DCIT, Hyderabad V. M/s Reliance Celulose Products Ltd., Secunderabad

ITA 882/HYD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2892 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Keywords: Depreciation; Additional depreciation; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER S.NO. ITA NO. AY APPELLANT RESPONDENT 1. 882/H/10 2006-07 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(1), HYDERABAD. M/S RELIANCE CELULOSE PRODUCTS LTD., SECUNDERABAD. (PAN AABCR0766Q) 2. 392/H/12 2007-08 -DO- -DO- 3. 393/H/12 2008-09 -DO- -DO- 4. 114/H/13 2009-10 -DO- -DO- APPELLANT BY : SHRI M.H. NAIK RESPONDENT BY : SHRI K.C. DEVDAS DATE OF HEARING : 21/05/2013 DATE OF PRONOUNCEMENT : 15/07/ 2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: ALL THESE APPEALS PREFERRED BY THE REVENUE ARE DIR ECTED AGAINST SEPARATE ORDERS OF LEARNED CIT(A). SINCE ID ENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE CLUBBED AN D HEARD TOGETHER AND, THEREFORE, WE FIND IT CONVENIENT TO D ISPOSE OF THESE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. ITA NO. 882/HYD/10 FOR AY 2006-07 2. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTU RING OF THE CHEMICALS, CELLULOSE POWDER AND ALLIED PRODUCTS . THE ASSESSEE 2 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. COMPANY WAS REGISTERED ENTITY WITH THE DEPARTMENT O F SCIENCE & TECHNOLOGY AND ACCORDING TO THE ASSESSEE IT WAS ELI GIBLE FOR CLAIMING WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT IN RESPECT OF EXPENDITURE ON RESEARCH AND DEVELOPMENT ACTIVITIES CARRIED OUT. FOR THE RELEVANT PREVIOUS YEAR, THE ASSESSEE COMPAN Y HAD INCURRED AN EXPENDITURE OF RS. 1,50,44,807/- AND TH E SAME WAS CLAIMED FOR WEIGHTED DEDUCTION OF RS. 2,25,67,212/- U/S 35(2AB). THE FORM 3CM EVIDENCING REGISTRATION WAS ALSO PLACE D BEFORE THE AO. HOWEVER, THE AO HAD DISALLOWED THE ENTIRE CLAIM U/S 35(2AB) AS THE ASSESSEE WAS NOT ABLE TO FURNISH THE FORM 3C M AND FORM 3CL OF THE IT RULES TO SUBSTANTIATE THE CLAIM. 3. ON APPEAL, THE CIT(A) HELD THAT THE SAID FORM 3C M IS AN ORDER OF APPROVAL FOR IN-HOUSE RESEARCH & DEVELOPME NT FACILITY TO BE ISSUED BY THE DEPARTMENT OF SCIENTIFIC AND INDUS TRIAL RESEARCH (DSIR), GOVERNMENT OF INDIA WHILE FORM 3CL IS A CER TIFICATE OF EXPENDITURE INCURRED ISSUED BY THE SAME AGENCY. HE FURTHER HELD THAT IT IS GENERALLY NOTICED THAT THE FORM 3CM & FO RM 3CL ARE ISSUED WITH MUCH DELAY BY THE SAID AGENCY AND IT IS ALSO NOTICED THAT THE ASSESSEE COMPANY HAS BEEN ACCEPTED AS R&D CENTRE IN AY 2005-06. THE CIT(A) NOTED THAT, ACCORDINGLY, THE AR HAD PLEADED THAT TILL THE FORM 3CL IS ISSUED BY THE DSI R, THE ASSESSEE MAY BE ALLOWED NORMAL DEDUCTION FOR THE EXPENDITURE INCURRED ON THE R&D ACTIVITY AS THE SAME HAS NOT BEEN DISPUTED. THE CIT(A) CONCLUDED THAT THE THERE IS STRENGTH AND REASONING IN THE ARGUMENT OF THE AR TO ALLOW 100% DEDUCTION, HOWEVER , THE AO HAD DISMISSED THE CLAIM DUE TO NON-FURNISHING THE R ELEVANT FORMS. THEREFORE, THE CIT(A) HELD THAT THE ASSESSEE IS HEL D TO BE ENTITLED FOR 100% DEDUCTION WITH A RIDER THAT AS AND WHEN HE WOULD RECEIVE THE FORM 3CL FROM THE DSIR, IT SHOULD BE EN TITLED FOR WEIGHTED DEDUCTION AT 150% AS PER SECTION 35(2AB). 