Sandan Vikas (India) Ltd., New Delhi v. DCIT, New Delhi

ITA 4955/DEL/2010 | 2006-2007
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 495520114 RSA 2010
Assessee PAN AABCS3174M
Bench Delhi
Appeal Number ITA 4955/DEL/2010
Duration Of Justice 2 month(s) 9 day(s)
Appellant Sandan Vikas (India) Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 21-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2006-2007
Appeal Filed On 12-11-2010
Judgment Text
I.T.A. NO. 4955/DEL/2010 1/5 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH G NEW DELHI BENCH G NEW DELHI BENCH G NEW DELHI BENCH G BEFORE SHRI A. D. JAIN JUDICIAL MEMBER AND SHRI K. D. RANJAN ACCOUTANT MEMBER ITA NO. 4955 /DEL/2010 (ASSESSMENT YEAR 2006-07 ) M/S. SANDAN VIKAS (INDIA) LTD. VS. DCIT CO. CIRC LE 7(1) 12-A SHIVAJI MARG NEW DELHI NEW DELHI (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AABCS3174M APPELLANT BY: SHRI S KRISHNAN ADV RESPONDENT BY: SMT. BANITA DEVI DR ORDER ORDER ORDER ORDER PER K. D. RANJAN AM: PER K. D. RANJAN AM: PER K. D. RANJAN AM: PER K. D. RANJAN AM: 1. THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT Y EAR 2006-07 ARISES OUT OF THE RODE OF LD. CIT(A) X NEW DELHI. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UND ER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN UPHOLDING THE ASSESSMENT MADE BY THE A .O. WHEREIN THE A.O. HAS REDUCED DEDUCTION U/S 35(2AB) BY ` 30 02 842/- (90 08 525 60 05 683) IN CASE OF REVE NUE EXPENSES RELATING TO RESEARCH AND DEVELOPMENT. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW THE DEDUCT ION ONLY TO THE EXTENT APPROVED BY DSIR AND NOT AS CLAIMED BY T HE ASSESSEE. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) HAS ERRED NOT FOLLOWING THE DECISION OF HONBLE GUJ ARAT HIGH COURT IN THE CASE OF CIT VS CLARIES LIFE SCIENCES L TD. IN I.T.A. NO. 383 OF 2008. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) HAS ERRED IN NOT FULLY FOLLOWING THE DECISION OF TH E ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO ALLO WANCE OF WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT. THE FAC TS STATED IN BRIEF ARE THAT THE ASSESSEE IN THE RETURN OF INCOME CLAIM ED WEIGHTED I.T.A. NO. 4955/DEL/2010 2/5 DEDUCTION IN RESPECT OF R&D EXPENDITURE INCURRED BY THE ASSESSEE. ON A QUERY RAISED BY THE A.O. IT WAS SUBMITTED THA T AS PER CBDT NOTIFICATION NO.SO-1021(E) DATED 21.09.2004 THE AU TOMOBILE AND COMPONENTS MANUFACTURED BY A COMPANY ARE ELIGIBLE F OR WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT IN RESPECT OF THE EXPENSES INCURRED ON IN HOUSE R&D FACILITIES. THE ASSESSEE WAS IN TH E PROCESS OF SETTING UP OF IN HOUSE R&D FACILITIES. THE ASSESSE E COMPANY APPROACHED THE PRESCRIBED AUTHORITY I.E. DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH (DSIR) MINISTRY OF SCIENCE & TECHNOLOGY GOVT. OF INDIA FOR RECOGNITION OF IN HOUSE R&D FACI LITIES VIDE APPLICATION DATED 10.01.2005. THE RECOGNITION OF T HE SAID FACILITIES WAS GRANTED BY DSIR VIDE THEIR LETTER REF: TU/IV-RD /2551/2005 DATED 23 RD FEB 2006. IT WAS ALSO SUBMITTED THAT PRESCRIBED F ORM 3CL TO THE DIRECTOR INCOME TAX (EXEMPTION) ENTITLIN G THE ASSESSEE FOR WEIGHTED DEDUCTION U/S 35(2AB) WAS ISSUED BY DS IR FOR WHICH THE