The Tax Publishers2020 TaxPub(DT) 3125 (Mum-Trib)

INCOME TAX ACT, 1961

Section 35(2AB) Rule 6 Rule 6(5A) & 6(7A)

Where approval for scientific research expenditure was given without prescribed procedure and in prescribed form under rule 6A merely on the ground of technicalities of procedure, the benefit bestowed by legislature cannot be denied when it comes to follow the prescribed procedure, the exemption provisions have to be liberally construed and if in substance, the assessee had fulfilled the basic requirements the exemption therefore, cannot be denied.

Business deduction under section 35(2B) - Scientific research expenditure - Weighted deduction - Approval not on prescribed form(s) and by competent authority

Assessee-company, in the relevant assessment year, carried on the business of manufacturing of electrical and electronic instruments. AO observed that the assessee had not submitted order in Form No. 3CM by the prescribed authority and report of prescribed authority to DG (Exemptions) under the prescribed Form No. 3CL, which was a first and foremost conditions for claiming weighted deduction under section 35(2AB) read with rules 6(1B), 6(4), 6(5A), 6(7A). The AO denied the assessee's claim under section 35(2AB) on the ground that procedure as prescribed by the Finance Act, 1997 w.e.f. 1-4-1998 was not complied with. CIT(A) allowed assessee's appeal. Held: The assessee filed an application in the prescribed Form No. 3CM on 28-4-2008 giving all relevant details, including expenditure on scientific research for financial years 2002-03 to 2004-05. On this application, the approval has been granted with effect from 1-4-2007 to 31-3-2011. The assessee was entitled for weighted deduction under section 35(2AB). Once the approval is there by the prescribed authority, it could be easily concluded that the same met the basic requirement and merely the same is not in prescribed form, it would not lead to the conclusion that the approval was of no purpose. In any view of the matter, at best it could be said that it was only a procedural defect and from the various decisions, noted in the arguments of assessee, it was clear that merely on the ground of technicalities of procedure, the benefit bestowed by legislature cannot be denied. When it comes to follow the prescribed procedure, the exemption provisions have to be liberally construed and if in substance, assessee had fulfilled the basic requirements then the exemption could not be denied. In view of above discussion, the Tribunal therefore, dismissed the revenue's appeal.

Followed:CIT v. Claris Lifesciences Ltd. (2008) 174 Taxman 113 (Guj-HC) : 2010 TaxPub(DT) 166 (Guj-HC). Relied:CIT v. Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466 (SC) : 1957 TaxPub(DT) 152 (SC), Viswanatha Sastri, J in CIT v. K.E. Sundara Mudaliar (1950) 18 ITR 259 (Mad.) : 1950 TaxPub(DT) 61 (Mad-HC), CIT v. Minerva Maritime Corpn. (1985) 155 ITR 258 (Bom.) : 1985 TaxPub(DT) 747 (Bom-HC), Bajaj Tempo Ltd. v. CIT (1992) 196 ITR 188 (SC) : 1992 TaxPub(DT) 1271 (SC), CIT v. Trustees of Shri Teckchand Chandiram Trust (1990) 184 ITR 537 (Bom-HC) : 1990 TaxPub(DT) 592 (Bom-HC) and Claris Lifesciences Ltd. v. Asstt. CIT (2007) 111 TTJ 902 (Ahd-Trib) : 2008 TaxPub(DT) 450 (Ahd-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2005-06



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