Disallowance of Weighted R&D Deduction u/s 35 Unsustainable where Valid DSIR Approval in Form 3CM Exists: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench upheld the deletion of disallowance of ₹1.91 crore claimed as weighted deduction on research and development (R&D) expenditure holding that the existence of a valid approval in Form 3CM is sufficient compliance.

The assessee ITW India Private Limited claimed a weighted deduction of ₹1,91,97,051 under section 35 of the Income Tax Act 1961 for expenditure incurred on scientific research. The Assessing Officer (AO) disallowed the claim on the ground that the assessee failed to furnish Form 3CL issued by the Department of Scientific and Industrial Research (DSIR) which was considered mandatory.

However, the Commissioner of Income Tax (Appeals) [CIT(A)] while dealing with the matter took notice of the fact that there was production of form 3CM and some other documents too and such approval under form 3CM was valid for the relevant assessment year.

The revenue claimed that the form 3CL was mandatory and accused the assessee of having presented some more evidence before the CIT(A) without allowing the AO to consider the same as provided under Rule 46A.Further, the assessee claimed that all necessary forms such as 3CM, 3CLA, etc.were already filed before the AO.

The Tribunal comprising Challa Nagendra Prasad (Judicial Member) and Sanjay Awasthi (Accountant Member) observed that the assessee was in possession of a valid Form 3CM covering the relevant period and that there existed sufficient documentary evidence indicating that the same was placed before the AO.

The ITAT noted that merely because there was some ambiguity regarding Form 3CL, the substantive claim could not be denied as a result upholding the findings of the CIT(A) the Tribunal held that the disallowance was unwarranted and dismissed the Revenue’s appeal.

Thus, the Bench concluded that where statutory approval in Form 3CM exists and relevant documents are on record a denial of deduction on procedural grounds is unjustified.

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