ASSESSEE HAD FILED ITS REVIEW LETTER AND REQUES TED FOR ISSUANCE OF FORM 3CL. THE A.O. HELD THAT THE ASSESSEE WAS NOT ENTITLED FOR WEIGHTED DEDUCTION @ 150% U/S 35(2AB) ON THE EXPENS ES CLAIMED BY THE ASSESSEE. HOWEVER THE A.O. ALLOWED THE CL AIM OF THE ASSESSEE U/S 35(2) READ WITH SECTION 35(1)(IV) OF T HE ACT. 3. ON APPEAL THE ASSESSEE ON THE BASIS OF DECISION OF ITAT FOR ASSESSMENT YEAR 2005-06 PLEADED THAT THE ASSESSEE I S ELIGIBLE FOR RELIEF U/S 35(2AB) W.E.F. 10.01.2005 WHICH IS THE DATE OF FILING OF APPLICATION FOR APPROVAL BEFORE DSIR. LD. CIT(A) R ELYING ON THE DECISION OF ITAT HELD THAT THE ASSESSEE WAS ENTITLE D TO WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT. HOWEVER IN THE PRECEDING ASSESSMENT YEAR THE DETAILED SUBMISSION BY THE ASS ESSEE SHOWED THAT THE EXPENDITURE AND DEDUCTION CLAIMED BY THE A SSESSEE ON ACCOUNT OF BUILDING OTHER CAPITAL EXPENDITURE REV ENUE EXPENDITURE ETC WERE ` 5 345.97 LACS AND DEDUCTION CLAIMED BY THE COMPANY WAS AT ` 723.28 LACS. HOWEVER AS PER THE SUBMISSIO NS MADE BY THE ASSESSEE THE WEIGHTED DEDUCTION APPROVED BY DSIR WA S TO THE TUNE OF ` 474.91 LACS ON ACCOUNT OF EXPENSES AND A DEDUC TION OF ` 633.20 I.T.A. NO. 4955/DEL/2010 3/5 LACS WAS APPROVED BY DSIR AGAINST THE CLAIM OF ` 72 3.28 LACS. ACCORDINGLY THE A.O. WAS DIRECTED TO ALLOW WEIGHTE D DEDUCTION AS PER THE DIRECTIONS OF ITAT AND TO ASCERTAIN THE AMO UNT APPROVED BY DSIR IN RESPECT OF DEDUCTION ALLOWABLE TO THE ASSES SEE. IN OTHER WORDS THE DEDUCTION WHICH IS TO BE ALLOWED TO THE ASSESSEE WAS TO THE EXTENT OF APPROVAL BY DSIR AND NOT AS CLAIMED B Y THE ASSESSEE. 4. BEFORE US THE LD. A.R. SUBMITTED THAT THE PROVI SIONS OF SECTION 35(2AB) DO NOT PUT ANY CAP ON CLAIM OF THE ASSESSEE U/S 35(2AB). THERE IS NO REQUIREMENT UNDER THE LAW UND ER WHICH DSIR HAS TO QUANTIFY THE CLAIM OF THE ASSESSEE. THEREFO RE LD. CIT(A) IS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO TH E EXTENT OF THE AMOUNT APPROVED BY DSIR. HE PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS CL ARIS LIFESCIENCES LTD. 326 ITR 251. THE ASSESSEE WILL BE ENTITLED T O CLAIM WEIGHTED DEDUCTION IN RESPECT OF ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE ON RESEARCH AND DEVELOPMENT. ON THE OTHER HAND TH E LD. SR. D.R. SUPPORTED THE ORDER OF LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. ITAT DELHI BENCH E VIDE ITS ORDER DATED 23.03.2010 IN ASSESSEES OWN CASE IN I.T.A. N O. 1105/DEL/2009 FOR THE ASSESSMENT YEAR 2005-06 ON ID ENTICAL FACTS HAS HELD AS UNDER:- 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE LD. CIT(A) IT IS SEEN HAS CONFIRMED THE DISALLOWANCE OBSERVING INTER ALIA THAT THE FINAN CIAL PERIOD INVOLVED WAS FROM 1.4.2004 TO 31.3.2005 WHEREAS TH E APPLICATION FOR RECOGNITION OF IN-HOUSE R&D FACILIT Y WAS MADE ONLY ON 10.1.2005 I.E. AT THE FAG END OF THE FINA NCIAL YEAR; THAT AS ADMITTED BY THE ASSESSEE ITSELF VIDE ITS LETTER DATED 13.1.2009 THE PRESCRIBED FORM NO. 3 CL HAD NOT BEEN ISSUED BY THE DEPARTMENT OF SCIENCE; THAT CIT V. CLARIS LIFESCIE NCES LTD.(SUPRA) WAS NOT APPLICABLE IN THAT CASE THE APPLICATION HAD BEEN MADE AND APPROVAL HAD BEEN MADE IN THE SAME FI NANCIAL YEAR WHEREAS IN THE ASSESSEES CASE THERE WAS A GA P OF TWO FINANCIAL YEARS BETWEEN THE MAKING OF THE APPLICATI ON AND THE GRANT OF THE APPROVAL. I.T.A. NO. 4955/DEL/2010 4/5 8. THE DECISION IN CIT V. CLARIS LIFESCIENCES LTD. (SUPRA) HAS BEEN REPORTED IN 221 CTR 301(GUJ). THEREIN THE H ONBLE GUJARAT HIGH COURT HAS HELD THE PROVISIONS OF SECTI ON 35(2AB) DO NOT STATE OR IMPLY THAT THE R&D FACILITY IS TO B E APPROVED FROM A PARTICULAR DATE OR THAT IT IS ONLY THE DATE OF A PPROVAL THAT WOULD BE THE CUT OFF DATE FOR ELIGIBILITY OF WEIGHT ED DEDUCTION ON THE EXPENSES INCURRED FROM THAT DATE ONWARDS; THAT A PLAIN READING OF THE SECTION SHOWS THAT THE ASSESSEE HAS TO DEVELOP THE FACILITY WHICH PRE-SUPPOSES INCURRING THE EXPENDIT URE IN THIS BEHALF APPLICATION TO THE PRESCRIBED AUTHORITY WH O AFTER FOLLOWING THE PROPER PROCEDURE WILL APPROVE THE FA CILITY OR OTHERWISE AND THE ASSESSEE WILL BE ENTITLED TO WEI GHTED DEDUCTION OF ANY AND ALL EXPENDITURE SO INCURRED. 9. THIS DECISION IN OUR CONSIDERED OPINION HAS WR ONGLY BEEN DISTINGUISHED BY THE LD. CIT(A). IT DOES NOT MATT ER THAT IN THAT CASE THE MAKING OF THE APPLICATION AND THE GRANT O F APPROVAL CAME ABOUT IN THE SAME FINANCIAL YEAR WHEREAS IN T HE ASSESSEES CASE THERE WAS A GAP OF TWO FINANCIAL YEARS BETWEE N THE TWO ACTS. WHAT IS PERTINENT IS THAT THE ASSESSEE DID MAKE AN APPLICATION WHICH HAS BEEN OBSERVED IN THE IMPUGNED ORDER ALSO. IT IS ALSO A FACT THAT THE FORM 3 CL WAS GIVEN BY THE AUTHORITY IN THE SUBSEQUENT YEAR. THE LD. CIT(A) HAS BEEN OF THE O PINION THAT IT WAS AT THE FAG END OF THE ASSESSEE THAT THE ASSESSE E MADE THE APPLICATION. THIS HOWEVER DOES NOT ACT PREJUDIC IALLY TO THE ASSESSEE. 10. IN VIEW OF CIT V. CLARIS LIFESCIENCES LTD. (S UPRA) THEREFORE THE ASSESSEE IS ENTITLED TO WEIGHTED DED UCTION CLAIMED U/S 35(2AB) OF THE ACT AND WE HOLD SO. THE GRIEVA NCE OF THE ASSESSEE IS AS SUCH FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. 6. FURTHER U/S 35(2AB)(1) WHERE A COMPANY IS ENGAGE D IN THE ELIGIBLE BUSINESS INCURRED ANY EXPENDITURE ON SCIEN TIFIC RESEARCH NOT BEING EXPENDITURE IN THE NATURE OF COST OF ANY LAND AND BUILDING EXPENSES ON IN HOUSE RESEARCH AND DEVELOPMENT FACIL ITY AS APPROVED BY THE PRESCRIBED AUTHORITY THEN THERE SH ALL BE ALLOWED A DEDUCTION OF A SUM EQUAL TO 1 TIMES OF THE EXPEND ITURE SO INCURRED. THE PROVISIONS OF SUB-SECTION (1) OF SEC TION 35(2AB) DO NOT PRESCRIBE ANY CAP FOR ALLOWANCE OF WEIGHTED DED UCTION UNDER THIS SECTION. THEREFORE IN OUR CONSIDER OPINION LD. CIT(A) IS NOT I.T.A. NO. 4955/DEL/2010 5/5 JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO THE EX TENT OF EXPENDITURE APPROVED BY THE PRESCRIBED AUTHORITY I.E. DSIR. AS DISCUSSED ABOVE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF IT AT IN THE ASSESSEES OWN CASE. RESPECTFULLY FOLLOWINGS THE S AME WE DECIDE THE APPEAL IN FAVOUR OF THE ASSESSEE. THE ASSESSEE WILL BE ENTITLED FOR FULL DEDUCTION U/S 35(2AB) IN RESPECT OF EXPEND ITURE OTHER THAN EXPENDITURE INCURRED ON LAND AND BUILDING. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. 8. PRONOUNCED IN THE OPEN COURT ON 21 ST JAN. 2011 SD./- SD./- (A. D. JAIN) (K. D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:21 ST JAN. 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI