Crest Composites & Plastics Pvt. Ltd.,, Ahmedabad v. The Deputy Commissioner of Income Tax, Circle-1(1)(2),, Ahmedabad

ITA 28/AHD/2017 | 2013-2014
Pronouncement Date: 31-08-2021 | Result: Allowed

Appeal Details

RSA Number 2820514 RSA 2017
Assessee PAN AAACC6333R
Bench Ahmedabad
Appeal Number ITA 28/AHD/2017
Duration Of Justice 4 year(s) 7 month(s) 28 day(s)
Appellant Crest Composites & Plastics Pvt. Ltd.,, Ahmedabad
Respondent The Deputy Commissioner of Income Tax, Circle-1(1)(2),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-08-2021
Last Hearing Date 30-03-2021
First Hearing Date 28-07-2021
Assessment Year 2013-2014
Appeal Filed On 03-01-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI AMARJIT SINGH ACCOUNTANT MEMBER AND MS. MADHUMITA ROY JUDICIAL MEMBER CREST COMPOSITES & PLASTICS PVT. LTD. SURVEY NO. 609 VILLAGE-SHETRA KHEDA-AHMEDABAD- 387560 PAN: AAACC6333R (APPELLANT) VS THE DCIT WARD-1(1)(2) AHMEDABAD (RESPONDENT) REVENUE BY: SHRI L.P. JAIN SR. D.R. ASSESSEE BY: SHRI MANISH J. SHAH A .R. DATE OF HEARING : 28-07-2021 DATE OF PRONOUNCEMENT : 31-08-202 1 /ORDER PER : AMARJIT SINGH ACCOUNTANT MEMBER:- THIS ASSESSEES APPEAL FOR A.Y. 2013-14 ARISES FRO M ORDER OF THE CIT(A)-1 AHMEDABAD DATED 30-11-2016 IN PROCEEDIN GS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961; IN SHORT THE ACT. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THE LEARNED C.I.T. (APPEALS) ER RED IN LAW AND FACTS IN DEDUCTION OF RESEARCH & /DEVELOPMENT EXPENSES UNDER NORMAL PROVISION RELATE D TO DEDUCTION LIKE GENERAL DEDUCTION U/S 37( 1) SCIENTIFIC RESEARCH U/S 35 DEPRECIATION ALLOWANCE U/S 32 AND /OR ANY OTHER PROVISIONS. ITA NO. 28 /AHD/2017 ASSESSMENT YEAR 2013-14 I.T.A NO. 28/AHD/2017 A.Y. 2013-14 PAGE NO CREST COMPOSITES & PLASTICS PVT. LTD. VS. DCIT. 2 2. THE LEARNED C.I.T (APPEALS) ERRED IN LAW AND ON FACTS IN DISALLOWING COMMISSION OF RS. 6 00 000 /- PAID TO PERSONS COVERED U/S 40A(2)(B) OF THE INCOME TAX ACT 1961. 2.1 THE LEARNED C.I.T (APPEALS) FAILED TO APP RECIATE THE LANGUAGE OF SECTION 40A(2)(B) WHICH IN CLEAR TERMS STATE THAT ONLY EXCESSIVE OR UNREASONABLE CLA IM WITH REGARD TO FAIR MARKET VALUE REQUIRES 2 DISALLOWANCE AND NOT THE WHOLE EXPENDITURE. 3. THE FACT IN BRIEF IS THAT RETURN OF INCOME D ECLARING INCOME OF RS. 73 45 680/- WAS FILED ON 30 TH SEP 2013. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT AND NOTICE U/S. 143(2) OF THE ACT WAS IS SUED ON 4 TH SEP 2014. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS FINALIZED ON 21 ST DECEMBER 2015 AFTER MAKING DISALLOWANCE U/S. 35(2AB) OF RS. 21 84 842/- AND DISALLOWANCE U/S. 40A(2)(B) OF RS. 7 50 000/- WHICH ARE CONTESTED IN THE INSTANT APPEAL. FURTHER RELEVANT FACTS OF THE CAS E ARE DISCUSSED WHILE ADJUDICATING THE AFORESAID TWO GROUNDS OF APPEAL OF THE ASSESSEE AS FOLLOWS:- GROUND NO. 1 (DEDUCTION OF RESEARCH AND DEVELOPMENT EXPENSES U/S. 35(2AB) 4. DURING THE COURSE OF ASSESSMENT THE ASSESSI NG OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 35(2AB) OF RS. 66 66 790/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE CLAIM OF DEDUCTION OF RS. 79 43 842/- AS AGAINST ALLOWABLE DEDUCTION OF RS. 5 6 84 000/- IN VIEW OF R & D EXPENDITURE OF RS. 28 42 000 HAS BEEN APPROVED FO R DEDUCTION U/S. 35(2AB) OF THE ACT AND APPROVAL BY THE DSIR HAS BEE N GRANTED AFTER COMPLETION OF F.Y. 2012-13. THE ASSESSEE EXPLAINED VIDE LETTER DATED 3 RD DECEMBER 2015 THAT ASSESSEE COMPANY HAS SUBMITTED ITS APPLICATION FOR GRANT OF APPROVAL FOR DEDUCTION U/S. 35(2AB) WITH T HE OFFICE OF DSIR ON 28 TH OCT 2013. IT IS ALSO EXPLAINED THAT ASSESSEE HAS CLAIMED RS 79 43 842/- TOWARDS R & D EXPENSES. THE ASSESSEE HAS GIVEN THE BREAK UP OF THESE EXPENSES AS UNDER:- I.T.A NO. 28/AHD/2017 A.Y. 2013-14 PAGE NO CREST COMPOSITES & PLASTICS PVT. LTD. VS. DCIT. 3 A. U/S. 32(2AB)- REVENUE EXP RS. 66 66 790 B. U/S. 35(2AB)- CAPITAL EXP RS. 12 02 052 C. U/S. 35(2)-REPAIRS & MAINTENANCE OF R& D BUILDIN G RS. 75 000 THE ASSESSING OFFICER HAS ALSO POINTED OUT THAT TH E ASSESSEE HAS PRODUCED CERTIFICATE ISSUED BY THE DSIR DATED 13 TH APRIL 2015 IN RESPECT OF ASSESSMENT YEAR 2013-14 AND THE DSIR HAS APPROVED REVENUE EXPENDITURE OF RS. 28 10 000/- AND CAPITAL EXPENDITURE OF RS. 3 2 000/- FOR ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS CLAIMED REVENUE EXP ENSES OF RS. 33 33 395/- AND CAPITAL EXPENDITURE OF RS. 6 01 026 /- ON WHICH WEIGHTED DEDUCTION AT 200% HAS BEEN CLAIMED. THE ASSESSING OFFICER WAS OF THE VIEW THAT ONLY THE EXPENDITURE APPROVED BY THE PRES CRIBED AUTHORITY IS ALLOWABLE AS WEIGHTED DEDUCTION AT 200%. THE ASSESS ING OFFICER HAS RESTRICTED THE CLAIM OF DEDUCTION OF RS. 56 20 000/ - OF REVENUE EXPENDITURE + RS. 64 000/- CAPITAL EXPENDITURE TOTALING TO RS. 56 84 000/- AS A WEIGHTED DEDUCTION AT 200% OF SUCH EXPENDITURE AS AGAINST CL AIM OF THE ASSESSEE OF RS. 78 68 842/-. THEREFORE THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF DEDUCTION U/S. 35(2AB) OF THE ACT TO THE EXTENT OF RS.21 84 842/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE TH E LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE REI TERATING THE FACTS REPORTED BY THE ASSESSING OFFICER. 6. DURING THE COURSE OF APPELLATE PROCEEDINGS B EFORE US THE LD. COUNSEL CONTENDED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH OF THE ITAT VIDE ITA NOS. 1417/AHD/2016 IN THE I.T.A NO. 28/AHD/2017 A.Y. 2013-14 PAGE NO CREST COMPOSITES & PLASTICS PVT. LTD. VS. DCIT. 4 CASE OF SUN PHARMACEUTICALS INDUSTRIES VS. PR. CIT DATED 17.05.2019. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISIO N OF CO-ORDINATE BENCH OF THE ITAT VIDE ITA NOS. 5295/MUM/2017 & 5390/MUM/201 7 IN THE CASE OF M/S. CROMPTON GREAVES LTD. VS. ACIT DATED 27.09.201 9. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISION OF TORRENT PHARMACEUTICAL LTD (2009) 28 CCH 781 (AHMEDABAD). THE LD. COUNSEL SUB MITTED THAT THE REQUIREMENT FOR QUANTIFICATION OF EXPENDITURE FOR C LAIMING DEDUCTION WAS MADE W.E.F. 1.7.2016 AS PER THE SUB-RULE (7A) OF RU LE 6 OF INCOME TAX RULE 1961. ON THE OTHER HAND THE LD. DEPARTMENTAL REP RESENTATIVE HAS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 7. HEARD BOTH THE SIDES AND PERUSED THE MATERIA L ON RECORD. WITHOUT REITERATING THE FACTS AS ELABORATED SUPRA IN THIS O RDER DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE LD. COUNSEL HA S REFERRED THE AFORESAID JUDICIAL PRONOUNCEMENT INCLUDING THE DECISION OF IT AT AHMEDABAD ADJUDICATED IN FAVOUR OF THE ASSESSEE. WITH THE ASS ISTANCE OF LD. REPRESENTATIVES WE HAVE GONE THROUGH THE JUDICIAL P RONOUNCEMENT IN THE CASE OF SUN PHARMACEUTICALS INDUSTRIES VS. PR. CIT DATED 17.05.2019 OF THE ITAT AHMEDABAD VIDE ITA NO. 1417/AHD/2016 DATED 17-05-20 19 WHEREIN IDENTICAL ISSUE ON SIMILAR FACTS HAS BEEN ADJUDICAT ED. WE HAVE ALSO GONE THROUGH THE DECISION OF THE ITAT MUMBAI IN THE CASE OF M/S. CROMPTON GREAVES LTD. VS. ACIT VIDE ITA NO. 5295/MUM/2017 DA TED 27.09.2019. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER:- 6. HERE IT IS SEEN THAT IT IS THE ASSESSEES STAND THAT IT HAD INCURRED IN-HOUSE SCIENTIFIC RESEARCH EXPENDITURE (CAPITAL AND REVENUE). IT HAD CLAIMED W EIGHTED DEDUCTION U/S. 35(2)(AB) OF THE ACT AS UNDER: I. REVENUE EXPENDITURE OF RS.10 05 03 198/- @ 150% - RS.15 07 54 797/-. II. CAPITAL EXPENDITURE OF RS.1 27 94 490/- @ 150% - RS.1 91 91 735/-. THE ASSESSEE THUS CLAIMED DEDUCTION OF A SUM OF RS.16 99 46 532/-. THE DETAILS OF THIS EXPENDITURE HAS BEEN FILED AT ASSESSEES PAPER BOOK (APB FOR SHORT) PGS. 93 TO 100. IT IS THE CLA IM OF THE ASSESSEE THAT THIS EXPENDITURE WAS I.T.A NO. 28/AHD/2017 A.Y. 2013-14 PAGE NO CREST COMPOSITES & PLASTICS PVT. LTD. VS. DCIT. 5 DEDUCTIBLE U/S.35(2AB) OF THE ACT IN COMPUTING THE TOTAL INCOME @ 150% OF THE ACTUAL EXPENDITURE. THE EXPENDITURE WAS INCURRED FOR THE K ANJURMARG UNIT OF THE COMPANY; RATHER THE UNIT STOOD APPROVED BY THE DSIR IN FORM NO. 3CM A S ON 28.08.2008 (APB PG. 88) AS PER THE REQUIREMENTS OF SECTION 35(2AB) OF THE ACT FOR THE PERIOD FROM 01.04.2007 TO 31.03.2009. THE ASSESSEES AUDITOR DULY CERTIFIED THE GENUINENESS O F SUCH EXPENDITURE AND ITS ELIGIBILITY FOR WEIGHTED DEDUCTION U/S. 35(2)(AB) AS AVAILABLE AT APB PGS. 93 TO 100 AS ALSO BY THE TAX AUDITOR AS EVIDENT FROM APB PGS. 91 92. 