3 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. G ROUND NO. 1 IS GENERAL IN NATURE. 5. GROUND NO. 2, IS THAT THE CIT(A) ERRED IN RESTRI CTING DISALLOWANCE OF THE EXPENDITURE ON R&D TO 50% FROM 150% MADE BY THE AO. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. WE FIND THAT IN THE CASE OF ADDI TIONAL CIT VS. M/S BHAGIRADHA CHEMICALS & INDUSTRIES LTD., IN ITA NO. 906/HYD/2009 FOR AY 2006-07 SIMILAR ISSUE WAS DEALT BY THE COORDINATE BENCH. THE FACTS OF THAT CASE WAS THAT T HE ASSESSING OFFICER DISALLOWED THE CLAIM U/S 35(2AB) MADE BY TH E ASSESSEE ON THE GROUND THAT THE REQUISITE CERTIFICATE FROM THE PRESCRIBED AUTHORITY HAD NOT BEEN FILED. ON APPEAL, BEFORE THE CIT(A) THE ASSESSEE FILED WRITTEN SUBMISSION AND SUBMITTED THA T WHILE COMPUTING TAXABLE INCOME, THE ASSESSEE HAD ADDED BA CK RS. 45,97,325/- (RS.44,70,010/- + RS. 1,27,315/) TO ITS TOTAL INCOME AND THEREAFTER HAD CLAIMED DEDUCTION U/S 35(2AB) @ 150%. THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER DISAL LOWED THE CLAIM U/S 35(2AB) WITHOUT CORRESPONDINGLY ALLOWING THE REVENUE EXPENDITURE WHICH WAS ADDED TO THE COMPUTATION OF I NCOME, WHICH TANTAMOUNTS TO DOUBLE ADDITION. THE ASSESSEE ALSO CONTENDED THAT RS. 45,97,325/- WHICH WAS ORIGINALL Y ADDED TO THE COMPUTATION OF TOTAL INCOME SHOULD BE DEDUCTED FRO M THE TOTAL INCOME. AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE THE CIT(A) HELD AS UNDER:- 5.1 I HAVE GONE THROUGH THE FACTS OF THE ISSUE. I F IND THAT IN THE COMPUTATION OF TOTAL INCOME FILED ALONG WITH THE RETURN OF INCOME, THE APPELLANT HAD ADDED BACK RS. 45,97,325/- TO ITS NET PROFIT IN THE P&L A/CIT (A) AND HAD THEREAFTER CLAIMED DEDUCTION U/S 35(2AB) OF RS. 68, 95,988/- 4 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. . THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM U/ S 35(2AB) ON THE GROUND THAT THE REQUISITE CERTIFICATE FROM T HE PRESCRIBED AUTHORITY HAS NOT BEEN FILED BY THE APPE LLANT. I ALSO FIND THAT AN IDENTICAL ISSUE WAS DECIDED BY ME IN APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2005-0 6 IN ITA NO. 222/CIT(A)-II/HYD/07-08, DATED 19/06/08. WH ILE DECIDING THE APPEAL I HAD HELD THAT SINCE THE APPEL LANT IS HAVING AN R&D CENTRE WHICH IS DULY RECOGNIZED BY DS IR, THE APPELLANT IS AT LEAST ENTITLED FOR DEDUCTION U/S 35 (1) IN RESPECT OF EXPENDITURE ON SCIENTIFIC RESEARCH. WHIL E DECIDING SO, I HAD RELIED ON THE COMMUNICATION RECEIVED BY T HE APPELLANT FROM THE MINISTRY OF SCIENCE & TECHNOLOGY FOR RENEWAL OF RECOGNITION OF THE IN HOUSE R&D UNIT AS ALSO DECISIONS OF ITAT, SPECIAL BENCH IN THE CASE OF JCI T VS. ITC (112 ITD 57) AS ALSO THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. YA MUNA DIGITAL ELECTRONICS PVT. LTD. (238 ITR 717). I HAD ALSO ALLOWED 100% DEDUCTION U/S 35(1)(IV) ON THE CAPITAL EXPENDITURE INCURRED ON THE R&D ACTIVITY. WHILE ALL OWING THE DEDUCTION U/S 35(1)(IV), I HAD RELIED ON THE DECISI ON OF HONBLE MADRAS HIGH COURT IN THE CASE OF TUBE INVES TMENTS OF INDIA LTD., 260 ITR 94. SINCE THE APPELLANT ITSE LF HAS ADDED BACK THE EXPENDITURE ON RESEARCH AND DEVELOPM ENT WHILE COMPUTING THE INCOME, IT WILL TANTAMOUNT TO D OUBLE DISALLOWANCE IF THE AMOUNT IS NOT ALLOWED U/S 35(1)/35(1)(IV). SINCE THE ISSUE IN THE YEAR UNDER CONSIDERATION IS IDENTICAL TO THE ONE DECIDED BY ME IN APPELLLANTS OWN CASE FOR THE ASSESSMENT YEAR 2005- 06, FOLLOWING THE STAND TAKEN THEREIN, THE ASSESSING OF FICER IS DIRECTED TO ALLOW DEDUCTION U/S 35(1) FOR THE EXPEN DITURE INCURRED BY THE APPELLANT ON THE REVENUE AND CAPITA L ACCOUNT FOR THE DETAIL REASON MENTIONED IN THE APPELLATE OR DER PASSED FOR THE ASSESSMENT YEAR 2005-06 AND BECAUSE OF THE FACT THAT THE YEAR UNDER THE CONSIDERATION REMA INS. IN THE RESULT, THIS GROUND OF APPEAL IS PARTLY ALLOWED . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE COORDINATE BENCH HELD AS FOLLOWS: 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AS WELL AS DECISIONS CITED. IN VIEW OF THE RA TIOS LAID DOWN BY THE HONBLE DELHI HIGH COURT AND GUJAR AT 5 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. HIGH COURT(SUPRA) AND IN THE LIGHT OF CERTIFICATE I SSUED BY DSIR, GOVERNMENT OF INDIA DATED 16.06.2009, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO TO GRANT WEIGHTED DEDUCTION U/S 35(2AB). THE BALANCE EXPENDITURE IF ANY NOT APPROVED BY THE DSIR WILL HA VE TO BE CONSIDERED FOR DEDUCTION UNDER SECTION 35(1) OR UNDER NORMAL PROVISIONS OF THE ACT. THE EXPENDITURE HAS BEEN INCURRED BY THE R & D FACILITY OF THE ASSE SSEE APPROVED BY THE GOVERNMENT OF INDIA. MERELY BECAUSE PART OF THE EXPENDITURE INCURRED BY THE APPROVED R & D FACILITIES IS NOT CONSIDERED FOR WEIGHTED DEDUCTION UNDER SECTION 35(2AB) WOULD NOT RENDER THAT EXPENDITURE IS NOT TOWARDS R & D OR NOT FOR THE PURPOSES OF THE BUSINESS. ALLOWABILITY OF SUCH EXPENDITURE U/S 35(1) OR UNDER OTHER APPROPRIATE PROVISIONS OF THE ACT WILL HAVE TO BE CONSIDERED. 