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33. The assessee by way of grounds of appeal No.10.1, 10.2 and 10.3 has raised the issue against disallowance of deduction under section 35(2AB) of the Act.

Cummins India Limited.

34. Brief facts relating to the issue are that the assessee during the year under consideration had claimed deduction of ₹ 3.89 crores under section 35(2AB) of the Act being 150% of expenditure incurred of ₹ 2.594 crores. The Assessing Officer vide draft assessment order had short granted deduction under section 35(2AB) of the Act by ₹ 6,75,000/- on the ground that the Department of Industrial and Scientific Research i.e. DSIR had approved expenditure only to the extent of ₹ 2.594 crores in form No.3CL. The DRP upheld the draft assessment order and accordingly, the Assessing Officer passed final assessment order granting deduction under section 35(2AB) of the Act short by ₹ 6,75,000/-.

explaining the Finance Bill, 1997 and Notes on clauses when section 35(2AB) of the Act was inserted, where it was stated that deduction was available to companies having in-house R&D facility, approved for the purpose of section by the prescribed authority. The learned Authorized Representative for the assessee thereafter, took us to provisions of IT (Tenth Amendment) Rules, 2016 w.e.f. 01.07.2016 with special reference to Rule 6 (7A) of the Income Tax Rules (in short 'the Rules'), wherein under clause (b), specific provision stipulating the prescribed authority to submit its report in relation to approval of in-house R&D facility in form No.3CL to the DG, Income Tax (Exemption) within sixty days of granting approval, was provided. In other words, it was merely an intimation to be sent by the prescribed authority to the Department, nowhere under the Act, it was stipulated that the deduction under section 35(2AB) of the Act was allowable year after year after approval by DSIR in form No.3CL. The learned Authorized Representative for the assessee further referred to the amended form No.3CL by the IT (Tenth Amendment) Rules, 2016 w.e.f. 01.07.2016, wherein column for certified amounts of expenditure had been inserted in the said form No.3CL. The learned Authorized Representative for the assessee further placed reliance on the ratio laid down by the Ahmedabad Bench of Tribunal in Sun Pharmaceutical Industries Ltd. Vs. Pr.CIT (2017) 162 ITD 484 (Ahmedabad - Trib.), wherein it has been held by the Tribunal that form No.3CL is merely a report in the form of intimation regarding approval of in-house R&D facility to be sent from prescribed authority's end to the Department and once the facility is approved in form No.3CM, the expenses incurred within the notified period have to be allowed under section 35(2AB) of the Act. He further pointed out that the said decision has been affirmed by the Hon'ble High Court of Gujarat in CIT Vs. Sun Pharmaceutical Industries Ltd. (2017) 250 Taxman 270 (Guj). In respect of Cummins India Limited.

42. The issue which is raised before us relates to pre-amended provisions and question is where the facility has been approved by the prescribed authority, can the deduction be denied to the assessee under section 35(2AB) of the Act for non issue of form No.3CL by the said prescribed authority or the power is with the Assessing Officer to look into the nature of expenditure to be allowed as weighted deduction under section 35(2AB) of the Act. The first issue which arises is the recognition of facility by the prescribed authority as provided in section 35(2AB) of the Act.

Cummins India Limited.

46. The Courts have held that for deduction under section 35(2AB) of the Act, first step was the recognition of facility by the prescribed authority and entering an agreement between the facility and the prescribed authority. Once such an agreement has been executed, under which recognition has been given to the facility, then thereafter the role of Assessing Officer is to look into and allow the expenditure incurred on in-house R&D facility as weighted deduction under section 35(2AB) of the Act. Accordingly, we hold so. Thus, we reverse the order of Assessing Officer in curtailing the deduction claimed under section 35(2AB) of the Act by ₹ 6,75,000/-. Thus, grounds of appeal No.10.1, 10.2 and 10.3 are allowed.