Segregation of Expenditure, not sufficient reason to deny the benefit under section 35(2AB) of the Income Tax Act,1961, ruled the Pune Bench of the Income Tax Appellate Tribunal (ITAT) and upheld the allowance of weighted Deduction of Expenditure on Serum Institute of India.
The respondent-assessee claimeda weighted deduction of Rs.86,32,04,668/- under the provisions of section 35(2AB) in respect of product development expenditure. The prescribed authority i.e. DSIR had only certified that only a sum of Rs.80,48,24,167/- was eligible for weighted deduction u/s 35(2AB) and the DSIR had not certified the expenditure claimed on clinical trial expenses amounting to Rs.4,19,75,171/- and payments made to certain parties amounting to Rs.1,64,05,330/- is not eligible for weighted deduction u/s 35(2AB) of the Act.
The respondent-assessee had incurred a total product development expenditure of Rs.50,34,55,690/-. Out of which, the respondent-assessee claimeda weighted deduction of expenditure of Rs.35,97,48,978/- u/s 35(1)/37(1) of the Act.
On appeal, the CIT(A)allowed the weighted deduction u/s 35(2AB) in respect of the product development expenditure of Rs.10,03,55,672/-.
It was viewed that the expenditure incurred on clinical trial expenditure was incurred outside the approved facility for section 35(2AB) of the Act.
A Coram of Shri Inturi Rama Rao, AM and Shri S S Viswanethra Ravi, JM observed that merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the in-house facility and those can be incurred outside would not be sufficient to deny the benefit to the assessee under section 35(2AB) of the Act. The appeal for the Revenue got dismissed.
Shri J. P. Chadraker appeared for the revenue and Shri Percy Pardiwalla & Shri Sukh Sagar Syal Counsels appeared for the assessee.
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