Arrdy Enginnering Innovations (P) Ltd, Rourkela V. THE ACIT, CIRCLE - 3(1), VISAKHAPATNAM., Visakhapatnam

ITA 432/VIZ/2012

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3608 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-02-2024
• Assessment Year: 2007-2008
• Appeal Filed On: 28-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA VILLURI
• Section: 148; 143(3); 40(a)(ia)

Judgement Text

आयकरअपीलȣयअͬधकरण, ͪवशाखापटणमपीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įीदुåवूǽआरएलरेɬडी, ÛयाǓयकसदèयएवंĮीएसबालाकृçणन, लेखासदèयकेसम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ I.T.A. Nos. 431 & 432/Viz/2012 (Ǔनधा[रणवष[/ Assessment Years: 2005-06 & 2007-08) M/s. Arrdy Engineering Innovations (P) Ltd., (Formerly known as M/s. Ardee Technologies (P) Ltd), Rourkela, Odisha. PAN: AABCA 4800 A Vs. Asst. Commissioner of Income Tax, Circle-3(1), Visakhapatnam. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸकȧओरसे/ Assessee by : Sri GVN Hari, AR Ĥ×याथȸकȧओरसे/ Revenue by : Dr. Aparna Villuri, Sr. AR सुनवाईकȧतारȣख/ Date of Hearing : 07/02/2024 घोषणाकȧतारȣख/Date of Pronouncement : 28/02/2024 O R D E R PER S. BALAKRISHNAN, Accountant Member : Both the captioned appeals are filed by the assessee against the orders of the Ld. Commissioner of Income Tax (Appeals), Visakhapatnam in ITA Nos. 255/09-10/ACIT, Cir-3(1)/Vsp/12-13 and 256/09-10/Addl. CIT, R-3/VSP/12-13,dated 2 28/09/2012arising out of the order passed U/s. 143(3) r.w.s 147 of the Income Tax Act, 1961 [the Act] for the AY 2005-06 and U/s. 143(3) of the Act for the AY 2007-08. Since the assessee has raised identical grounds of appeal involving the similar issues and therefore, both these appeals are clubbed, heard together and disposed off in this consolidated order. Firstly, we shall take up ITA No.431/Viz/2012 (AY: 2005-06) as a lead appeal: 2. Brief facts of the case are that the assessee-company carrying the business of production and sale of censors, instruments and other related products which are used in Steel Industry, filed its return of income on 01/11/2005 admitting a total income of Rs. 3,74,72,380/- for the AY 2005-06. Thereafter the assessee filed a revised return of income revising the income to Rs. 3,75,63,580/-. While filing the return of income, the assessee has claimed weighted deduction U/s. 35(2AB) of the Act. The Ld. AO observed that there is an escapement of income with respect to deduction claimed U/s. 35(2AB) of the Act and issued notice U/s. 148 on 23/01/2009. During the assessment proceedings, the Ld. AO rejected the weighted deduction claimed by the assessee U/s. 35(2AB) of the Act apart from making 3 disallowance for Donation and for non-compliance U/s. 40(a)(ia) of the Act. The Ld. AO also added the difference of interest disclosed by the assessee thereby determining the assessed income at Rs. 4,14,52,484/-. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). Considering the submissions made by the assessee and relying on various judicial pronouncements, the Ld. CIT(A) partly allowed the appeal. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal: “1. The Ld. CIT(A), Vis akh ap atn am erre d in confirming the order of the Ld. AO in disall o wing entire weighte d deduction of Rs. 34,02,197/- cl aime d U/s. 35(2AB) of the Act on the ground that appell ant was not carrying on rese arch activi ty at the address mention ed in Form 3CL but incurred at Kal unga, Rourkel a. Such dis al l owance h as resul ted in addi tion al tax l iabil ity and in terest thereon. 