No Denial of Sec. 35(2AB) Deduction Merely Because Competent Authority Failed to Issue Form 3CL During Assessment | HC

Case Details: PCIT vs. M/S Schaeffler India Ltd. - [2023] 155 taxmann.com 651 (Gujarat)

Judiciary and Counsel Details

• • Biren Vaishnav & Mrs Mauna M. Bhatt, JJ.
  • Nikunt K Raval for the Appellant.

Facts of the Case

Assessee filed its return of income for the relevant assessment year and claimed deduction under section 35(2AB). Subsequent to the scrutiny proceedings, the Principal Commissioner of Income Tax (PCIT) noticed that the assessee had not submitted necessary documentary evidence, i.e., Form 3CL, which must be filed on or before the due date of filing of return of income.

Accordingly, PCIT invoked jurisdiction under section 263, contending it to be prejudicial to the interest of Revenue and disallowed the deduction claimed.

The matter reached the Gujarat High Court.

High Court Held

The High Court held that the assessee, at the time of the original assessment, had filed a copy of recognition of the in-house R&D facility dated 25.08.2014. The assessee also filed the approval of the in-house R&D facility dated 07.10.2015 in Form 3CM with regard to the computation of deduction under section 35(2AB). The assessee also filed the auditor’s certificate certifying the expenditure during assessment proceedings.

Regarding Form 3CL, the same was issued by the prescribed authority on 20.07.2021 after passing the assessment order under section 143(3). Hence, considering that the taxpayer submitted documentation validating its Research and Development (R&D) facility as approved by the designated authority in the correct format, the absence of intimation from the authority during the assessment proceedings should not serve as grounds for disallowing the deduction claim under section 35(2AB).