The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that the absence of Form 3CL alone cannot justify the denial of weighted deduction under Section 35(2AB) of the Income Tax Act, 1961.
Trivitron Healthcare Pvt. Ltd., the assessee, is engaged in the manufacturing and distribution of medical technology. The company claimed a weighted deduction of Rs. 1,21,28,068 under Section 35(2AB) for in-house research and development (R&D) expenses for the Assessment Year 2018-19, duly maintaining separate books of accounts and filing Form 3CK as required for statutory approval.
The Principal Commissioner of Income Tax (PCIT) exercising revisionary powers under Section 263, directed the Assessing Officer (AO) to disallow the deduction on the ground that the assessee had not submitted Form 3CL, which is issued by the prescribed authority. The PCIT claimed that without this form, the deduction could not be granted.
The assessee’s counsel argued that the AO had already examined the R&D expenditure, and the non-receipt of Form 3CL from the prescribed authority should not be held against it, as the issuance of the form was beyond its control.
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The assessee’s counsel further relied on the Hyderabad ITAT’s decision in Sri Biotech Laboratories India Ltd., which held that once an R&D facility is approved, the deduction cannot be denied merely because Form 3CL is absent.
The two-member bench comprising George George K (Vice President) and S.R. Raghunatha (Accountant Member) considered the arguments from both sides. The tribunal observed that the absence of Form 3CL alone does not make the AO’s order erroneous or prejudicial to the interest of the Revenue, as the AO had conducted due verification before allowing the claim.
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The tribunal ruled that mere procedural lapses should not lead to the denial of legitimate tax benefits, explaining that if Form 3CL is issued later, the AO may allow the deduction after due verification. The revision order under Section 263 was quashed, and the appeal was allowed.
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