ACIT Vs M/s. Crompton Greaves Ltd. (ITAT Mumbai)
Conclusion: Disallowance of deduction under section 35(2)(AB) on the ground of non approval of expenditure claimed by the DSIR was allowable as prior to the amendment, i.e., upto 30.06.2016, the pre-requisite for allow ability of deduction was approval for Units and not approval for the quantum of expenditure. Moreover, AO disallowed the claim without due application of mind.
Held:
Assessee had incurred in-house scientific research expenditure (capital and revenue). It had claimed weighted deduction u/s. 35(2)(AB) in computing the total income @ 150% of the actual expenditure. The expenditure was incurred for the K unit of the company; rather, the unit stood approved by the DSIR, in Form No. 3CM. Assessee’s auditor duly certified the genuineness of such expenditure and its eligibility for weighted deduction u/s. 35(2)(AB). AO noted after verifying Form Nos. 3CM and 3CL concerning the deduction claimed by assessee u/s. 35(AB) that the eligible amount, as noted by Department of Scientific and Industrial Research (‘DSIR’), in Form No. 3CL was less as compared to the deduction claimed by assessee. AO made the disallowance on this basis. It was held on reading of sections 35(1)(i) and 35(2AB), it was noted that a specific approval of quantum of expenditure, by the prescribed authority, was the pre-requisite for deduction, the provisions of section 35(2AB) required approval for Units and not approval for the quantum of expenditure. Prior to the amendment, 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 had been put in place. The year under consideration was A.Y. 2009-10 and, for this year, the amendment was not applicable. Therefore, the assessee was right in contending that the non approval of the expenditure claimed by CSIR did not entitle the AO to make the disallowance. AO disallowed the claim without due application of mind.
FULL TEXT OF THE ITAT JUDGEMENT
These are department’s appeal and the assessee’s appeal, respectively, for Assessment Year (‘A.Y.’, for short) 2009-10, against the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A)’, for short) order dated 22.05.2017.
ITA No. 5390/Mum/2017 – (Assessee’s appeal)