13. HENCE, THE CROSS OBJECTION (C.O. NO. 47/HYD/09) CLAIMING WEIGHTED DEDUCTION UNDER SECTION 35(2AB) O N THE GROUND THAT REQUISITE CERTIFICATE FROM THE DSIR HAS BEEN RECEIVED IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. SINCE THE ISSUE IN DISPUTE IS IDENTICAL TO THAT OF THE CASE DECIDED BY THE COORDINATE BENCH IN THE CASE OF M/S BAGHIRADHA CHEMICALS & INDUSTRIES LTD. (SUPRA), RESPECTFULLY F OLLOWING THE SAME, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT( A) AND, THEREFORE, THE SAME IS UPHELD ON THIS ISSUE. ACCORD INGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. GROUND NO. 3 IS PERTAINING TO THE DISALLOWANCE MADE ON ACCOUNT OF DEFERMENT OF SALES TAX. 9. THE AO NOTICED THAT THE COMPANY HAD AVAILED SALE S TAX BENEFIT OF RS. 172.70 LAKHS AND SINCE NO EXPLANATIO N HAD BEEN OFFERED OF RS. 172.40 LAKHS, THE AO BROUGHT THE SAM E TO TAX IN THE PRESENT ASSESSMENT YEAR. 6 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. 10. ON APPEAL, BEFORE THE CIT(A) THE AR OF THE ASSE SSEE HAD SUBMITTED THAT THAT THE AO HAD MADE AN ADDITION TAK ING THE CUMULATIVE AMOUNT AS REFLECTED IN THE NOTES TO ACCO UNTS OF THE BALANCE SHEET WHILE THE AMOUNT RELEVANT FOR AY IS R S. 89,75,967. IT WAS ALSO SUBMITTED THAT SIMILAR ISSUE IN AY 2004 -05 WAS SET ASIDE BY THE HONBLE ITAT FOR FRESH EXAMINATION AND FILED A COPY OF THE SAME ORDER. FURTHER IT WAS SUBMITTED THAT AS THERE WAS NO DISCUSSION BY THE AO IN HIS ASSESSMENT OR MAKING TH E ADDITION ABOUT THE NATURE OF DISPUTE, IT WAS GATHERED FROM T HE ORDER OF THE ITAT THAT THE DISPUTE IS WHETHER THE SAID RECEIPTS TANTAMOUNT TO REVENUE RECEIPT OR CAPITAL RECEIPT. IT WAS THE CONT ENTION OF THE ASSESSEE THAT THE AMOUNT NOT COLLECTED BY THE SALES TAX DEPARTMENT UNDER TARGET 2000 SCHEME, THE SAID AMOUN T WAS TREATED AS SALES TAX DEFERMENT LOAN. THE AR SUBMITT ED THAT THIS SALES TAX DEFERMENT LOAN HAD BEEN ASSIGNED TO ANOTH ER COMPANY ON PAYMENT OF PORTION OF THE AMOUNT AND THE BALANCE AMOUNT WAS NOT OFFERED AS INCOME SINCE IT WAS TREATED AS A CAP ITAL RECEIPT BY THE ASSESSEE. FURTHER, THE AR SUBMITTED THAT THE AO HAD TREATED THE BALANCE AMOUNT AS REVENUE RECEIPT NOT LIABLE TO TAX. THE AR PLACED RELIANCE ON THE DECISIONS REPORTED IN [1998] 230 ITR 580 (SC), [2001] 252 ITR 372 (P&H), [2004] 267 ITR 770 (GUJ.) AND [2007] 14 SOT 546. THE AR SUBMITTED THAT IN THE YEA R UNDER CONSIDERATION, SALES TAX DEFERMENT LOAN OF RS. 89,7 5,967/- HAD BEEN ASSIGNED TO M/S RANICHEM PVT LTD FOR A SUM OF RS. 22,50,000/- AND THE BALANCE AMOUNT OF RS. 67,25,967 IS SHOWN AS CAPITAL RECEIPT. 11. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) HELD THAT BY VIRTUE OF VARIOUS INCENTIVES, P ACKAGES, THE STATE GOVERNMENTS HAVE BEEN EXTENDING CERTAIN DEFER MENT FOR PAYING THE SALES TAX THUS COLLECTED BY TREATING IT AS A LOAN REPAYABLE AT A FUTURE DATE. THIS IS DONE BASICALLY TO ENCOURAGE 7 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. INVESTMENT AND BUSINESS IN THE STATE AND ALSO TO FA CILITATE AN ENHANCED CASH FLOW IN THE HANDS OF THE ENTREPRENEUR S AND HAVING TREATED THE SALES TAX RECEIPTS AS LOAN REPAYABLE AF TER A PERIOD, THE RECEIPTS LOSE THEIR CHARACTER AS REVENUE RECEIP T AND ATTAIN THE NATURE OF CAPITAL LIABILITY. HE FURTHER HELD THAT T HE REVERSAL OF THE LOAN AMOUNT ON ASSIGNING TO A THIRD PARTY WILL NOT CHANGE THE NATURE OF RECEIPT FROM CAPITAL TO REVENUE AND, HENC E, THESE AMOUNTS WERE TO BE TREATED AS CAPITAL RECEIPTS ALON E. ACCORDINGLY, THE CIT(A) DELETED THE ADDITION MADE BY THE AO ON T HE GROUND THAT SUCH RECEIPTS CANNOT BE BROUGHT TO TAX AS REVE NUE RECEIPTS SINCE THE RECEIPTS HAVE LOST THEIR REVENUE NATURE I N THE SANDS OF TIME. 12. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 13. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THIS ISSUE HAS NOT BEEN CONSID ERED BY THE AO, AS NO PARTICULARS WERE FURNISHED BEFORE HIM. TH EREFORE, IN THE INTEREST OF JUSTICE, WE DEEM IT FIT AND PROPER TO S ET ASIDE THE ISSUE TO THE FILE OF THE AO TO DECIDE THE SAME AFRE SH IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE. 14. IN THE RESULT, REVENUES APPEAL BEING ITA NO. 8 82/HYD/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 392 & 393/HYD/12 AND 114/HYD/13 FOR AY 2007 -08, 2008-09 & 2009-10. 15. THE REVENUE HAS RAISED A COMMON GROUND IN THESE APPEALS WHICH IS AS UNDER: 8 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE DISALLO WANCE OF DEDUCTION U/S 35(2AB) IN VIEW OF ASSESSEES FAIL URE TO PRODUCE FORM NO. 3CL. 16. THE ONLY ISSUE IN ALL THE THREE APPEALS IS IDEN TICAL TO THE ISSUE RAISED IN ITA NO. 882/HYD/10 FOR AY 2006-07. DURING THE YEAR 2007-08 THE ASSESSEE HAD INCURRED EXPENDITURE OF RS. 1,46,05,521/- ON RESEARCH AND DEVELOPMENT (R&D). IT CLAIMED DEDUCTION @150% U/S 35(2AB) OF THE ACT OF RS. 2,19, 08,282/-. THE AO NOTICED THAT IN SCHEDULE 18(B)(12) TO THE BA LANCE SHEET, UNDER THE HEADING NOTES TO ACCOUNTS, THE AUDITORS HAD CERTIFIED SUCH EXPENDITURE, STATING THAT OUT OF RS. 1,46,05,5 21/-, RS. 1,21,76,744/- WAS IN RESPECT OF PROCESS AND PRODUC T DEVELOPMENT AND THAT SUCH EXPENDITURE WAS TO BE AM ORTIZED OVER A PERIOD OF 5 YEARS, BEGINNING WITH THE YEAR OF COM MERCIAL EXPLOITATION. LIKEWISE, IN ANNEXURE V, RELATING TO THE COLUMN 15 OF FORM 3CB, THEY HAD CERTIFIED THE EXPENSES ON IN-HOU SE R&D, QUALIFYING FOR DEDUCTION U/S 35(2AB) AT RS. 1,46,05 ,521/-. THE AO NOTICED THAT SUCH DEVELOPMENT EXPENDITURE HAD ALSO BEEN REFLECTED IN THE BALANCE SHEET AS AN ASSET AND IN CLUDED IN THE AMOUNT OF RS. 3,67,16,306/-. THE AO NOTED THAT THE PROVISIONS OF SECTION 35(2AB) ARE APPLICABLE TO EXPENDITURE ON S CIENTIFIC RESEARCH ON IN-HOUSE R&D FACILITY APPROVED BY THE DEPARTMENT OF SCIENCE AND INDUSTRIAL RESEARCH (DSIR), UNDER RULE 6(1B). AS HE NOTED THAT THE ASSESSEE HAD ITSELF CLAIMED AMORTIZA TION OF EXPENDITURE OVER 5 YEARS, AND FURTHER NOTED THAT SE CTION 35(2AB) IS APPLICABLE FOR EXPENSES OF SCIENTIFIC RESEARCH, WHEREAS THE ASSESSEE HAD CLAIMED SUCH DEDUCTION EVEN ON DEVELOP MENT EXPENDITURE (RS. 1,21,76,744/-), HE REQUIRED THE AS SESSEE TO JUSTIFY THE CLAIM. AFTER CONSIDERING THE ASSESSEE S EXPLANATION, THE AO NOTED THAT THE FORM NO. 3CL WAS TILL THEN AW AITED, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 35(2AB) . 