Nsl Renewable Power Private Limited , ... vs Department Of Income Tax

ITA No.1586/Hyd/14 : Assessment year 2010-11

Dy. Commissioner of Income- V/s. M/s. NSL Renewable power (P) tax Circle 16(1), Hyderabad Ltd., Hyderabad

(PAN - AABCN 6009 L ) (Appellant) (Respondent)

Appellant by : Shri Rajat Mitra DR

Respondent by : Shri V. Raghavendra Rao

Date of Hearing 24.2.2015 Date of Pronouncement 11.3.2015

ORDER

Per P.M.Jagtap, Accountant Member :

This appeal filed by the Revenue is directed against the order of the learned Commissioner of Income-tax (Appeals) V, Hyderabad dated 11.8.2014, whereby he allowed the claim of the assessee for weighted deduction on account of Research and Development expenditure under S.35(2AB) of the Act to the extent of Rs.1,84,55,000.

2. The assessee in the present case is a company, which is engaged in the business of research, production, processing and marketing of agricultural sowing/planting seeds, trading in pesticides, generation and sale of power and letting of immovable properties. The return of income for the year under consideration was filed by it on 30.9.2010, declaring total income of Rs.23,18,25,430 and book profit of Rs.114,72,88,700 under S.115JB of the Act. In the said return, research and development expenditure of Rs.8,80,51,916 was claimed to be incurred by the 2 ITA No.1586/Hyd/2014 M/s. NSL Renewable Power (P)Ltd., Hyderabad

assessee and weighted deduction at 150% of such expenditure amounting to Rs.13,20,77,874 was claimed under S.35(2AB) of the Act.

3. During the course of assessment proceedings, although the assessee produced copy of Form 3CM dated 16.6.2010, issued by the prescribed authority approving the R&D facility of the assessee for the purpose of S.35(2AB), form 3CL from the prescribed authority certifying the fulfilment of the condition contained in S.35(2AB) was not furnished. As noted by the Assessing Officer, for the purposes of claiming deduction under S.35(2AB), not only the in house research and development facility was required to be approved by the prescribed authority, but also the expenditure incurred on research and development was required to be approved. Accordingly, in the absence of Form 3CL issued by the prescribed authority in support o such expenditure incurred by the assessee on research and development, the claim of the assessee for additional weighted deduction amounting to Rs.4,40,25,958 was disallowed by the Assessing Officer in the assessment completed under S.143(3) vide order dated 31.1.2013.

4. Against the order passed by the Assessing Officer under S.143(3), an appeal was preferred by the assessee before the learned CIT(A), who allowed the claim of the assessee for weighted deduction in respect of research and development expenses under S.35(2AB) of Rs.1,84,55,000, after recording the following observations in paragraph No.6.2 and 6.3 of his impugned order-

"6.2 During the appeal proceedings, under powers vested u/s.250(4) of the Act, the assessee was asked to submit Form.3CL for allowing the expenditure claimed u/s 35 (2AB) of the Act and the appellant submitted the same. The submissions of the appellant are as under:

1. The Assessing Officer is not justified in 3 ITA No.1586/Hyd/2014 M/s. NSL Renewable Power (P)Ltd., Hyderabad

disallowing the Appellant's claim of weighted deduction of Rs. 4,40,25,234 under section 35(2AB) of the Act on the Research & Development expenditure on the ground that Form No. 3CL from the prescribed authority has not been furnished.

The Appellant incurred an expenditure of Rs.

8,80,51,916 on Research & Development expenditure and claimed a weighted deduction of 150 % thereon amounting to Rs.

13,20,77,874.

However, the Assessing Officer duly allowed the actual expenditure of Rs. 8,80,51,916, but disallowed the claim of the weighted deduction of Rs. 4,40,25,234.

In course of the assessment proceedings, it was submitted that the Appellant has been granted approval under section 35(2AB) by the Secretary, Department of Scientific & Industrial Research, New Delhi for carrying out in-house research, for which Form No. 3CM has been received and a copy of the same has been furnished in course of the assessment proceedings. As required, the Appellant had furnished the requisite information to the prescribed authority i.e. the Secretary, Department of Scientific & Industrial Research, New D~/hi for scrutiny and approval and a copy of the same has been furnished in course of the assessment proceedings.

However, the Form No.3CLwas not received form teh Department of Scientific & Industrial Research, New Delhi before the completion of the assessment proceedings and hence the same could not be furnished then.

Subsequent to the completion of the assessment proceedings, the form No.3CL dated 21-05-2014 was received from the Department of Scientific & Industrial Research, New Delhi, a copy of which is furnished hereto.

As against the Appellant's claim of Research & Development expenditure of Rs.8,80,51,916, the Department of Scientific & Industrial Research, New Delhi had approved an expenditure of Rs.3,69,10,000, on which the appellant is entitled to weighted deduction of Rs.1,84,55,000.

The Appellant accordingly prays for allowing the weighted deduction of Rs.1,84,55,000 under section 35(2AB) of the Act.

4 ITA No.1586/Hyd/2014 M/s. NSL Renewable Power (P)Ltd., Hyderabad

6.3 I have carefully considered the submissions of the appellant and the assessment order. As called for by me u/s 250 (4) of the Act, the appellant submitted Form.3CL vide 3CL No.TU/IV-15(366)35 (2AB)/3CL/1169/2013 dated 21st May, 2014, from the Department of Scientific and Industrial Research Technology, Ministry of Science and Technology, New Delhi, wherein it approved the total R&D expenditure incurred for the AY.2010-11 at Rs.369.10 lakhs. Considering the approval of DSIR in Form 3CL, I allow the weighted deduction of 50% amounting to Rs.1,84,55,OOO u/s 35 (2AB) of the Act out of Rs.4,40,25,234 disallowed by the AO. "

Aggrieved by the order of the learned CIT(A), Revenue has preferred the present appeal before tee Tribunal.

5. We have heard the arguments of both the sides and also perused the relevant material on record. The only contention of the Learned Departmental Representative is that the additional evidence field by the assessee in the form of Form 3CL issued by the prescribed authority has been admitted and relied upon by the learned CIT(A) to give relief to the assessee without giving any opportunity to the Assessing Officer to verify the same, which is in contravention of Rule 46A of the Income-tax Rules. The learned counsel for the assessee, on the other hand, has contended that Form 3CL was filed by the assessee during the course of appellate proceedings before the learned CIT(A) as per the directions issued by him in terms of powers vested under S.250(4) of the Act, and therefore, Rule 46A of the Income-tax Rules has no application. In support of this contention, he has relied on the decision of the Hon'ble Gauhati High Court in the case of CIT V/s Poddar Swadesh Udyog P. Ltd. (295 ITR 252). In the said case, additional evidence was filed by the assessee as per the direction of the learned CIT(A) by exercising the powers conferred upon him under S.250(4) and 5 ITA No.1586/Hyd/2014 M/s. NSL Renewable Power (P)Ltd., Hyderabad

the same was admitted and relied upon by the learned CIT(A) to give relief to the assessee without giving any opportunity to the Assessing Officer to verify the same. When this issue was raised by the Revenue before the Hon'ble Gauhati High Court by relying on Rule 46A of the IT Rules, Their Lordships held that although there was apparently an irregularity in the matter, it would not be in aid of justice to refer the matter to the Assessing Officer again, since both the CIT(A) as well as the Tribunal had rendered concurrent findings of fact.

6. Keeping in view this decision of the Hon'ble Gauhati High Court CIT V/s Poddar Swadesh Udyog P. Ltd.(supra), we directed the learned counsel for the assessee to file copy of the Form No.3CL issued by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India before us. A perusal of the said Form filed by the learned counsel for the assessee before us shows that it is issued in the name of M/s. Nuziveedu Seeds Pvt. Ltd. and not in the name of the assessee company. Although the learned CIT(A) in the cause title of the impugned order has indicated that as the earlier name of the assessee company, it is observed that there is no such mention either in the assessment order passed by the Assessing Officer at earlier point of time, and even in the Appeal Memo filed by the assessee before the learned CIT(A). It is also observed that the learned CIT(A) in his impugned order has indicated earlier name of the assessee company as Nuziveedu Seeds Ltd., whereas the Form No.3CL is issued in the name of Nuziveedu Seeds Pvt. Ltd. It is, therefore, not clear as to what exactly the earlier name of the assessee company was, and when exactly it got changed. It is also not clear that if there was already a change in the name of the assessee company, how the form No.3CL has been issued by the prescribed authority in the old name as late as on May 21, 2014.

6 ITA No.1586/Hyd/2014 M/s. NSL Renewable Power (P)Ltd., Hyderabad

Moreover, the expenditure claimed to be incurred by the assessee on research and development eligible for weighted deduction as per the return was Rs.8,80,51,916 whereas the expenditure approved by the prescribed authority as per Form 3CL is only Rs.369.10 lakhs. Keeping in view all these anomalies and contradictions, we are of the view that an opportunity should be given to the Assessing Officer to verify Form 3CL dated May 21, 2014 issued by the prescribed authority in the interests of justice. Accordingly, we set aside the impugned order of the learned CIT(A) on this issue and restore the matter to the file of the Assessing Officer for deciding the same afresh after verifying Form No.3CL, in accordance with law and after giving sufficient opportunity of hearing to the assessee.

7. In the result, appeal of the Revenue is treated as allowed for statistical purposes.

Order pronounced in the court on 11th March, 2015

Sd/- Sd/- (Asha Vijayaraghavan) (P.M.Jagtap) Judicial Member Accountant Member

Dt/- 11th March, 2015

Copy forwarded to:

1. M/s. NSL Renewable Power (P) Ltd., NSL Icon Fourth Floor, Road No.12, Banjara Hills, Hyderabad

2. Dy. Commissioner of Income-tax 16(1), Hyderabad

3. Commissioner of Income-tax(Appeals) V Hyderabad

4. Commissioner of Income-tax IV, Hyderabad

5. Departmental Representative, ITAT, Hyderabad.

B.V.S