7. IT WAS THE ACTION OF THE DSIR IN ISSUING FORM NO . 3CL (APB PGS. 89 & 90) DATED 24.08.2010 QUANTIFYING THE ELIGIBLE EXPENDITURE AT RS.11 04 63 000/- AS AGAINST THAT OF RS.11 32 97 688/- RESULTING IN A DIFFERENCE OF RS.28 34 688/- WHICH PROMPTED THE A.O. TO MAKE THE DISALLOWANCE IN QUESTION. 8. IT IS SEEN THAT AS RIGHTLY CONTENDED ON BEHALF O F THE ASSESSEE SECTION 35 OF THE ACT GRANTS DEDUCTION FOR SCIENTIFIC RESEARCH EXPENDITURE UNDE R THE CIRCUMSTANCES PRESCRIBED THERE-UNDER ON COMPLIANCE OF THE CONDITIONS LAID DOWN IN VARIOU S PROVISIONS OF SECTION 35. NOW WHEREAS IN SOME CASES LIKE THOSE COMING UNDER THE PROVISIONS OF SECTIONS 35(1)(I) AND 35(2AB) A SPECIFIC APPROVAL OF QUANTUM OF EXPENDITURE BY THE PRESCRIB ED AUTHORITY IS THE PRE-REQUISITE FOR DEDUCTION THE PROVISIONS OF SECTION 35(2AB) REQUIR ES APPROVAL FOR UNITS AND NOT APPROVAL FOR THE QUANTUM OF EXPENDITURE. FOR READY REFERENCE SECTIO N 35(2)(AB) READS AS UNDER: EXPENDITURE ON SCIENTIFIC RESEARCH. 35. (2AB)(1) W HERE A COMPANY ENGAGED IN THE BUSINESS OF BIO-TECHNOLOGY OR IN ANY BUSINESS OF MA NUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING NOT BEING AN ARTICLE OR THING SPECIFIED I N THE LIST OF THE ELEVENTH SCHEDULE INCURS ANY EXPENDITURE ON SCIENTIFIC RESEARCH (NOT BEING E XPENDITURE IN THE NATURE OF COST OF ANY LAND OR BUILDING) ON IN-HOUSE RESEARCH AND DEVELOPM ENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY THEN THERE SHALL BE ALLOWED A DEDUCTION OF A SUM EQUAL TO ONE AND ONE-HALF TIMES OF THE EXPENDITURE SO INCURRED: PROV IDED THAT WHERE SUCH EXPENDITURE ON SCIENTIFIC RESEARCH (NOT BEING EXPENDITURE IN THE N ATURE OF COST OF ANY LAND OR BUILDING) ON IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY IS INCUR RED IN A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BEGINNING ON OR AFTER THE 1ST DAY O F APRIL 2021 THE DEDUCTION UNDER THIS CLAUSE SHALL BE EQUAL TO THE EXPENDITURE SO INCURRE D. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE 'EXPENDITURE ON SCIENTIFIC RESEARCH' IN RELATION TO DRUGS AND PHARMACEUTICALS SHALL INCLUDE EXPENDITURE INCURRED ON CLINICAL DRUG TRIAL OBTAINING APPROVAL FROM ANY REGULATORY AUTHORITY UNDER ANY CE NTRAL STATE OR PROVINCIAL ACT AND FILING AN APPLICATION FOR A PATENT UNDER THE PATENT S ACT 1970 (39 OF 1970). (2) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPEND ITURE MENTIONED IN CLAUSE (1) UNDER ANY OTHER PROVISION OF THIS ACT. (3) NO COMPANY SHA LL BE ENTITLED FOR DEDUCTION UNDER CLAUSE (1) UNLESS IT ENTERS INTO AN AGREEMENT WITH THE PRESCRIBED AUTHORITY FOR CO- OPERATION IN SUCH RESEARCH AND DEVELOPMENT FACILITY AND FULFILS SUCH CONDITIONS WITH REGARD TO MAINTENANCE OF ACCOUNTS AND AUDIT THEREOF AND FURNISHING OF REPORTS IN SUCH MANNER AS MAY BE PRESCRIBED. (4) THE PRESCRIBED AUT HORITY SHALL SUBMIT ITS REPORT IN RELATION TO THE APPROVAL OF THE SAID FACILITY TO TH E PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL DIRECTOR GENERAL OR DIREC TOR GENERAL IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. (5) [***] ( 6) NO DEDUCTION SHALL BE ALLOWED TO A COMPANY APPROVED UNDER SUB-CLAUSE (C) OF CLAUSE (II A) OF SUB-SECTION (1) IN RESPECT OF THE EXPENDITURE REFERRED TO IN CLAUSE (1) WHICH IS INCURRED AFTER THE 31ST DAY OF MARCH 2008. 9. THE OPERATIVE PHRASE HERE IS ON IN-HOUSE RESEAR CH AND DEVELOPMENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY . THE WORD FACILITY HAS BEEN HEREBY SHOW US TO EMPHASIS THE POINT THAT IT IS THE UNIT WHICH REQUIRES APPROVAL O F THE PRESCRIBED AUTHORITY UNDER THIS PROVISION. FURTHER IN THE MEMORANDUM EXPLAINING THE PROVISIO N OF SECTION AND THE NOTES ON THE CLAUSES ISSUED AT THE TIME OF INSERTION OF SECTION 35(2AB) IN THE ACT COPIES OF BOTH OF WHICH HAVE BEEN FILED ON RECORD BEFORE US BY THE ASSESSEE IT HAS B EEN CLEARLY PROVIDED THAT THE DEDUCTION WOULD BE AVAILABLE TO THE ASSESSEES HAVING AN APPROVED IN-H OUSE R & D FACILITY BY THE PRESCRIBED AUTHORITY. UNDISPUTEDLY THERE IS NO MENTION OR APP ROVAL OF THE QUANTUM OF EXPENDITURE. I.T.A NO. 28/AHD/2017 A.Y. 2013-14 PAGE NO CREST COMPOSITES & PLASTICS PVT. LTD. VS. DCIT. 6 10. THEN AS OBSERVED BY THE AHMEDBAD BENCH OF THE TRIBUNAL IN THE CASE OF SUN PHARMACEUTICAL INDUSTRIES LTD. VS. PR.CIT (2017) 162 ITD 484 AS AP PROVED BY THE HONBLE GUJARAT HIGH COURT VIDE ITS DECISION REPORTED AT 250 TAXMANN 270 IT H AS BEEN HELD THAT THE OBJECTIVE OF FORM 3CL IS LIMITED TO THE FORWARDING OF THE INTIMATION OF THE APPROVAL OF THE UNIT; THAT FORM NO. 3CL IS A MERE REPORT FOR INTIMATION OF APPROVAL OF R & D FAC ILITY. IN THIS REGARD AS RIGHTLY POINTED OUT SUCH ASPECT STANDS CONFIRMED BY SUBRULE (7A) OF RUL E 6 OF INCOME TAX RULES AS WITHIN SUBSISTING (NOW AMENDED W.E.F. 01.07.2016) TO PROVIDE FOR QUA NTIFICATION OF EXPENDITURE AS WELL. THE FINANCE ACT 2015 AS AMENDED TO SUB SECTION (3) OF SECTION 35 W.E.F. 01.04.2016 PROVIDING FOR FURNISHING OF REPORTS IN THE MANNER TO BE PRESCRIBE D. IT IS THUS W.E.F. 01.04.2016 THAT THE PROVISION HAS BEEN MADE FOR APPROVAL OF QUANTUM OF EXPENDITURE FOR THE FIRST TIME. 11. FURTHER STILL IN PUNE ITAT DECISION IN THE CAS E OF CUMMINS INDIA LTD. V. DY. CIT (2018) 96 TAXMANN.COM 576 (PUNE-TRIB.) WHICH IS A DECISION D IRECTLY ON THE ISSUE AT HAND IT HAS BEEN HELD INTER ALIA TO THE FACT THAT THOUGH THE RULES STIPU LATE THE FILING OF AUDIT REPORT BEFORE THE PRESCRIB ED AUTHORITY BY AVAILING THE DEDUCTION U/S. 35(2AB) OF THE ACT. THE PROVISION OF THE ACT PRESCRIBED OR APPROVED TO BE GRANTED BY THE PRESCRIBED AUTHORITY VIS--VIS THE EXPENDITURE FROM YEAR TO YEAR; THAT THE AMENDMENT WAS BROUGHT IN BY THE INCOME TAX AMENDMENT RULES W.E.F. 01.04.2016 WHEREIN A SEPARATE PART HAS BEEN INSERTED FOR CERT IFYING THE AMOUNT OF EXPENDITURE FROM YEAR TO YEAR AND THE AMENDED FORM NO. 3CL THUS LAYS DOWN THE PROCEDURE TO BE FOLLOWED BY THE PRESCRIBED AUTHORITY; THAT PRIOR TO THE SAID AMENDM ENT NO SUCH PROCEDURE; METHODOLOGY WAS PRESCRIBED; AND THAT THEREFORE IN THE ABSENCE OF A NY SUCH PROCEDURE OR METHODOLOGY THE A.O. HAD ERRED IN CURTAILING THE EXPENDITURE AND CONSEQUENT WEIGHTED DEDUCTION CLAIMED U/S. 35(2AB) OF THE ACT ON THE SUMMON THAT THE PRESCRIBED AUTHORITY HAD APPROVED THE PART OF THE EXPENDITURE IN FORM NO. 3CL. 12. IT WOULD ALSO BE APT TO REPRODUCE HERE-UNDER TH E PROVISIONS SUBSTITUTED IN CLAUSE (B) OF SUB RULE (7A) OF RULE 6 AS BROUGHT IN BY THE AMENDMENT EFFECTIVE FROM 01.07.2016 AS ABOVE: THE PRESCRIBED AUTHORITY SHALL FURNISH ELECTRONICALLY I TS REPORT - (I) IN RELATION TO THE APPROVAL OF THE IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY IN PART A OF ROOM NO. 3CL; (II) QUANTIFYING THE EXPENDITURE INCURRED ON IN-HOUSE RESEARCH AND DEVEL OPMENT FACILITY BY THE COMPANY DURING THE PREVIOUS YEAR AND ELIGIBLE FOR WEIGHTED DEDUCTION U NDER SUB-SECTION (2AB) OF SECTION 35 OF THE INCOME TAX ACT 1961 IN PART B OF FORM NO. 3CL. 13. HITHERTO THE PROVISION WAS AS FOLLOWS: THE P RESCRIBED AUTHORITY SHALL SUBMIT ITS REPORT IN RELATION TO THE APPROVAL OF IN-HOUSE FACILITY AND D EVELOPMENT FACILITY IN FORM NO. 3CL TO THE DIRECTOR GENERAL (INCOME-TAX EXEMPTIONS) WITHIN SIX TY DAYS OF ITS GRANTING APPROVAL. THE ABOVE ALSO MAKES IT AMPLY CLEAR THAT PRIOR TO THE AMENDME NT I.E. UPTO 30.06.2016 IT WAS NOT REQUIRED TO QUANTIFY THE EXPENDITURE AND IT WAS ONLY W.E.F. 01. 07.2016 THAT THIS MANDATE HAS BEEN PUT IN PLACE. 14. THE YEAR UNDER CONSIDERATION IS A.Y. 2009-10 AN D FOR THIS YEAR THE AMENDMENT WAS NOT APPLICABLE. THEREFORE THE ASSESSEE IS RIGHT IN CON TENDING THAT THE NON APPROVAL OF THE EXPENDITURE CLAIMED BY CSIR DID NOT ENTITLE THE A.O. TO MAKE TH E DISALLOWANCE AND THE LD. CIT(A) TO CONFIRM THE SAME. THIS DOES ALSO TAKE CARE OF A WITHOUT PREJUDICE CON TENTIONS RAISED BY THE ASSESSEE TO THE FACT THAT DEDUCTION OF ACTUAL EXPENDITURE OF RS.28 34 688/- B E ALLOWED TO THE ASSESSEE UNDER THE PROVISIONS OF SECTION 35(1)(I) AND 35(1)(IV). THESE PROVISIONS OF ALLOWING 100% DEDUCTION OF EXPENDITURE ON IN-HOUSE SCIENTIFIC RESEARCH IRRESPECTIVE OF THE A PPROVAL OF THE UNIT AND THE CERTIFICATION OF THE EXPENDITURE WHERE THE ACTUAL EXPENDITURE AS IN TH E CASE OF THE ASSESSEE IS VERIFIED BY THE STATUTORY AUDITOR AND CERTIFIED BY THE INDEPENDENT AUDITOR AND TAX AUDITOR. 15. THE ASSESSEE IS FOUND CORRECT IN CONTENDING THA T THE LD. CIT(A) HAS OBSERVED THAT THE EXTENT OF THE EXPENDITURE WAS NEVER VERIFIED BY THE A.O. THUS ACCORDING TO THE ASSESSEE IT GOES TO CONFIRMS THAT THE A.O. DISALLOWED THE CLAIM WITHOUT DUE APPL ICATION OF MIND. THIS CONTENTION OF THE ASSESSEE IS CORRECT AS EVIDENT FROM THE ASSESSMENT ORDER IT SELF WHEREIN THE GROUND FOR THE DISALLOWANCE WAS THE NON APPROVAL OF THE EXPENDITURE CLAIMED BY THE DSIR. 16. ON BEHALF OF THE ASSESSEE ANOTHER CONTENTION H AS BEEN RAISED THAT THE LD. CIT(A) IS WRONG IN OBSERVING THAT DURING THE REMAND PROCEEDINGS THE A SSESSEE HAS NOT OBJECTED TO THE ACTION OF THE A.O. IN MAKING THE DISALLOWANCE U/S. 35(2AB). THIS IT HAS BEEN EMPHASIZED THAT THE ASSESSEE HAD ALWAYS OBJECTED TO THE DISALLOWANCE BEFORE THE A.O. AS WELL AS THE LD. CIT(A). THE ATTENTION IN THIS I.T.A NO. 28/AHD/2017 A.Y. 2013-14 PAGE NO CREST COMPOSITES & PLASTICS PVT. LTD. VS. DCIT. 7 REGARD HAS BEEN DRAWN TO THE GROUNDS TAKEN BY THE A SSESSEE AND THE SUBMISSIONS RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A). IT HAS FURTHER BEEN SUBMITTED THAT IN THE REMAND PROCEEDINGS QUA THIS ISSUE NO ENQUIRY WHATSOEVER HAD BEEN MADE BY THE A.O. NOTWITHSTANDING THE FACT THAT THE REMAND PROCEEDINGS WERE PROCEEDINGS WHERE THE ASSES SEE WAS REQUIRED TO PRESS HIS CLAIM AFRESH WHICH COULD HAVE ONLY BE DONE BY WAY OF OBJECTING T O THE ACTION OF THE A.O. 17. BE THAT AS IT MAY THE DISALLOWANCE STANDS OBJE CTED TO BY THE ASSESSEE BEFORE US WHICH ISSUE WE HAVE ANSWERED IN THE PRECEDING PARAGRAPHS. IN VI EW OF THE ABOVE FINDING MERIT IN GROUND NO. 1 RAISED BY THE ASSESSEE THE SAME IS HEREBY ACCEPT ED TO THE REVERSING ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND DELETING THE DISALLOWANCE OF RS.42 52 032/- MADE U/S. 35(2AB) OF THE ACT. IN THE ABOVE CITED FINDINGS THE ITAT HAS ALSO REFE RRED THE DECISION OF THE ITAT AHMEDABAD IN THE CASE OF SUN PHARMACEUTICAL I ND. LTD. VS. PR. CIT (2017) 162 ITD 484 AS UPHELD BY THE HONBLE GUJARAT HIGH COURT VIDE ITS DECISION REPORTED AT 250 TAXMAN 270. IN THE LIGHT OF THE FINDINGS AS SUPRA AND AMENDMENT TO SUB-SECTION (3) OF SECTION 35 W.E. F. 1-04-2016 FOR FURNISHING OF REPORT WE CONSIDER THAT THERE IS NOT HING BEFORE US ON HAND DIFFERS FROM THE CASES CITED (SUPRA) SO AS TO TAKE A DIFFERENT VIEW ON THIS ISSUE. THEREFORE SINCE THE ISSUE ON HAND BEING SQ UARELY COVERED FOLLOWING THE PRINCIPLE OF CONSISTENCY WE FIND MERIT IN THE SUBMISSION OF THE ASSESSEE AND ALLOWED THE CLAIM OF DEDUCTION. THEREFORE THI S GROUND OF APPEAL IS ALLOWED. GROUND NO. 2 (DISALLOWANCE OF COMMISSION OF RS. 6 L ACS U/S. 40A(2)(B) 8. DURING THE COURSE OF ASSESSMENT THE ASSESS ING OFFICER NOTICED THAT ASSESSEE HAS PAID COMMISSION