONDITIONS FOR CLAIMING DEDUCTION U/S.35(2AB) O F THE ACT HAS BEEN AMENDED BY THE INCOME TAX (10 TH AMENDMENT) RU LES, 2016 W.E.F. 1.7.2016, WHEREBY IT HAS BEEN LAID DOWN THAT THE PRESCRIBED AUTHORITY, I.E., DSIR SHALL QUANTIFY THE QUANTUM OF DEDUCTION TO BE ALLOWED TO AN ASSESSEE U/S.35(2AB) OF THE ACT. P RIOR TO SUCH SUBSTITUTION, THE ABOVE PROVISIONS MERELY PROVIDED THAT THE PRESCRIBED AUTHORITY SHALL SUBMIT ITS REPORT IN REL ATION TO THE APPROVAL OF IN-HOUSE R & D FACILITY IN FORM NO.3CL TO THE DGIT (EXEMPTION) WITHIN 60 ITA NO. 641/BANG/2017 PAGE 12 OF 17 DAYS OF GRANTING APPROVAL. THEREFORE PRIOR TO 1.7.2 016 THERE WAS LEGAL SANCTITY FOR FORM NO.3CL IN THE CONTEXT OF AL LOWING DEDUCTION U/S.35(2AB) OF THE ACT. 18. THE ISSUE AS TO WHETHER DEDUCTION U/S.35(2AB) O F THE ACT CAN BE DENIED FOR ABSENCE OF FORM NO.3CL BY THE DSIR WA S SUBJECT MATTER OF SEVERAL JUDICIAL DECISIONS RENDERED BY VA RIOUS BENCHES OF ITAT. (I) THE PUNE ITAT IN THE CASE OF CUMMINS INDIA LTD. VS. DCIT IN ITA NO.309/PUN/2014 FOR AY 2009-10 ORDER DATED 1 5.5.2018 HAD AN OCCASION TO CONSIDER A CASE WHERE PART OF TH E CLAIM FOR DEDUCTION U/S.35(2AB) OF THE ACT WAS CLAIMED SUPPOR TED BY FORM NO.3CL BUT PART OF IT WAS NOT SUPPORTED BY FORM NO. 3CL. THE PUNE ITAT HELD AS FOLLOWS:- 45. THE ISSUE WHICH IS RAISED IN THE PRESENT APPEA L IS THAT WHETHER WHERE THE FACILITY HAS BEEN RECOGNIZED AND NECESSARY CERTIFICATION IS ISSUED BY THE PRESCRIBED AUTHORITY, ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 10 OF 16 THE ASSESSEE CAN AVAIL THE DEDUCTION IN RESPECT OF EXPENDITURE INCURRED ON IN-HOUSE R&D FACILITY, FOR WHICH THE ADJUDICATING AUTHORITY IS THE ASSESSING OFFICER AND WHETHER THE PRESCRIBED AUTHORITY IS TO APPROVE EXPE NDITURE IN FORM NO.3CL FROM YEAR TO YEAR. LOOKING INTO THE PROVISIONS OF RULES, IT STIPULATES THE FILING OF AU DIT REPORT BEFORE THE PRESCRIBED AUTHORITY BY THE PERSONS AVAI LING THE DEDUCTION UNDER SECTION 35(2AB) OF THE ACT BUT THE PROVISIONS OF THE ACT DO NOT PRESCRIBE ANY METHODOL OGY OF APPROVAL TO BE GRANTED BY THE PRESCRIBED AUTHORITY VIS--VIS EXPENDITURE FROM YEAR TO YEAR. THE AMENDMENT BROUGH T IN BY THE IT (TENTH AMENDMENT) RULES W.E.F. 01.07.2016 , WHEREIN SEPARATE PART HAS BEEN INSERTED FOR CERTIFY ING THE AMOUNT OF EXPENDITURE FROM YEAR TO YEAR AND THE AME NDED FORM NO.3CL THUS, LAYS DOWN THE PROCEDURE TO BE FOL LOWED BY THE PRESCRIBED AUTHORITY. PRIOR TO THE AFORESAID AMENDMENT IN 2016, NO SUCH PROCEDURE / METHODOLOGY WAS PRESCRIBED. IN THE ABSENCE OF THE SAME, THERE IS NO MERIT IN THE ORDER OF ASSESSING OFFICER IN CURTAILING THE EX PENDITURE AND CONSEQUENT WEIGHTED DEDUCTION ITA NO. 641/BANG/2017 PAGE 13 OF 17 CLAIM UNDER SECTION 35( 2AB) OF THE ACT ON THE SURMISE THAT PRESCRIBED AUTHORITY HAS ONLY APPROVED PART OF EXPENDITURE IN FORM NO.3CL. WE FIN D NO MERIT IN THE SAID ORDER OF AUTHORITIES BELOW. 46. THE COURTS HAVE HELD THAT FOR DEDUCTION UNDER S ECTION 35(2AB) OF THE ACT, FIRST STEP WAS THE RECOGNITION OF FACILITY BY THE PRESCRIBED AUTHORITY AND ENTERING AN AGREEME NT BETWEEN THE FACILITY AND THE PRESCRIBED AUTHORITY. ONCE ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 11 OF 16 SUCH AN AGREEMENT HAS BEEN EXECUTED, UNDER WHICH RECOGNITION HAS BEEN GIVEN TO THE FACILITY, THEN TH EREAFTER THE ROLE OF ASSESSING OFFICER IS TO LOOK INTO AND A LLOW THE EXPENDITURE INCURRED ON IN-HOUSE R&D FACILITY AS WE IGHTED DEDUCTION UNDER SECTION 35(2AB) OF THE ACT. ACCORDI NGLY, WE HOLD SO. THUS, WE REVERSE THE ORDER OF ASSESSING OFFICER IN CURTAILING THE DEDUCTION CLAIMED UNDER SECTION 3 5(2AB) OF THE ACT BY ? 6,75,000/-. THUS, GROUNDS OF APPEAL NO.10.1, 10.2 AND 10.3 ARE ALLOWED. (II) THE HYDERABAD ITAT IN THE CASE OF M/S. SRI BIO TECH LABORATORIES INDIA LTD. VS. ACIT ITA NO.385/HYD/201 4 FOR AY 2009-10 ORDER DATED 24.9.2014 TOOK THE VIEW (VIDE PARAGRAPH-13 OF THE ORDER) THAT WHEN THE ASSESSEES R & D FACILITY IS APPROVED THE DEDUCTION U/S.35(2AB) OF T HE ACT CANNOT BE DENIED MERELY ON THE GROUND THAT PRESCRIB ED AUTHORITY HAS NOT SUBMITTED REPORT IN FORM 3CL. 19. THE QUESTION OF ALLOWING DEDUCTION U/S.35(2AB) OF THE ACT WAS CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN T HE CASE OF CIT VS. SADAN VIKAS (INDIA) LTD. (2011) 335 ITR 117 (DEL) WHERE AO REFUSED TO ACCORD THE BENEFIT OF THE WEIGHTED DE DUCTION TO THE ASSESSEE UNDER S. 35(2AB) ON THE GROUND THAT RECOGN ITION AND APPROVAL WAS GIVEN BY THE DSIR IN FEBRUARY/SEPTEMBE R, 2006, I.E., IN THE NEXT ASSESSMENT YEAR AND, THEREFORE, T HE WEIGHTED DEDUCTION CANNOT BE ALLOWED. THE CIT(A) CONFIRMED T HE ORDER OF THE AO. THE TRIBUNAL HELD THAT THE ASSESSEE WOULD B E ENTITLED TO WEIGHTED DEDUCTIONS OF THE AFORESAID EXPENDITURE IN CURRED BY ITA NO. 641/BANG/2017 PAGE 14 OF 17 THE ASSESSEE IN TER MS OF THE S. 35(2AB) OF THE ACT AND IN COMING TO THIS CONCLUSION , THE TRIBUNAL ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 12 OF 16 RELIED UPON THE JUDGMENT OF GUJARAT HIGH COURT IN C IT VS. CLARIS LIFESCIENCES LTD. 326 ITR 251 (GUJ). IN ITS DECISIO N THE HONBLE GUJARAT HIGH COURT HELD THAT THE CUT-OFF DATE MENTI ONED IN THE CERTIFICATE ISSUED BY THE DSIR WOULD BE OF NO RELEV ANCE. WHAT IS TO BE SEEN IS THAT THE ASSESSEE WAS IN INDULGING IN R&D ACTIVITY AND HAD INCURRED THE EXPENDITURE THEREUPON. ONCE A CERTIFICATE BY DSIR IS ISSUED, THAT WOULD BE SUFFICIENT TO HOLD TH AT THE ASSESSEE FULFILS THE CONDITIONS LAID DOWN IN THE AFORESAID P ROVISIONS. THE HONBLE DELHI HIGH COURT FOLLOWED THE DECISION OF T HE HONBLE GUJARAT HIGH COURT AND UPHELD THE DECISION OF THE T RIBUNAL. THE HONBLE DELHI HIGH COURT QUOTED THE FOLLOWING OBSER VATIONS OF THE HONBLE GUJARAT HIGH COURT AND AGREED WITH THE SAID VIEW: '7. ... THE LOWER AUTHORITIES ARE READING MORE THAN WHAT IS PROVIDED BY LAW. A PLAIN AND SIMPLE READING OF THE ACT PROVIDES THAT ON APPROVAL OF THE RESEARCH AND DEVEL OPMENT FACILITY, EXPENDITURE SO INCURRED IS ELIGIBLE FOR W EIGHTED DEDUCTION. 8. THE TRIBUNAL HAS CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND TOOK THE VIEW THAT SECTI ON SPEAKS OF : (I) DEVELOPMENT OF FACILITY; (II) INCURRING OF EXPENDITURE BY THE ASSESSEE FOR DEVELOPMENT OF SUCH FACILITY; ( III) APPROVAL OF THE FACILITY BY THE PRESCRIBED AUTHORIT Y, WHICH IS DSIR; AND (IV) ALLOWANCE OF WEIGHTED DEDUCTION O N THE EXPENDITURE SO INCURRED BY THE ASSESSEE. 9. THE PROVISIONS NOWHERE SUGGEST OR IMPLY THAT RES EARCH AND DEVELOPMENT FACILITY IS TO BE APPROVED FROM A P ARTICULAR DATE AND, IN OTHER WORDS, IT IS NOWHERE SUGGESTED T HAT DATE ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 13 OF 16 OF APPROVAL ONLY WILL BE CUT-OFF DATE FOR ELIGIBILI TY OF WEIGHTED DEDUCTION ON THE EXPENSES INCURRED FROM TH AT DATE ONWARDS. A PLAIN READING CLEARLY MANIFESTS THAT THE ASSESSEE HAS TO DEVELOP FACILITY, WHICH PRESUPPOSES INCURRIN G EXPENDITURE IN THIS BEHALF, APPLICATION TO PRESCRIB ED AUTHORITY, WHO AFTER FOLLOWING PROPER PROCEDURE WIL L APPROVE THE FACILITY OR OTHERWISE AND THE ASSESSEE WILL BE ENTITLED TO WEIGHTED DEDUCTION OF ANY AND ALL EXPEN DITURE SO INCURRED. THE TRIBUNAL HAS, THEREFORE, COME TO T HE CONCLUSION THAT ON PLAIN READING OF S. ITSELF, THE ASSESSEE IS ENTITLED TO WEIGHTED DEDUCTION ON EXPENDITURE SO IN CURRED BY THE ASSESSEE FOR DEVELOPMENT OF FACILITY. THE TR IBUNAL HAS ALSO CONSIDERED R. 6(5A) AND FORM NO. 3CM AND C OME TO THE CONCLUSION THAT A PLAIN AND HARMONIOUS READI NG OF RULE AND FORM CLEARLY SUGGESTS THAT ONCE FACILITY I S APPROVED, THE ENTIRE EXPENDITURE SO INCURRED ON DEVELOPMENT OF R&D FACILITY HAS TO BE ALLOWED FOR WEIGHTED DEDUCTION AS PROVIDED BY S. 35(2AB). THE TRIBUNAL HAS ALSO CONSIDERED THE LEGISLATIVE INTENT ION BEHIND ABOVE ENACTMENT AND OBSERVED THAT TO BOOST U P RESEARCH AND DEVELOPMENT FACILITY IN INDIA, THE LEG ISLATURE HAS PROVIDED THIS PROVISION TO ENCOURAGE THE DEVELO PMENT OF THE FACILITY BY PROVIDING DEDUCTION OF WEIGHTED EXPENDITURE. SINCE WHAT IS STATED TO BE PROMOTED WA S DEVELOPMENT OF FACILITY, INTENTION OF THE LEGISLATU RE BY MAKING ABOVE AMENDMENT IS VERY CLEAR THAT THE ENTIR E EXPENDITURE INCURRED BY THE ASSESSEE ON DEVELOPMENT OF ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 14 OF 16 FACILITY, IF APPROVED, HAS TO BE ALLOWED FOR THE PU RPOSE 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 T HE QUANTIFICATION OF THE WEIGHTED DEDUCTION U/S.35(2AB ) OF THE ACT HAS SIGNIFICANCE. IN THE PRESENT CASE THERE IS NO D IFFICULTY ABOUT THE QUANTUM OF DEDUCTION U/S.35(2AB) OF THE ACT, BE CAUSE THE AO ALLOWED 100% OF THE EXPENDITURE AS DEDUCTION U/S.35 (2AB)(1)(I) OF THE ACT, 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(2AB) IS ALLOWED AS WEIGHTED DEDUCT ION AT 200% OF THE EXPENDITURE WHILE DEDUCTION U/S.35(1)(I) IS ALLOWED ONLY AT 100%. THE CONDITIONS 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 ASSESSEE CLAIMING DEDUCTI ON U/S.35(2AB) OF THE ACT SHOULD BE ENGAGED IN MANUFAC TURE OF CERTAIN ARTICLES OR THINGS. IT IS NOT IN DISPUTE TH AT THE ASSESSEE IS ENGAGED IN BUSINESS TO WHICH SEC.35(2AB) OF THE ACT APPLIED. THE OTHER CONDITION REQUIRED TO BE FULFILLED FOR CL AIMING DEDUCTION U/S.35(2AB) OF THE ACT IS THAT THE RESEARCH AND DEV ELOPMENT FACILITY SHOULD BE APPROVED BY THE PRESCRIBED AUTHO RITY. THE PRESCRIBED AUTHORITY IS THE SECRETARY, DEPARTMENT O F SCIENTIFIC INDUSTRIAL RESEARCH, GOVT. OF INDIA (DSIR). IT IS N OT IN DISPUTE THAT THE ASSESSEE IN THE PRESENT CASE OBTAINED APPR OVAL IN FORM NO.3CM AS REQUIRED BY RULE 6 (5A) OF THE RULES. IN THESE FACTS AND CIRCUMSTANCES AND IN THE LIGHT OF THE JUDICIAL PRECEDENTS ON THE ISSUE, WE ARE OF THE VIEW THAT THE DEDUCTION U/ S.35(2AB) OF THE ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 15 OF 16 ACT OUGHT TO HAVE BEEN ALLOWED AS WEIGHTED DEDUCTIO N AT 200% OF THE EXPENDITURE AS CLAIMED BY THE ASSESSEE AND O UGHT NOT TO HAVE BEEN RESTRICTED TO 100% OF THE EXPENDITURE INC URRED ON SCIENTIFIC RESEARCH. WE HOLD AND DIRECT ACCORDINGLY AND ALLOW THE APPEAL OF THE ASSESSEE. 10. WE NOTICE THAT THE ABOVE SAID DECISION OF TRI BUNAL WAS AVAILABLE WHEN THE IMPUGNED REVISION ORDER WAS PASSED U/S 263 OF THE ACT, MEANING THEREBY, THERE WAS TWO POSSIBLE VIEWS WITH REGARD TO THE QUESTION AS TO WHETHER FURNISHING OF FORM 3CL IS MA NDATORY OR NOT FOR CLAIMING DEDUCTION U/S 35(2AB) OF THE ACT. HEN CE, IT HAS TO BE HELD THAT THE AO HAS FOLLOWED ONE OF THE POSSIBLE V IEWS IN WHICH CASE, THE IMPUGNED ASSESSMENT ORDER CANNOT BE TERMED AS P REJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THAT VIEW OF THE MATTER, ONE OF THE TWO CONDITIONS WOULD FAIL AND HENCE THE IMPUGNED RE VISION ORDER CANNOT BE SUSTAINED. WE HAVE NOTICED EARLIER THAT THE CO-ORDINATE BENCH HAS ALSO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN AY 2013-14 AND 2015-16. 11. ACCORDINGLY, WE SET ASIDE THE REVISION ORD ER PASSED BY PR. CIT FOR AY 2015-16. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DEC, 2020. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 3 RD DEC, 2020. VG/SPS ITA NO.2215/BANG/2019 M/S. PROVIMI ANIMAL NUTRITION INDIA PVT. LTD., BANG ALORE PAGE 16 OF 16 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.