Commissioner Of Income Taxmadurai v. M/S.rajapalayam Mills Ltd.,Pac Ramaswamy Raja Salai,Rajapalayam

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.4.2019 CORAMTHE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE MR.JUSTICE C.V.KARTHIKEYAN Tax Case No.2444 of 2008 Commissioner of Income TaxMadurai. Appellant/Respondents Vs. M/s.Rajapalayam Mills Ltd.,PAC Ramaswamy Raja Salai,Rajapalayam,PAN: AACR8897F Respondent/Appellant Tax Case filed under Section 260A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal,Madras 'B' Bench, Chennai, dated 31. 7.2008 made in ITANO.261/Mds/2007 as against the order dated 31.10.2006 of thecommissioner of Income Tax Act order is ITA.NO.154/2006-07,for the asst. year 2003-04, and as against the order dated02/03/2006 of the Asst. Commissioner of Income Tax, circle-I,Virudhunagar, in PAN NO.AAA.CR8897F/R-127, for the Assessmentyear 2003-04. For Appellant: Mr.M.Swaminathan Senior Standing Counsel assisted by Ms.PremalathaFor Respondent : No appearance. JUDGMENT (Delivered by DR.VINEET KOTHARI,J) Heard Mr.M.Swaminathan, learned Senior Standing Counselappearing for the Appellant-Revenue. Despite service ofnotice, none appears for the Respondent-Assessee. 2. The present Appeal has been filed by the Revenue underSection 260-A of the Income Tax Act by raising the followingpurported substantial questions of law arising from the orderpassed by the Income Tax Appellate Tribunal dated 31.7.2008,by which the learned Tribunal upheld the order of the learnedCommissioner of Income Tax (Appeals) and held that the https://hcservices.ecourts.gov.in/hcservices/ expenditure incurred by the Assessee on Scientific Researchwas not entitled to weighted deduction of 1.5 times underSection 35(2AB) of the Act as the Project in question was notduly approved by the Competent Authority, however, theAsssessee, was entitled to normal deduction of 100% ofexpenditure incurred only under Section 35(1)(i) of the Act. 3. The learned Commissioner of Income Tax (Appeals) haddiscussed the above aspect in his order dated 31.10.2006 ashereunder: - "3. Deduction u/s 35(2AB) - RS.95,06,516/-:The appellant claimed deduction of RS.96,06,516/-u/s. 35(2AB) in respect of Sri.Ramco Bio-tech unit.Thebreak up details are as below:R&D Expenditure - revenueRs. 55, 12,558/-R&D Expenditure - capitalRs. 8,91,785/-------------------TotalRS.64,04,344/-------------------Deduction @ 150%Rs.96,06,516/-The assessing officer found that the appellantdid not fulfil the conditions laid down in sub-section (4) of section 35(2AB). The appellantadmitted before the assessing officer that therelevant papers were pending before the Secretary,Department of Scientific and Industrial Research,Govt. of India and no approval has been granted bythe prescribed authority u/s. 35(2AB). In the abovecircumstances, the assessing officer disallowed theclaim of the appellant. 3.1 At the time of hearing, the representativeadmitted on facts that the approval u/s. 35(2AB) bythe prescribed authority is still pending. Howeverhe argued that the assessing officer ought to haveconsidered the deduction u/s.35(1)(i) and 35(1)(iv)for Rs.55,12,558/- and Rs.46,387/- respectfully. 3.2 After considering the submissions I findthat the assessing officer has rightly rejected theclaim of the appellant u/s. 32(2AB) as there was noapproval from the prescribed authority as on thedate of completion of assessment. Having regard toalternative claim, I find that the assessingofficer had no occasion to consider the claim ofthe appellant. In the circumstances, the assessingofficer is directed to consider the claim ofdeduction u/s. 35(1)(i) for Rs.55,12,558/-representing R&D Revenue Expenditure and deductionu/s. 35(1)(iv) for Rs.46,387/- representing expenditure incurred for the purchase of Cameraused in R&D unit." 4. However, the Revenue took up the matter before theTribunal which held against the Revenue on the said aspect ofthe matter in thefollowing manner:- 3.2 After considering the submissions I findthat the assessing officer has rightly rejected theclaim of the appellant u/s. 32(2AB) as there was noapproval from the prescribed authority as on thedate of completion of assessment. Having regard toalternative claim, I find that the assessingofficer had no occasion to consider the claim ofthe appellant. In the circumstances, the assessingofficer is directed to consider the claim ofdeduction u/s. 35(1)(i) for Rs.55,12,558/-representing R&D Revenue Expenditure and deductionu/s. 35(1)(iv) for Rs.46,387/- representing expenditure incurred for the purchase of Cameraused in R&D unit." 4. However, the Revenue took up the matter before theTribunal which held against the Revenue on the said aspect ofthe matter in thefollowing manner:- "4. After considering the rival submissioncarefully, we agree that Sec.35(1) as well as Sec.35(2AB) deal with the same expenditure i.e.,scientific expenditure consisting of revenue andcapital expenditure and only difference is thatSect.35(1) provides for allowance at normal ratei.e., actual expenditure whereas Sec.35(2AB) allowsdeduction to be claimed at weighted rate of 150%subject to fulfilment of certain conditions.Therefore, we find nothing wrong with the directionsof the CIT(Appeals) to the Assessing Officer toallow normal deduction under Sec.35(1) particularlyin view of the fact that the Assessing Officerhimself has allowed deduction for the Asst. Year2005-06." 5. Though there was no issue about the claim of weighteddeduction, the Revenue has still preferred the present Appealunder Section 260A of the Act which was admitted by acoordinate Bench of this Court by order dated 9.1.2009, byframing the following substantial questions of law:- "i) Whether, on the facts and circumstances ofthe case, the Tribunal was right in law inentertaining a change of claim of deduction bythe assessee from 35(2AB) to 35(1) of the IncomeTax Act? ii) Whether, on the facts and circumstances ofthe case, the Tribunal was right in grantingrelief under Section 35(1) when the Assessee hasnot produced the relevant approval from theprescribed authorities for the claim ofdeduction?" 6. Having heard the learned Senior Standing Counsel forthe Revenue, we are satisfied that there is no substance inthe present Appeal, since the claim of weighted deduction at1.5 times of the expenditure incurred by the Assessee onScientific Research was not even decided against the Revenueby the Appellate Authorities, viz., the Commissioner of IncomeTax (Appeals) and the Tribunal and therefore, there was nooccasion for the Revenue to prefer any further appeal, as theexpenditure was allowed only under Section 35( l)(i) of theAct which does not require any approval by the CompetentAuthority. 7. Since the spending of the amount on ScientificResearch itself was not even disputed by the Revenue, in ouropinion, the Appellate Authorities have rightly allowed theclaim under Section 35(1)(i) of the Act. The Assessee has notpreferred any Appeal against that finding and therefore, thequestion of approval by the Competent Authority for makingsuch claim becomes irrelevant. Therefore, we do not find anysubstantial question of law to be arising in the presentAppeal. 8. We do not find any merit in the present Appeal filedby the Revenue and the same is liable to be dismissed andaccordingly, it is dismissed. No order as to costs. A copy ofthis judgment may be sent to the Assessee forthwith. Sd/-Asst. Registrar //True Copy//Sub Asst. RegistrarTo1. Commissioner of Income Tax Madurai.2. Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai3. The Deputy Commissioner of Income Tax, Circle-I, Virudhunagar. 4.MR. V. RAJAPALAYAM MILLS LTD.,PAC RAMASWAMY RAJA SALAI, RAJAPALAYAM PAN.AACR8897F.