Weighted R&D Deduction Cannot Exceed DSIR Approved Amount: ITAT Rejects Excess Claim u/s 35(2AB) [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has held that weighted deduction on research and development expenditure under Section 35(2AB) cannot exceed the amount approved by the Department of Scientific and Industrial Research (DSIR).

The assessee, Alembic Pharmaceuticals Ltd., is engaged in the manufacture and marketing of pharmaceutical products. It claimed weighted deduction on a wider set of R&D expenses incurred in its approved in-house facility.

The claim included items such as contract labour, support staff salaries, maintenance and other related expenses,beyond the amount approved by the DSIR.

The Assessing Officer restricted the deduction to the amount approved by DSIR and disallowed the excess claim.

The assessee carried the matter in appeal, contending that once the in-house R&D facility is approved, the entire expenditure incurred for research should qualify for weighted deduction.

The Revenue, however, argued that after the amendment to Section 35(2AB), the deduction cannot go beyond what is certified by the prescribed authority.

The Tribunal, comprising T.R. Senthil Kumar (Judicial Member) and Dr. B.R.R. Kumar (Vice President), noted that the position changed from 1 April 2016. It observed that post-amendment, the role of the prescribed authority includes quantifying the eligible expenditure, and the deduction is to be limited accordingly.

Since the DSIR had certified a specific amount of R&D expenditure, the Tribunal held that no further weighted deduction could be allowed beyond that figure.

The claim for additional deduction was therefore rejected, and the ground raised by the assessee was dismissed.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates