Deduction u/s 35(2AB) of Income Tax Act cannot be Denied Ignoring Form 3CL: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that deduction under Section 35(2AB) of the Income Tax Act could not be denied by ignoring Form 3CL.

The assessee Indian Toners and Developers Ltd was a resident corporate entity engaged in manufacturing and sale of inks and toners for photocopiers. For the assessment year under dispute, the assessee filed its return of income claiming deduction under Section 35(2AB) of the Income Tax Act in respect of research and development expenditure.

While examining assessee’s claim of deduction in course of assessment proceeding, the Assessing Officer observed that though the assessee had submitted Form 3CLA and 3CK for the impugned assessment year, it had not submitted Form 3CL.

Thus, being of the view that in absence of Form 3CL issued by the competent authority, assessee’s claim of deduction under Section 35(2AB) Income Tax Act was not acceptable, the Assessing Officer disallowed deduction claimed under Section 35(2AB) of the Income Tax Act and restricted the deduction to the extent of revenue expenditure incurred.

Pramod Kapur,on behalf of the assessee submitted that, though, before the Assessing Officer, the assessee could not furnish Form 3CL, as, it was not issued by competent authority, the assessee did furnish Form 3CL issued by the competent authority in course of proceeding before the first appellate authority. He further contented that Form 3CL submitted by the assessee was completely ignored by the first appellate authority while confirming the addition.

Anuj Garg, appearing on behalf of the revenue, relied upon the order of the revenue.

Section 35(2AB) of the Income Tax Act deals with Scientific research expenditure giving a weighted deduction of the amount of expenditure incurred by the assessee for in house research and development as approved by the prescribed authority.

The two-member Bench of Saktijit Dey, (Judicial Member) and M. Balaganesh, and (Accountant Member) observed that the first appellate authority had completely ignored Form 3CL issued by the competent authority, though it was placed on record.

The Bench deleted the disallowance and allowed the appeal filed by the assessee holding that when the competent authority had issued Form 3CL entitling the assessee to claim deduction in respect of both capital and revenue expenditure, which was a mandate under section 35(2AB) of the Income Tax Act, the departmental authorities could not disentitle the assessee from availing the deduction by ignoring Form 3CL.

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