2. The Ld. CIT(A) erred in confirming the order of the Ld. AO which was ch al l enged by appell ant on the ground th at intimation of reassessment proceedings U/s. 147 is not permissible merel y on the basis of change of opinion because the AO for subsequent AY 2006-07 had taken a vie w th at weighted deduction U/s. 35(2AB) cannot be al l o wed. 3. Even assuming ( wi thout admi tting) th at appell ant was not el igibl e for weighte d deduction U/s. 35(2AB) in respect of R&D expenditure to wards fiel d tri al s incurred at Rourkel a (on the ground th at the s ame was not covered under the definition of approved in-house R & D house and this is presentl y the subject matter of l itig ation before the Hon’bl e AP High Court), the Ld. AO was not justified in denying even the pl ain 100% deduction for R & D expenditure in respect of both revenue and capi tal expenditure as provided U/s. 35(1)(i) and (iv) read with section 35(2)(ia) of the Act which does not provide for an y such conditional ity. 4 Therefore the Ld. CIT (A) erre d in confirming the orde r of Ld. AO and ought to h ave at l eas t al l o wed 100% deduction U/s. 35(1)&(iv) read wi th section 35(2)(ia) amounting to Rs. 22,68,131/- instead of the weighte d deduction U/s. 35(2AB) as cl aimed by appel l ant. 4. Any other ground that the appell ant may urge at the time of hearing.” 3. Further, the assessee has also raised additional ground vide its petition dated 22/11/2016 which reads as under: “On the facts and circums tances of the case, whe ther the expenditure incurred by the appell ant to wards the Research an d Development is el igibl e for deduction U/s. 35(1)(iv) of the Act?” 4. Grounds No. 1 & 3 relate to disallowance of entire weighted deduction claimed U/s. 35(2AB) of the Act. The Ld. AR submitted that the assessee has incurred these expenses subject to the order of approval from the Ministry of Science and Technology, Government of India. The Ld. AR further submitted that he relevant Form-3CM and Form-3CL were enclosed in the paper book. Further, the Ld. AR also submitted that Form-3CM and Form-3CL contain the Registered Office address of the assessee where as the Ld. AO rejected the claim of weighted deduction stating that these expenses were incurred at Kalunga, Rourkela wherein such address was not mentioned in the Form-3CM and Form-3CL. The Ld. AR pleaded that the assessee may be allowed the normal deduction which was not disputed by the Ld. Revenue Authorities. 5 Per contra, the Ld. DR fully supported the orders of the Ld. Revenue Authorities and pleaded to uphold the same. 5. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. Admittedly, there is no dispute on the fact that the assessee has incurred expenditure on research activities which was approved by the Ministry of Science and Technology, Government of India. The relevant Form-3CM and Form-3CL are reproduced herein below for reference: 6 7 From From-3CL, we find that the total expenditure incurred for in-house R & D facility eligible for deduction U/s. 35(2AB) is Rs. 22.68 Lakhs. The amount has been claimed U/s. 35(1) of the Act 8 as deduction by the assessee while filing the revised return of income. The pleading of the Ld. AR is that the actual expenditure which was not disputed by the Revenue and which is certified by the Ministry of Science and Technology may be allowed during the impugned assessment year without any weighted deduction deserves consideration. We therefore are of the view that given the facts and circumstances of the case, since the amount certified by the Ministry of Science and Technology, Government of India in Form-3CL amounting to Rs. 22.68 Lakhs corresponds with the claim made by the assessee while filing the return of income, we direct the Ld. AO to allow the actual expenditure incurred by the assessee for in-house R & D facility. Accordingly, these grounds raised by the assessee are allowed. 6. Since, Grounds No. 1 & 3 are decided in favour of the assessee, Ground No.2 and the additional ground raised by the assessee needs no adjudication. 