9 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. 17. WITH REGARD TO THE ALTERNATIVE CLAIM U/S 35(1)( I), THE AO OPINED THAT THE CASE LAW RELIED UPON BY THE ASSESSE E WAS UNRELATED TO THE ASSESSEES CASE. BESIDES, HE OPINE D THAT SINCE THE MATTER REGARDING QUANTIFICATION OF SUCH EXPENDI TURE/APPROVAL OF EXPENDITURE WAS PENDING BEFORE THE APPROPRIATE A UTHORITIES AND THE ORIGINAL CLAIM WAS FOR AMORTIZATION OVER A PERI OD OF 5 YEARS, THE FRESH CLAIM WAS NOT ACCEPTABLE. 18. THE AO NOTED THAT SINCE OUT OF THE EXPENDITURE OF RS. 1,46,05,521/-, RS. 1,21,76,744/-, WHICH HAD BEEN AM ORTIZED, HAD BEEN INCURRED FOR DEVELOPMENT EXPENSES, AS PER THE ASSESSEE ITSELF, THE EXPENSES ON SCIENTIFIC RESEARCH WERE OF RS. 24,28,777/- ONLY. ACCORDINGLY, EXPENDITURE OF RS. 24,28,777/- O NLY WAS ELIGIBLE FOR DEDUCTION U/S 35(2AB) AND EVEN FOR THE SAME APPROVAL WAS AWAITED. ACCORDINGLY, THE CLAIM OF RS. 24,28,77 7/- WAS NOT ALLOWED AND THE AO DISALLOWED THE TOTAL CLAIM OF RS . 2,19,08,282/-. 19. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE CIT(A). 20. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) HELD THAT IN ORDER TO AVAIL THE WEIGHTED DEDUCTION U/S 35(2AB ) OF THE ACT, THE APPELLANT IS REQUIRED TO FULFIL THE REQUIREMENTS OF RULE 6(1B), WHICH PRESCRIBE FORM NO S. 3CK, 3CM AND 3CL. OUT OF THESE, FORM NO. 3CK IS THE 'APPLICATION FORM FOR ENTERING INTO AN AGREEMENT WITH DISR FOR COOPERATION IN IN- HOUSE RESEARCH AND DEVELOPMENT FACILITY AND FOR AUD IT OF THE ACCOUNTS MAINTAINED FOR THAT FACILITY'. THE FORM NO . 3CM IS THE 'ORDER OF THE APPROVAL OF IN-HOUSE R & D FACILITY UNDER SEC. 35(2AB) OF THE ACT' TO THE PASSED BY THE SECRETARY, DISR. 10 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. FINALLY, THE FORM NO. 3CL IS ISSUED, WHICH IS A 'RE PORT TO BE SUBMITTED BY THE PRESCRIBED AUTHORITY TO THE DGIT (EXEMPTIONS) UNDER SEC. 35(2AB)'. 21. THE CIT(A) FURTHER HELD THAT IT IS AN UNDISPUTE D FACT THAT THE APPELLANT HAS BEEN GRANTED APPROVAL BY THE DISR . THE REQUISITE FORM NO. 3CM DTD. 1.1 1.2006 IN THIS REGA RD IS ON RECORD. VIDE THEIR LETTER NO. F NO. TU/IV-RD-1382/2 010, D TD. 26.3.2010, THE RECOGNITION OF THE IN-HOUSE R &, D UNIT OF THE APPELLANT HAS BEEN RENEWED UPTO 31.3.2013. ON THE O THER HAND, IT IS SEEN THAT FOR THE A.V. 2008-09, THE TOT AL R & D COST INCURRED BY THE APPELLANT OF RS. 1,64,98,362/ - HAS BEEN CERTIFIED BY THE AUDITORS IN THE