Alembic Pharmaceuticals Limited Vs DCIT (ITAT Ahmedabad)
The matter concerns cross appeals filed by both the assessee and the Revenue against orders dated 24-07-2024 passed by the Commissioner of Income Tax (Appeals) [CIT(A)] for Assessment Years 2018–19 and 2020–21. The appeals arise from assessment orders passed under Sections 143(3) read with 144B of the Income Tax Act, 1961. Since common issues were involved, both appeals were disposed of through a consolidated order.
The assessee, a pharmaceutical manufacturing company, filed its return declaring income under normal provisions and book profits under Section 115JB. During assessment, the Assessing Officer (AO) made disallowances primarily on two issues: (i) weighted deduction under Section 35(2AB) on research and development (R&D) expenses, and (ii) treatment of export incentives under the Merchandise Export Incentive Scheme (MEIS).
With respect to Section 35(2AB), the assessee claimed weighted deduction on R&D expenditure incurred in its DSIR-approved in-house facility, including expenses such as contract labour, salaries of non-technical staff, maintenance, rent, and other overheads. However, the AO restricted the deduction to the amount certified by the auditor and DSIR, disallowing the excess claim. The CIT(A) partly upheld this disallowance by limiting the deduction to the amount allowable under Section 35(1), resulting in sustained disallowances for both assessment years.
