This case involves a tax dispute for the assessment year 2018-19, where Indian Tonners and Developers Ltd, Delhi, filed an appeal against the ACIT, Circle-10(1), New Delhi. The case was filed on December 2, 2022, and the final order was pronounced on May 16, 2023. The primary issue in this dispute was the disallowance of a deduction under section 35(2AB) of the Income-tax Act, 1961, for research and development expenditure.
The case was heard in the Income Tax Appellate Tribunal, Delhi Bench ‘C’ New Delhi, before Shri Saktijit Dey, Judicial Member, and Shri M. Balaganesh, Accountant Member.
The case number for the assessment year 2018-19 is ITA 2841/DEL/2022. The appellant is Indian Tonners and Developers Ltd, located at Tower-B, 1223 DLF, Jasola, New Delhi, and the respondent is ACIT, Circle-10(1), New Delhi.
The appellant was represented by Shri Pramod Kapur, CA, and the respondent was represented by Shri Anuj Garg, Sr. DR.
The date of hearing was May 9, 2023, and the date of pronouncement was May 16, 2023.
This appeal was filed against the order dated October 28, 2022, passed by the National Faceless Appeal Centre (NFAC), Delhi, pertaining to the assessment year 2018-19.
The dispute in this appeal is confined to the disallowance of Rs.29,05,724/- claimed as a deduction under section 35(2AB) of the Income-tax Act, 1961. The assessee, Indian Tonners and Developers Ltd, is a resident corporate entity engaged in manufacturing and selling inks and toners for photocopiers. For the assessment year under dispute, the assessee filed its return of income claiming a deduction under section 35(2AB) in respect of research and development expenditure.
During the assessment proceedings, the Assessing Officer (AO) observed that while the assessee had submitted Forms 3CLA and 3CK, it had not submitted Form 3CL. The AO, therefore, disallowed the deduction under section 35(2AB) due to the absence of Form 3CL, although 100% of the revenue expenditure related to research and development was allowed.
The assessee contested the disallowance before the first appellate authority but was unsuccessful.
The learned counsel for the assessee submitted that although the assessee could not furnish Form 3CL during the assessment proceedings, it was subsequently issued by the competent authority for assessment years 2018-19, 2019-20, and 2020-21 and furnished before the first appellate authority. The counsel argued that the first appellate authority ignored Form 3CL while confirming the addition.
The learned Departmental Representative supported the observations of the Assessing Officer and the Commissioner (Appeals).
The Tribunal noted that the AO admitted the submission of Forms 3CLA and 3CK for the impugned assessment year and Form 3CL for the assessment year 2017-18. The only reason for the disallowance was the absence of Form 3CL for the assessment year 2018-19.
The Tribunal further observed that after the completion of the assessment, the assessee received Form 3CL issued by the competent authority for assessment years 2018-19, 2019-20, and 2020-21, which was furnished before the first appellate authority. The first appellate authority, however, ignored Form 3CL issued by the competent authority, which the Tribunal found unacceptable.
The Tribunal emphasized that when the competent authority issues Form 3CL entitling the assessee to claim a deduction in respect of both capital and revenue expenditure, the departmental authorities cannot deny the deduction by ignoring Form 3CL. Therefore, the disallowance of Rs.29,05,724/- was deemed unsustainable and was deleted.
The appeal was allowed in favor of the assessee. The Tribunal concluded that the first appellate authority should have considered Form 3CL issued by the competent authority, which validated the deduction claimed under section 35(2AB) of the Income-tax Act.
Order pronounced in the open court on May 16, 2023, by Shri Saktijit Dey, Judicial Member, and Shri M. Balaganesh, Accountant Member.
Indian Tonners and Developers Ltd vs. ACIT Circle-10(1), New Delhi: Tax Dispute for AY 2018-19
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