The Income Tax Appellate Tribunal (ITAT) Bangalore bench held that revenue expenditure incurred for the scientific research is allowed as deduction under Section 37 of the Income Tax Act, 1961.The bench determined that even if it was not certified by the Department of Scientific & Industrial Research the expenditure would be considered for deduction.
Assessee ,BEML Limited is a manufacturing company engaged in manufacturing heavy earth moving equipment and railway rolling stock having plants all over the country.
During the assessment proceedings AO Disallowed the expenditure of Rs.7.98 crores on scientific research under Section 35(2AB) of the Income Tax Act although the Department of Scientific & Industrial Research (“DSIR”) has not quantified the same in that certificate.
expenditure on scientific research in respect of capital expenditure is Rs.7.98 Crores which has been allowed by the AO as certified by the DSIR.
However In case of revenue expenditure, out of Rs.46.66 crores, it was certified by DSIR only to the extent of Rs.38.62 crores and the balance amount of Rs.7.94 crores were not certified by the DSIR. This claim was disallowed by the AO.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal){ CIT(A)} . who allowed the appeal . Thereafter the revenue filed an appeal before the tribunal.
It was observed by the tribunal that the assessee has incurred capital expenditure of Rs.7.98 crores on scientific research which is entitled for weighted deduction under Section 35(2AB) of the Income Tax Act and the balance amount of Rs.46.56 crores, which was revenue expenditure spent on scientific research.
Further the assessee claimed only a sum of Rs.38.62 crores under Section 35(2AB) of the Income Tax Act and the balance amount of Rs.7.94 crores could not be claimed under Section 35(2AB) of the Income Tax Act on the reason that it was not certified by DSIR.
However, this expenditure of Rs.7.94 crores has been incurred by the assessee for the purpose of business and this fact is not disputed by the AO therefore the assessee is entitled for deduction on this amount under Section 37 of the Income Tax Act
The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Chandra Poojari ,(Accountant Member ) and Beena Pillai ,(Judicial Member) held that revenue expenditure incurred for the scientific research is allowed as deduction under Section 37 of the Income Tax Act.
Therefore the bench dismissed the appeal of revenue.
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