Joginder Singh, Member (J) -
(1.) THE Revenue is aggrieved by the impugned order dated 06/12/2012 of the ld. First Appellate Authority, Mumbai, the only ground raised in this appeal is that the ld. Commissioner of Income -tax (Appeals) failed to appreciate that the assessee failed to take permission of the prescribed authority before incurring any expenditure u/s. 34(2AB) and further unable to prove that the permission of the prescribed authority was obtained before incurring expenditure u/s. 35(2AB) of the Act. At the time of hearing, Shri Rajesh Ranjan Prasad, ld. CIT -DR defended the conclusion drawn in the assessment order by advancing the arguments which are identical to the ground raised. On the other hand, Shri Yogesh Thar, ld. Counsel for the assessee supported the conclusion drawn in the impugned order.
1.1. We have considered the rival submissions and perused the material available on record. The fact, in brief, are that the assessee declared loss of Rs. 31,02,10,470/ - in its return filed on 25/09/2009 which was subsequently revised on 11/01/2011 declaring loss of Rs. 30,80,33,675/ -. Assessment was completed u/s. 143(3) of the Income -tax Act, 1961 (hereinafter the Act) on 27/12/2011, determining the loss at Rs. 17,40,77,314/ -. During the year under consideration, the assessee claimed research and development expenditure u/s. 35(2AB) of the Act, relating to its in -house division, amounting to Rs. 16,41,80,309/ -. The assessee claimed weighted deduction u/s. 35(2AB) of the Act @ 150% of the capital expenses of Rs. 3,76,48,919/ - and revenue expenses of Rs. 7,18,04,620/ -. The ld. Assessing Officer disallowed the claimed deduction on the plea that the assessee did not submit the approval from the prescribed authority. On appeal, before the ld. Commissioner of Income -tax (Appeals), the issue was decided in favour of the assessee. The relevant finding/conclusion is reproduced hereunder for ready reference from the impugned order.
"I have considered the facts of the case and submission of the assessee. It was beyond the control of the assessee to file Form No. 3CL, because it is issued by the Secretary, DSIR, Government of India and it was not issued till the time of assessment order i.e. 30/12/2011 because Form No. 3CL is dated 30/03/2012, a copy of which has been filed as per Form No. 3CL and Form No. 3CM, assessee is eligible for weighted deduction u/s. 35(2AB). Therefore, A.O. is directed to verify Form No. 3CM and Form No. 3CL and accordingly allow weighted deduction to the assessee u/s. 35(2AB) on revenue expenditure as well as capital expenditure claimed by the assessee. Assessee is directed to file a copy of Form No. 3CL and Form No. 3CM before the A.O. for giving necessary effect to this order. In result, the ground of appeal is treated as allowed."
1.2. We note that for granting approval u/s. 35(2AB) of the Act, the assessee made application, with the prescribed authority, in accordance with section 35(2AB)(3) r.w. Rule 6(4) of the Income -tax Rules, 1962 (hereinafter the Rules), on 11/12/2007. The prescribed authority approved/granted in -house research and development facility u/s. 35(2AB) of the Act on 04/03/2009 for a period from October 19, 2007 to 31st March 2010 in Form No. 3CM, in accordance with Rule 6(5A) of the Rules. This approval was produced before the Assessing Officer during assessment proceedings i.e. before framing the assessment on 30/12/2011. The prescribed authority sent Form No. 3CL to the Income -tax Department on 22nd November 2010 (A.Y. 2008 -09) in accordance with section 35(2AB)(4) read with Rule 6(7A)(b) of the Rules. As the approval of the entire period was given once i.e. by way of Form No. 3M, thus, in our view, the assessee complied with the conditions for claim of deduction as required u/s. 35(2AB) of the Act. We are reproducing hereunder the relevant provision of section 35(2AB) of the Act for ready reference.
"Expenditure on scientific research
35(2AB)(1) Where a company engaged in the business of bio -technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature 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 equal to two times of the expenditure so incurred."
(4) The prescribed authority shall submit its report in relation to the approval for the said facility to the Director General in such Form and within such time as may be prescribed."
If the aforesaid section is analyzed then the deduction shall be allowed of a sum equal to two times of the expenditure so incurred and the prescribed authority is to submit its report of such approval/facility to the Director General on a prescribed form within specified time, meaning thereby, the authority concerned has to submit the report to the Director General. However, if the totality of facts are analyzed, as mentioned earlier, the assessee made application for such approval on 11/12/2007 with the prescribed authority and such approval was granted on 04/03/2009, therefore, the assessee cannot be denied the claimed deduction u/s. 35(2AB) of the Act merely on the ground that the prescribed authority did not submit Form No. 3CL in time to the Income -tax Department. The assessee cannot be penalized for the fault, if any, of the Department. The Assessing Officer cannot be expected to be too technical rather is to take practical approach under the facts narrated hereinabove, because, it was beyond the control of the assessee to direct the authority to submit the prescribed form on Form No. 3CL to the Department. Section 35(2AB) of the Act, nowhere suggest that the date of approval of research and development facility will be cut off date for eligibility of weighted deduction under this section on expenses incurred from that date onwards; Once facility is approved, entire expenditure so incurred on development of research and development facility has to be allowed for such weighted deduction u/s. 35(2AB) of the Act and thus it would be sufficient to hold that assessee has fulfilled the conditions as laid down in the section. Even otherwise, the ld. Commissioner of Income -tax (Appeals) directed the Assessing Officer to verify the Form No. 3CM and 3CL and then allowed weighted deduction, as claimed by the assessee. We find no infirmity in the conclusion and the direction in the impugned order. It is affirmed.
Finally, the appeal of the Revenue is dismissed.;