TO PRAKASH UDESHI HUF AMOUNTING TO RS. 1 50 000/- RANJEET SEN HUF OF RS. 4 LACS AND SUSHAN TO PRAMANIK HUF OF RS. 2 LACS. THE ASSESSING OFFICER STATED THAT CLA RIFICATION GIVEN BY THE ASSESSEE REGARDING DETAILS OF SERVICES RENDERED KEE PING IN VIEW SECTION 10A(2)(B) OF THE ACT WAS OF THE GENERAL NATURE. TH EREFORE CLAIM OF COMMISSION PAYMENT TO THE AMOUNT OF RS. 7 50 000/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A NO. 28/AHD/2017 A.Y. 2013-14 PAGE NO CREST COMPOSITES & PLASTICS PVT. LTD. VS. DCIT. 8 9. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE TH E LD. CIT(A). THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS. 6 LAC S AFTER DELETING THE DISALLOWANCE OF COMMISSION PAID TO PRAKASH UDESHI H UF OF RS. 1 50 000/-. 10. HEARD BOTH THE SIDES AND PERUSED THE MATERI AL ON RECORD. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER HAS DIS ALLOWED THE EXPENDITURE INCURRED ON PAYMENT OF COMMISSION TO PERSONS SPECIF IED U/S. 40A(2)(B) STATING THAT ASSESSEE HAS FAILED TO ESTABLISH THE G ENUINENESS OF THE EXPENDITURE. ON PERUSAL OF THE MATERIAL ON RECORD IT IS OBSERVED THAT DURING THE COURSE OF ASSESSMENT THE ASSESSEE HAS EXPLAINE D THE SPECIFIC SERVICES RENDERED BY THE PARTIES TO WHOM THE COMMISSION WAS PAID ALONG WITH THE DETAIL OF THEIR EXPENSES AND TDS ON THE TRANSACTION OF COMMISSION PAYMENT. WE HAVE ALSO GONE THROUGH THE DIFFERENT PAGES OF TH E PAPER BOOK PERTAINING TO THE DETAILS OF COMMISSION EXPENDITURE FURNISHED BY THE ASSESSEE. IN THE PAPER BOOK SUBMITTED THE ASSESSEE PLACED COPIES OF INVOICES RAISED BY THE COMMISSION AGENT ALONG WITH LEDGER ACCOUNT ACKNOW LEDGEMENT OF INCOME TAX RETURN FOR A.Y. 2013-14. THE ASSESSEE HAS ALS O ENCLOSED THE COPIES OF I.T. RETURNS FILED BY THESE PARTIES SHOWING THE AMO UNT OF COMMISSION EARNED IN THEIR RETURN OF INCOME. IT IS NOTICED THAT ASS ESSING OFFICER HAS NOT MADE ANY FURTHER VERIFICATION INVESTIGATION AND EXAMINA TION FROM THE PARTIES TO WHOM THE SALES WERE MADE THROUGH THE COMMISSION AGE NTS TO DISPROVE THE FACTS REPORTED BY THE ASSESSEE IN ITS SUBMISSION. THE ASSESSING OFFICER HAS NOT DEMONSTRATED ANY MATERIAL OR INFORMATION GATHER ED TO DISPROVE THE GENUINENESS OF THE EXPENDITURE INCURRED ON COMMISSI ON PAYMENT OF RS. 6 LACS THEREFORE WE CONSIDER THE DECISION OF THE LD . CIT(A) TO SUSTAIN THE I.T.A NO. 28/AHD/2017 A.Y. 2013-14 PAGE NO CREST COMPOSITES & PLASTICS PVT. LTD. VS. DCIT. 9 DISALLOWANCE IS NOT JUSTIFIED. THEREFORE WE DO NOT FIND ANY MERIT IN THE DECISION OF LD. CIT(A) AND THE APPEAL OF THE ASSESS EE IS ALLOWED. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31-08-2021 SD/- SD/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 31/08/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER/ /