The Ahmedabad bench of the Income Tax Appellate Tribunal held that assessee is entitled to claim weighted deduction on all expenditure incurred by it, on in-house research & development facility.
The issue raised in the appeal was relating to the disallowance of claim of weighted deduction under Section 35(2AB) of the Income Tax Act.
The issue in dispute before the tribunal was vis a vis claim of weighted deduction at the rate of 200% of the expenditure incurred on inhouse research and development activity, as allowed by Section 35(2AB) of the Income Tax Act. The Revenue restricting the assessee’s claim to the extent approved by the prescribed authority in Form No.3CL, while the assessee claiming weighted deduction on the entire amount of research and development expenditure debited to its P&L account.
The counsel for the assessee argued that the issue already stood covered in favour of the assessee by various judgments of the ITAT hoing that DSIR was not empowered to give any approval for expenditure incurred on inhouse scientific research prior to 1.4.2016, when Form No.3CL issued by DSIR was only for the purpose of certifying that the assessee was approved to carry out in-house research and development, and that only subsequent to the amendment made in the Rule i.e. Rule-6 of the Income Tax Rules, 1962 and in Form No.3CL that the requirement of certifying the amount of expenditure incurred by the assessee on in-house research development, was also required to be mentioned in Form No.3CL by DSIR.
After hearing both the parties, the tribunal held that the amendments to Section 35(2AB) of the Income Tax Act are not applicable to the same and in terms of un-amended provisions of section 35(2AB) of the Act, since the prescribed authority was not required in law to quantify the amount of expenditure incurred on in-house research and development facility, such quantification, if any done by the prescribed authority in Form No.3CL was not required to be taken cognizance of by the Revenue authorities and the assessee is entitled to claim weighted deduction on all expenditure incurred by it, on in-house research & development facility.
The two member bench consisting of T.R Senthil Kumar (Judicial member) and Annapurna Gupta (Accountant member) held that the Revenue has erred in restricting the claim of weighted deduction under Section 35(2AB) of the Income Tax Act to the extent approved by the prescribed authority i.e. DSIR. The AO was directed to allow full benefit of claim of weighted deduction to the assessee to the extent claimed in the P&L accounts and the disallowance made under Section 35(2AB) of the Income Tax Act was directed to be deleted, Thus the appeal was allowed.
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