Apollo Tyres’ Weighted Deduction Claim u/s 35(2AB) Rejected: Supreme Court Refuses to Re-open Case [Read Judgement]

The apex court held that the matter, which had already been adjudicated by the Delhi High Court in 2010 and confirmed by the Kerala High Court in 2021, could not be re-opened at this stage.

Apollo Tyres had established two in-house R&D facilities, one at Perambra (Cochin) and another at Limda (Vadodara), both duly recognized by the Department of Scientific and Industrial Research (DSIR). While the company regularly claimed normal deductions under Section 35(1) for its R&D spending, it later sought the more beneficial weighted deduction at 150% under Section 35(2AB).

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The DSIR granted approval for the R&D units for the period 1 April 2007 to 31 March 2010, but restricted benefits for Assessment Year (AY) 2007-08 only to capital expenditure on equipment, not revenue expenditure. This was because Apollo Tyres signed the mandatory cooperation agreement with DSIR only on 21 August 2008, making the condition precedent effective only from that date.

The Assessing Officer rejected Apollo Tyres’ claim for weighted deduction under Section 35(2AB) on two principal grounds. First, the company had not filed a revised return specifically claiming such deduction for the relevant assessment years, which was a procedural lapse.

Secondly, the mandatory agreement with the Department of Scientific and Industrial Research (DSIR), as required under Section 35(2AB)(3), had been executed only on 21 August 2008, well after the close of the financial year for which the benefit was being claimed. Since both conditions were considered essential for availing the weighted deduction, the claim was disallowed.

Both the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT), Cochin Bench, upheld the disallowance.

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The Kerala High Court, in September 2021, also dismissed Apollo’s appeals, relying on the Delhi High Court’s 2010 ruling in the company’s own case. The Delhi High Court had held that approval could not be backdated beyond 1 April 2007, and that weighted deduction prior to that period was not permissible. Also following that, the Supreme court itself dismissed the case of the company filed before.

Recently, the Supreme Court bench comprising Justices Surya Kant, Ujjal Bhuyan, and N. Kotiswar Singh refused to entertain Apollo Tyres’ Special Leave Petition (SLP). The Court noted that Apollo had already challenged the DSIR’s approval period before the Delhi High Court in 2010, which dismissed its writ petition.

An SLP against that decision was filed in 2015 with an inordinate delay of 1,251 days, which the Supreme Court dismissed at that time.

Thus, considering the situations, the apex court observed that it was “difficult to re-open the case” after multiple rounds of adjudication. Accordingly, the SLP was dismissed.

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