AUDIT REPORT. IT H AS NOT BEEN DISPUTED THAT SUCH REVENUE EXPENDITURE HAS BEEN INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS DURING THE YEAR. IT HAS ALSO NOT BEEN SHOWN THAT ANY PART OF SUCH EXPENDITURE WAS EITHER NOT INCURRED FOR BUSINESS PU RPOSE OF THE APPELLANT OR WAS OF PERSONAL OR CAPITAL NATURE. FURTHER, EVEN IF THE SUM OF RS. 1,60,91,701/ - HAD BEEN MENT IONED AS 'DEVELOPMENT EXPENDITURE', IT IS CLEAR THAT SUCH EX PENSES WERE TOWARDS PRODUCTS RESEARCH AND DEVELOPMENT, AND THER EFORE, THE SAME HAVE BEEN CERTIFIED BY THE AUDITORS AS EXPENSES ON IN-HOUSE R&D QUALIFYING FOR DEDUCTION U/S 35(2AB), AS THESE CONSTITUTE EXPENSES TOWARDS SCIENTIFIC RESEARCH AND DEVELOPMENT RELATED TO THE PRODUCTS MANUFACTURED BY THE ASSESSEE. 22. THE CIT(A) OBSERVED THAT EVEN IF SUCH EXPENSES WERE AMORTIZED IN THE BOOKS OF ACCOUNT, IT IS CLEAR THAT SUCH EXPENDITURE WAS REVENUE IN NATURE. FURTHER, NO TANG IBLE ASSET OF AN ENDURING NATURE HAD BEEN BROUGHT ABOUT BY INC URRING SUCH EXPENDITURE. FURTHER, THE PERIOD FOR WHICH THE ASSESSEE 11 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. COULD HAVE BEEN SAID AS SECURED A BENEFIT FROM SUCH EXPENDITURE WAS NOT POSSIBLE TO BE REASONABLY ASCER TAINED. UNDER THE CIRCUMSTANCES, IN THE LIGHT OF THE RATIO OF THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPN. (225 ITR 802) AND IN J .K. INDUSTRIES VS. UOI & ORS (297 ITR 176), AS ALSO THE DECISION OF THE HON.BOMBAY HIGH COURT IN THE CASE OF TAPARIA TOOLS LTD. (260 ITR 102), THE R&D EXPENDITURE, EVEN THOUG H AMORTIZED IN THE BOOKS, IS REQUIRED TO BE ALLOWED I N THE YEAR OF INCURRENCE OF SUCH EXPENDITURE. THE ALLOWABILITY OF SUCH EXPENDITURE DURING THE YEAR FINDS SUPPORT ALSO FROM THE ORDER OF THE HON. JURISDICTIONAL ITAT IN THE CASE OF AMAR A RAJA BATTERIES VS. ACIT (272 ITR (AT) 27). 23. HENCE, THE CIT(A) OPINED THAT THE EXPENDITURE O F RS. 1,64,98,362/- TOWARDS R&D IS ELIGIBLE FOR DEDUCTION DURING THE YEAR. THIS VIEW IS ALSO SUPPORTED BY THE DECISIONS IN THE CASES OF TATA CHEMICALS LTD. VS. CIT (96 CTR 69)(BOM), WH EREIN, IN CONNECTION WITH THE CLAIM OF DEDUCTION U/S 35(1)(II ), IT WAS OPINED THAT EVEN IF DEDUCTION IS NOT ALLOWABLE U/S 35(1)(II), IT CAN BE ALLOWED TO THE ASSESSEE U/S 35(1)(I), IN CAS E THE ASSESSEE SATISFIES ALL THE CONDITIONS PROVIDED IN S EC. 35(1)(I). IT IS SEEN THAT THE SAID DECISION HAD BEEN FOLLOWED BY THE HONBLE DELHI BENCH OF THE ITAT IN THE CASE OF PANA CEA BIOTECH LTD. VS. ACIT (122 ITD 199) ALSO. THE CIT(A) HELD T HAT SINCE IN THE PRESENT ASSESSEES CASE, THE REQUISITE CONDI TIONS FOR CLAIMING DEDUCTION U/S 35(1)(I) HAVE BEEN SATISFIED , EVEN IF ITS CLAIM FOR WEIGHTED DEDUCTION U/S 35(2AB) IS NOT CON SIDERED, APPLYING THE RATIO OF THE ABOVE REFERRED CASE, THE ASSESSEE HAS TO BE ALLOWED DEDUCTION U/S 35(1)(I). 24. AS REGARDS, THE CLAIM OF WEIGHTED DEDUCTION U/S 35(2AB), 12 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. THE CIT(A) HELD THAT THE ASSESSEE HAS BEEN ACCEPTED AS AN R&D CENTRE IN THE AY 2005-06. THE APPELLANTS R&D F ACILITY HAS ALSO BEEN GRANTED RECOGNITION TILL 31/03/2013. THE CLAIM OF ADDITIONAL DEPRECIATION DURING THE YEAR HAS BEEN DENIED ON THE ONLY GROUND THAT THE REQUISITE FORM NO. 3CL HAS NOT BEEN FURNISHED. HOWEVER, IT IS SEEN THAT THE HONBLE DEL HI ITAT IN THE CASE OF SANDAN VIKAS (INDIA) LTD. VS. ACIT IN I TA NO. 1105/DEL/2009 DT. 22/03/2010 FOR THE AY 2005-06 HAV E REFERRED TO THE DECISION OF THE HONBLE GUJARAT HIG H COURT IN THE CASE OF CIT VS. CLARIS LIFE SCIENCES LTD. (326 ITR 251) AND HAVE OPINED THAT THE CUT OFF DATE MENTIONED IN THE CERTIFICATE ISSUED BY THE DSIR IS OF NO RELEVANCE. THEY ALSO OB SERVED THAT A PLAIN READING OF THE SECTION SHOWS THAT THE ASSES SEE HAS TO DEVELOP THE FACILITY, WHICH PRE-SUPPOSES INCURRING THE EXPENDITURE IN THIS BEHALF, APPLICATION TO THE PRES CRIBED AUTHORITY, WHO, AFTER FOLLOWING THE PROPER PROCEDUR E WILL APPROVE THE FACILITY, OR OTHERWISE, AND THE ASSESSE E WILL BE ENTITLED TO WEIGHTED DEDUCTION OF ANY AND ALL EXPEN DITURE SO INCURRED. THE CIT(A) HELD THAT IT IS CLEAR THAT IN THE ASSESSEES CASE ALSO, ALL THESE REQUIREMENTS HAVE BEEN DULY ME T. AS REGARDS THE NON FURNISHING OF FORM 3CL, THE ASSESSE E CANNOT BE SAID TO HAVE ANY CONTROL OVER THE SAME, AS THE S AID FORM IS TO BE SUBMITTED BY THE SECRETARY, DSIR TO THE DIREC TOR GENERAL (EXEMPTIONS), MARKING A COPY THEREOF TO THE ASSESSEE. 25. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 26. IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN IT A NO. 882/HYD/1- FOR AY 2006-07 (SUPRA). FOR THE REASONS STATED IN THE ABOVE APPEAL, WE UPHOLD THE ORDER OF THE CIT(A) AND 13 ITA NOS. 882/H/10, 392& 393/H/12 & 114/H/13 RELIANCE CELLULOSE PRODUCTS LTD. DISMISS THE REVENUES APPEAL. 27. AS THE GROUND NO. 2 RAISED IN AY 2008-09 AND 20 09-10 IS SIMILAR TO THAT OF AY 2007-08, FOLLOWING THE CONCLU SIONS DRAWN THEREIN, WE DISMISS THE GROUND RAISED IN THE SAID Y EARS. 28. IN THE RESULT, REVENUES APPEALS IN ITA NO. 392 & 393/H/12 AND 114/H/13 FOR ASSESSMENT YEARS 2007-08, 2008-09 & 2009-10 RESPECTIVELY ARE DISMISSED. 29. TO SUM UP, ALL THE APPEALS UNDER CONSIDERATION ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 15/07/2013. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAV AN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED:15 TH JULY, 2013. KV COPY TO:- 1) DCIT, CIRCLE 3(1), 7 TH FLOOR, B BLOC, IT TOWERS, AC GUARDS, HYDERABAD 2) RELIANCE CELLULOSE PRODUCTS LTD., 3E, SURYA TOWERS, SP ROAD, SECUNDERABAD 500 003. 3) CIT (A)-IV, HYDERABAD 4) THE CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.