IN INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA Nos.242 & 243/Chd/2015 (Assessment Years : 2009-10 & 2010-11) M/s Parabolic Drugs Ltd., Vs. D.C.I.T., SCO 99-100, Sector 17B, Central Circle-1, Chandigarh. Chandigarh. PAN: AACCP1419K (Appellant) (Respondent) Assessee by : Shri Sudhir Sehgal Department by : Shri Sushil Kumar, CIT DR Date of hearing : 27.09.2016 Date of Pronouncement : 07.10.2016 O R D E R PER ANNAPURNA GUPTA, A.M. : These two appeals are directed against separate orders of learned Commissioner of Income Tax (Appeals)-3, Gurgaon dated 16.12.2014 for assessment years 2009-10- and 2010-11 in case of same assessee.Since identical issue is involved in all appeals they were heard together and are being disposed off by this common order. For sake of convenience we shall be dealing with appeal in ITA No.242/Chd/2015 relating to AY 2009- 2010. 2 2. brief facts relating to case are that assessee is in business of manufacturing of bulk drugs and fine chemicals. Search under section 132 of Income Tax Act, 1961 (in short Act ) was conducted on assessee on 17.09.2010 and in response to notice under section 153A of Act, assessee filed return of income, declaring total income of Rs.9,44,78,080/-, after claiming weighted deduction of expenditure incurred on in-house Scientific Research & Development under section 35(2AB) of Act, amounting to Rs.18,86,68,086/-. Assessment was completed at total income of Rs.28,32,,49,660/-, denying assessee s claim for weighted deduction under section 35(2AB) in absence of statutory approval of expenditure from prescribed authority. Accordingly, Assessing Officer made substantive addition of Rs.11,31,49,726/- on account of weighted deduction of capital expenditure and excess weighted deduction on revenue expenditure claimed u/s 35(2AB) by assessee. Further AO made protective addition of 100% of revenue expenditure, amounting to Rs.7,55,18,360/- alternatively claimed by assessee under section 37(1) of Act by stating that though Hon ble ITAT had allowed identical claim in AY 2006-07 Revenue had filed appeal against same in High Court and substantive addition would be made if appeal was allowed. 3 3. During appellate proceedings before learned CIT (Appeals), assessee submitted statutory approval in Form.No.3CL as additional evidence and pleaded admittance of same, since it was received late by assessee i.e after completion of assessment, thereby preventing assessee to submit same during assessment proceedings. learned CIT (Appeals) refused to admit additional evidence by holding that assessee was not able to prove that delay in obtaining requisite certificate was not attributable to it. Thereafter learned CIT (Appeals) upheld disallowance of excess weighted deduction on both capital and revenue expenditure incurred while actual revenue expenditure was allowed since genuineness of expenditure was not disputed. As for capital expenditure incurred, disallowance of same was also upheld after rejecting assessee s alternative claim of same under section 35(1)(iv) of Act, in absence of any explanation given by assessee of manner of usage of same and also since matter was not considered by I.T.A.T. in assessee s case for assessment year 2006-07 and hence was held by Ld CIT(A) to be not covered by that decision. 4. Aggrieved by same, assessee has come up in appeal before us challenging action of Ld.CIT(A) in denying assessees claim of weighted 4 deduction u/s 35(2AB) of Act by rejecting additional evidence filed by it as also denying alternative claim of assessee of capital expenditure incurred on research and development u/s 35(1)(iv) of Act. assessee has raised following grounds: 1. That order of Ld. Commissioner on Income (Appeal) (Central), Gurgaon is contrary to facts of case and legally incorrect and without any basis of proper justification. 2. Ld. CIT (A) has erred in upholding addition on substantive basis made by Assessing Officer on account of deduction u/s 35(2AB). Ld. CIT(A) has not considered facts for disallowing weighted deduction u/s 35 (2AB) but on basis of recognition from DSIR is pending, which is out of control of assessee. assessee had duly complied with all formalities as mentioned in section 35( 2AB). However report in Form No. 3CL was received by assessee on 25/09/2013 (after completion of assessment and filling of present appeal). separate request letter to admit same as additional evidence was already submitted dated 4 t h October, 2013 via fax. DSIR, in its Form 3CL recognized Rs.3,51,19,000/- as capital expenditure and same is eligible for weighted deduction @150% (i.e.5,26,78,500/-). 3. Ld. CIT (A) has erred in upholding addition to extent of Rs.1,51,41,364/- made by Assessing Officer on account of deduction under section 35 (2AB) without allowing corresponding deduction u/s 35(1 )(iv). Ld. CIT (A) has not considered facts for disallowing weighted deduction u/s 35 (2AB) but on basis of non recognition from DSIR. If amount is not eligible for weighted deduction u/s 35(2AB), it can be eligible for deduction u/s 35(1 )(iv). 5 4. Ld. CIT (A) has erred in upholding addition of Rs.3,77,59,180/- made by Assessing Officer on account of deduction u/s 35(2AB). Ld. CIT (A) has not considered facts for disallowing weighted deduction u/s 35(2AB) but on basis of recognition from DSIR is pending, which is out of control of assessee. assessee had duly complied with all formalities as mentioned in section 35(2AB). However report in Form No. 3CL was received by assesseeon25/09/2013(after completion of assessment and filling of present appeal). separate request letter to admit same as additional evidence was already submitted dated 4 t h October ,2013 via fax. DSIR, in its Form 3CL recognized Rs. 7,55,18,000/-as revenue expenditure and same is eligible for weighted deduction @ 150%. 5. During course of hearing before us, learned counsel for assessee argued that CIT (Appeals) had wrongly rejected admission of its additional evidence, since it was evident that assessee was prevented by sufficient cause for not producing same before Assessing Officer. learned counsel for assessee drew our attention to application for admission of additional evidence filed before learned CIT (Appeals) and reproduced at para 4 of order of CIT (Appeals) and pointed out that it was categorically shown to CIT (Appeals) that approval from DSIR, which was additional evidence, was received late by assessee i.e. on 25.9.2003, six months after completion of assessment. learned counsel for assessee pointed out that even learned CIT (Appeals) appreciated same at para 6 4.3 of his order. learned counsel for assessee stated that when approval itself was received late, assessee could not have submitted it during assessment proceedings and there was sufficient cause for submitting same as additional evidence. learned counsel for assessee thereafter pleaded that since assessee had obtained requisite approval, it should not have be denied deduction under section 35(2AB) of Act in first place. Alternatively, learned counsel for assessee pleaded that its claim of capital expenses should be allowed under section 35(1(iv) of Act, since Hon,ble ITAT had allowed same to assessee in assessment year 2006-07 vide its order dated 17-06-2011 in ITA No.2111(Delhi) of 2010. 6. We have heard learned representatives of both parties, perused findings of authorities below and considered material available on record. 7. first issue which needs to be addressed in present set of appeals is denial of admission of additional evidence i.e Form No.3CL, being approval by prescribed authority of expenses incurred for purpose of claiming weighted deduction of same u/s 35(2AB) of Act. Undisputedly requisite approval for scientific research expenditure in Form.No.3CL, was received on 25.9.2013, i.e. six months after completion of assessment on 31-03-2013. This being so, we fail to understand how assessee could have submitted 7 same during assessment proceedings. Having received approval late, there was sufficient cause for not producing same before Assessing Officer and as per clause (b) of sub-rule (1) of Rule 46A of Income Tax Rules, learned CIT (Appeals), we hold, should have admitted additional evidence. denial of admission of additional evidence by Ld.CIT(A) for reason that assessee has not been able to prove that delay was not attributable to it, is absurd, since clearly receipt of approval was not in assessees control. Further, additional evidence was relevant and goes to root of matter. Hon'ble Supreme Court in case of Tek Ram v CIT 262 CTR 118 (SC) and Hon'ble Hon'ble Punjab & Haryana High Court in case of CIT v Mukta Metal Works, 336 ITR 555 (P&H) admitted additional evidence being relevant and required to be looked into. We, therefore, hold that additional evidence adduced by assessee, being approval of expenditure incurred on Scientific Research & Development in F.No.3CL be admitted. 8. Having admitted additional evidence ,we restore matter to assessing officer, to decide issue of allowability of claim u/s 35(2AB) afresh, as per law and in light of approval granted to assessee, after duly examining same and after giving due opportunity of hearing to assessee. assessee ,in turn,is directed to produce additional evidence 8 before AO and is also free to produce any other evidence on which it wishes to place reliance. 9. other grounds raised in appeal, being consequential to examination of additional evidence by AO, same are allowed for statistical purposes. 14. In result, appeal of assessee stands allowed for statistical purposes. ITA No. 243/Chd/2015 15. issue involved in appeal in ITA No. 243/Chd/2015 is identical to that in ITA No. 242/Chd/2015. In impugned case also assessee was denied claim of weighted deduction under section 35(2AB) of Act since it had not filed statutory approval in form no. 3CL to AO and when same was filed as additional evidence before Ld. CIT(A), since it was received late after passing of Assessment order, Ld. CIT(A) refused to admit same by stating that assessee was not able to prove that delay was not attributable to it. Ld. CIT(A) therefore disallowed assesses claim of deduction under section 35(2AB ) as also its alternative claim of capital expenditure under section 35(1)(iv) of Act while allowing at same time its claim of revenue expenditure under section 37(1) of Act. Since identical issue has been decided by us in 9 appeal in ITA NO. 242/Chd/2015 above, findings given therein shall apply to present appeal with equal force. 16. In result appeal of assessee stands allowed for statistical purposes. Order pronounced in open court. Sd/- Sd/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 7 t h October, 2016 *Rati/rkk* Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar, ITAT, Chandigarh M/s Parabolic Drugs Ltd. v. D.C.I.T., Central Circle-1, Chandigarh