7. In the result, appeal filed by the assessee is allowed. ITA No. 432/Viz/2012 (AY 2007-08) 8. This appeal filed by the assessee against the order of the Ld. CIT(A), Visakhapatnam dated 28/09/2012. 9 9. In this appeal, the assessee has raised the following grounds of appeal: 1. The Ld. CIT(A), Vis akh ap atn am erre d in confirming the order of the Ld. AO in disall o wing entire weighte d deduction to the extent of Rs. 1,05,85,292/- cl aimed U/s. 35(2AB) of the Act on the ground that appell ant was not carrying on research activity at the address [9-30-4, Bal aji Nag ar, Si ripuram, Vis akh ap atn am-530003] mentioned in Form 3CL / 3CM issued by the Department of Science & In dustri al Rese arch (DSIR), Ministry of Science and Technology, Government of Indi a, but i ncurred p art of the expenditure at Kal unga, Rourkel a. Such disal l owance h as resul ted in addi tion al tax l iabil ity and in terest thereon. 2. Even assuming ( wi thout admi tting) th at appell ant was not el igibl e for weighte d deduction U/s. 35(2AB) in respect of R&D expenditure to wards fiel d tri al s incurred at Rourkel a (on the ground th at the s ame was not covered under the definition of approved in-house R & D house and this is presentl y the subject matter of l itig ation before the Hon’bl e AP High Court), the Ld. AO was not justified in denying even the pl ain 100% deduction for R & D expenditure in respect of both revenue and capi tal expenditure as provided U/s. 35(1)(i) and (iv) read with section 35(2)(ia) of the Act which does not provide for an y such conditional ity. Therefore the Ld. CIT (A) erre d in confirming the orde r of Ld. AO and ought to h ave at l eas t al l o wed 100% deduction U/s. 35(1)&(iv) read wi th section 35(2)(ia) amounting to Rs. 54,24,406/- instead of the weighte d deduction U/s. 35(2AB) as cl aimed by appel l ant. 3. Any other ground that the appell ant may urge at the time of hearing.” 10. Further, the assessee has also raised additional ground vide its petition dated 22/11/2016 which reads as under: “On the facts and circums tances of the case, whe ther the expenditure incurred by the appell ant to wards the Research an d Development is el igibl e for deduction U/s. 35(1)(iv) of the Act? 10 11. Grounds No. 1 & 2 raised by the assessee in this appeal are identical to that of the Grounds No. 1 & 3 of the assessee’s appeal for the AY 2005-06. Therefore, our decision given while adjudicating the Grounds No. 1 & 3 of the assessee’s appeal for the AY 2005-06 mutatis mutandis applies to the Grounds No. 1 & 2 of the assessee’s appeal for the AY 2007-08 also. Accordingly, these grounds raised by the assessee are allowed. 12. Ground No.3 is general in nature and need no adjudication. 13. Since Grounds No. 1 & 2 raised by the assessee are adjudicated in favour of the assessee, the additional ground raised by the assessee needs no adjudication. 14. In the result, appeal of the assessee is allowed. 15. Ex-consequenti, both the appeals filed by the assessee are allowed. Pronounced in the open Court on 28 th February, 2024. Sd/- Sd/- (दुåवूǽआर.एलरेɬडी) (एसबालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखासदèय/ACCOUNTANT MEMBER Dated :28.02.2024 11 OKK - SPS आदेशकȧĤǓतͧलͪपअĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee–M/s. Arrdy Engineering Innovations (P) Ltd (Formerly known as M/s. Ardee Technologies (P) Ltd.k, BB-8 Area 7 & 8, Civil Township, Rourkela. 2. राजèव/The Revenue –Asst. Commissioner of Income Tax, Circle- 3(1), Infinity Tower, Shankaramatham Road, Santhipuram, Visakhapatnam, Andhra Pradesh – 530016. 3. The Principal Commissioner of Income Tax, 4. आयकरआयुÈत (अपील)/ The Commissioner of Income Tax 5. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयअͬधकरण, ͪवशाखापटणम/ DR,ITAT, Visakhapatnam 6. गाड[फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam