Once a Research Facility is Approved, Weighted Deduction can’t be denied for want of Form 3CL: ITAT [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Century Seeds Pvt. Ltd. v. DCIT ordered that once a research facility is approved, weighted deduction can’t be denied for want of Form 3CL.

The present case in its scrutiny by the CASS and Assessing Officer (AO) after completing its assessment determined the total income in excess of what was disclosed by the assessee in its return. Thereafter the Commissioner of Income Tax (CIT) invoked its jurisdiction u/s 263 of the Act and issued show cause notice to the assessee directing submission of form 3CM order of approval of in-house research and development facility by DSIR and Form 3CL in which the prescribed authority (DSIR) certify the expenditure which entitle the assessee to avail weighted deduction. However, the assessee did not submit any details in Form 3CM and 3CL report. In the absence of mandatory Form 3CM and Form 3CL, allowance of weighted deduction cannot be given. The AO allowed this allowance, without complying the related provisions of law, as mentioned above. Since the AO has not brought anything on record about this allowance, the same has to be treated as non-application of mind.

The issue arisen in the present appeal is that whether the jurisdiction exercised by Ld Principal Commissioner of Income Tax (Pr. CIT-2), Hyderabad u/s 263 vide his order dated 27/03/2017 is valid or not.

The Tribunal after perusing the material on record and the contentions raised by the parties was of the opinion that the Form is to be sent by DSIR to DIT (E). It is an internal mechanism before two Government Departments on which assessee has no role or control, except filing the necessary application with DSIR which assessee complied. So, non-filing of Form 3CL by assessee does not arise in such a situation. Furthermore, the Tribunal was of the opinion that the AO had correctly allowed the deduction and there is no “error” in the order passed by AO u/s 143(3). Once a research facility is approved, entire expenditure incurred on Department of R & D has to be allowed weighted deduction as provided u/s 35(2AB). Hence, allowing the appeal, the Tribunal held that the filing of Form 3CL by assessee does not arise.