UMEDICA LABORATORIES P.LTD, MUMBAI V. DCIT 1(3)(2), MUMBAI

ITA 498/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1419 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJEET SINGH, JUDICIAL MEMBER ITA NO.498/M/2016 ASSESSMENT YEAR: 2011-12 M/S. UMEDICA LABORATORIES PVT. LTD., 406, REWA CHAMBERS, 31 NEW MARINE LINES, MUMBAI-400 020 PAN: AAACU2966Q VS. DCIT 1(3)(2), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIPUL JOSHI, A.R. MS. DINKLE HARIA, A.R. REVENUE BY : SHRI RAJEEV GUBGOTRA, D.R. DATE OF HEARING : 27.09.2018 DATE OF PRONOUNCEMENT : 14.11.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 23.11.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO.1 IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF R&D EXPENSES UNDER SECTION 35(2AB) OF THE ACT OF RS.8, 16,49,302/- AND THE ISSUE RAISED IN GROUND NO.2 IS AGAINST THE DISALLOWANCE OF TOTAL DEDUCTION UNDER SECTION 35(2AB) INCLUDIN G ORIGINAL EXPENSES AND WEIGHTED DEDUCTION ARE DISALLOWED ON THE REASONING THAT EVEN IF THE ASSESSEE HAS NOT COMPLI ED WITH THE ITA NO.498/M/2016 M/S. UMEDICA LABORATORIES PVT. LTD. 2 REQUIREMENTS OF SECTION 35(2AB) , THE WEIGHTED DEDU CTION SHOULD BE DISALLOWED AND NOT THE ORIGINAL EXPENSES WHICH ARE PART OF BUSINESS EXPENSES. 3. THE FACTS IN BRIEF ARE THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 35(2AB) AMOUNTING TO RS.8,16,49,302/- . THE ASSESSEE HAS DULY APPLIED AND SUBMITTED ALL THE DOC UMENTS TO THE MINISTRY OF SCIENCE AND TECHNOLOGY, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH OBTAIN FORM 3CM AND THE ASSES SEE WAS GRANTED APPROVAL UNDER SECTION 35(2AB) OF THE ACT V IDE APPLICATION DATED 19.07.2010. THE CERTIFICATE IN F ORM 3CK ISSUED WAS EFFECTIVE FROM 09.06.10 TO 31.03.12. AC CORDING TO THE AO AS PER CLAUSE 7A OF RULE 6A OF INCOME TAX RULES, THE DEDUCTION UNDER SECTION 35(2AB) IN RESPECT OF EXPEN DITURE INCURRED ON IN-HOUSE RESEARCH AND DEVELOPMENT FACIL ITY WOULD BE AVAILABLE ONLY IF THE PRESCRIBED AUTHORITY HAS SUBM ITTED ITS REPORT IN ADDITION TO THE APPROVAL OF IN-HOUSE RESE ARCH AND DEVELOPMENT FACILITY IN FORM 3CL TO DIRECTOR GENERA L OF INCOME TAX (EXEMPTION) WITHIN 60 DAYS OF ITS GRANTING APPR OVAL. ACCORDING TO THE AO SINCE THE PRESCRIBED AUTHORITY COULD NOT ISSUE FORM 3CL TO DIRECTOR GENERAL OF INCOME TAX (E XEMPTION), NEW DELHI AS THE ASSESSEE FAILED TO FILE REQUISITE DETAILS AS SOUGHT BY THE PRESCRIBED AUTHORITY AS IS CLEAR FROM THE CORRESPONDENCE WITH THE PRESCRIBED AUTHORITY, MINIS TRY OF SCIENCE AND TECHNOLOGY, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH. ACCORDING TO THE AO THE DEDUCTION UNDER SECTION 35(2AB) IS SUBJECT TO THE FULFILLMENT OF CERTAIN C ONDITIONS AS LAID DOWN IN RULE 6A, CLAUSE 7A AND ACCORDINGLY THE DEDU CTION UNDER SECTION 35(2AB) WAS WITHDRAWN AND ADDED THE SAME BA CK TO THE INCOME OF THE ASSESSEE. ITA NO.498/M/2016 M/S. UMEDICA LABORATORIES PVT. LTD. 3 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AFF IRMED THE ORDER OF THE AO AFTER CONSIDERING THE CONTENTIONS O F THE ASSESSEE BY HOLDING THAT FORM 3CL WAS NOT ISSUED BY THE PRES CRIBED AUTHORITY IN TERMS OF RULE 6A CLAUSE 7A OF THE IT R ULES WITHIN PRESCRIBED TIME AND THE DELAY WAS ATTRIBUTED TO THE ASSESSEE ONLY. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS BEEN DENIED D EDUCTION UNDER SECTION 35(2AB) OF THE ACT IN RESPECT OF THE EXPENDITURE INCURRED ON IN-HOUSE RESEARCH AND DEVELOPMENT FACIL ITY BY THE ASSESSEE FOR THE REASON THAT FORM 3CL WAS NOT FILED BY THE PRESCRIBED AUTHORITY WITH THE DIRECTOR GENERAL OF I NCOME TAX (EXEMPTION) WITHIN A STIPULATED TIME. THE RECORDS REVEAL THAT THE NON FILING OF THE FORM 3CL WAS ATTRIBUTED TO TH E NON FILING OF NECESSARY DOCUMENTS ON THE PART OF THE ASSESSEE. T HIS IS UNDISPUTED THAT ASSESSEE HAS SUBMITTED ALL DOCUMENT S AND AUDITED EXPENSES CLAIMED UNDER SECTION 35(2AB) IN O RDER TO GET FORM 3CM. WE FIND MERIT IN THE CONTENTION OF THE L D. A.R. THAT EVEN IF THE FORM 3CL IS NOT FILED BY THE PRESCRIBED AUTHORITY WITH THE DIRECTOR GENERAL OF INCOME TAX (EXEMPTION) WITH IN PRESCRIBED TIME EVEN THEN THE APPROVAL IS DEEMED TO HAVE BEEN ACCORDED UNDER THE ACT. THE CASE OF THE ASSESSEE I S SQUARELY COVERED BY THE DECISIONS OF THE CO-ORDINATE BENCH O F THE TRIBUNAL IN THE CASE OF THE SRI BIOTECH LABORATORIES INDIA L TD. VS. ACIT (2014) 36 ITR (TRIB.) 88 (HYDERABAD) & DCIT VS. FA MY CARE LTD. (2014) 52 TAXMANN.COM 461 (MUMBAI-TRIB.). IN THE C ASE OF SRI BIOTECH LABORATORIES INDIA LTD. VS. ACIT (SUPRA) TH E CO-ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT SINCE THE ASSES SEE HAS ITA NO.498/M/2016 M/S. UMEDICA LABORATORIES PVT. LTD. 4 COMPLIED WITH ALL THE TERMS AND CONDITIONS AS LAID DOWN IN SECTION 35AB OF THE ACT READ WITH RULE 6A OF THE IT RULES, THE DEDUCTION TO THE ASSESSEE UNDER SECTION 35(2AB) CAN NOT BE DENIED MERELY ON THE GROUND THAT APPROVAL IN FORM 3 CL IS NOT FILED BY THE PRESCRIBED AUTHORITY WITH THE DIRECTOR GENERAL OF INCOME TAX (EXEMPTION). WE HAVE ALSO PERUSED THE C OPIES OF FORM 3CL ISSUED BY THE MINISTRY OF SCIENCE AND TECH NOLOGY, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH, GOV ERNMENT OF INDIA AND OBSERVED THAT THE ASSESSEE HAS BEEN ISSUE D EXEMPTION IN RESPECT OF FINANCIAL YEAR 2011-12 VIDE LETTER DA TED 11.08.14 RETROSPECTIVELY. WE FURTHER FIND THAT THE OMISSION IN THE ORIGINAL LETTER DATED 12.08.14 MENTIONING A.Y. 2011-12 WAS A N INADVERTENT ERROR WHICH WAS RECTIFIED BY A CORRIGEN DUM DATED 28.01.16 WHICH IS REPRODUCED AS UNDER: THIS HAS REFERENCE TO THIS DEPARTMENT'S COVERING L ETTER NO.TU/IV-15(614)/20I4 DATED 12 TH AUGUST, 2014 VIDE WHICH EXPENDITURE IN FORM 3CL NO . TU/IV/15(614)/35(2AB)/3CL/1260/2014 DATED 11/08/20I 4 OF AY 2011-12, 2012-13 AND 2013-14 FOR M/S UMEDICA LABORATORIES PVT. LTD., (VAPI) WAS FORWARDED (COPY ENCLOSED FOR READY REFERENCE), IT MAY PLEASE BE NOT ED THAT PRESCRIBED AUTHORITY APPROVAL WAS TAKEN FOR AY 2011-12 (FROM 09/06/2010- 31/03/2011), 2012-13 AND 20I3-I4, THE TYPOGRAPHICAL ERROR IS REGRETTED. FURT HER IN THIS REFERENCE, I AM DIRECTED TO ISSUE A CORRIGENDUM TO COVERING LETTER FOR FOLLO WING: PLEASE ROAD 'REPORT IN FORM 3CL NO TU/IV/I5(6I4)/35 (2AB)/3CL/1260/20I4 DATED 11 TH AUGUST 2014 IN ORIGINAL FOR THE ASSESSMENT YEAR 20 13-14 U/S 35(2AB) OF IT ACT 1961 IS ENCLOSED HEREWITH FOR NECESSARY ACTION AT Y OUR END' AS BELOW: REPORT IN FORM 3CL NO TU/IV/I5(614)/35(2AB)/3CL/I 260/20I4 DATED 11 TH AUGUST, 2014 IN ORIGINAL FOR THE ASSESSMENT YEAR 2011-12 (F ROM 09/06/2010-31/03/2011), 2012-13 AND 2013-14 U/S 35(2AB) OF IT ACT 1961 IS E NCLOSED HEREWITH FOR NECESSARY ACTION AT YOUR END 6. SO CONSIDERING THE FACTS AND CIRCUMSTANCES IN T OTALITY, WE FIND THAT THE ASSESSEE HAS BEEN GRANTED APPROVAL BY THE APPELLATE AUTHORITY WHICH WAS GRANTED BY WAY OF PAS SING CORRIGENDUM AND RECTIFYING THE MISTAKE WHICH HAS OC CURRED IN THE ORIGINAL LETTER DATED 12.08.2014. IN VIEW OF T HE FACT THAT ITA NO.498/M/2016 M/S. UMEDICA LABORATORIES PVT. LTD. 5 EVEN IF THE ASSESSEE IS NOT ISSUED ANY APPROVAL BY THE APPROPRIATE AUTHORITY EVEN THEN THERE IS DEEMED APP ROVAL IF THE ASSESSEE HAS FILED APPLICATION BEFORE THE PRESCRIB ED AUTHORITY UNDER SECTION 35(2AB) WITHIN THE DUE TIME. UNDER TH ESE CIRCUMSTANCES WE ARE NOT IN AGREEMENT WITH THE CONC LUSION OF THE CIT(A) THAT ASSESSEE HAS NOT SATISFIED THE COND ITIONS FOR GRANT OF DEDUCTION U/S 35(2AB). IN VIEW OF OUR OBSE RVATION HEREINABOVE WE SET ASIDE THE ORDER OF CIT(A) AND DI RECT THE AO TO ALLOW THE DEDUCTION U/S 35(2AB) OF THE ACT TO THE A SSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.11.2018. SD/- SD/- ( AMARJEET SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.11.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.