Titan Company Limited Vs DCIT (ITAT Chennai)
ITAT Permits Section 35(1)(iv) Deduction Because Scientific Research Expenditure Was Undisputed; ITAT Deletes Section 80IC TP Adjustment Because TPO Used Incorrect Benchmarking; Transfer Pricing Addition Deleted Because Revenue Produced No New Material; ITAT Upholds Section 80IC Relief Because Higher Profit Alone Cannot Justify TP Adjustment.
The appeals before the ITAT Chennai comprised cross appeals by the assessee and the Revenue for Assessment Year (AY) 2017-18 and the Revenue’s appeal for AY 2019-20. The issues involved were the assessee’s claim for weighted deduction under section 35(2AB) in respect of scientific research expenditure and the Revenue’s challenge to the deletion of transfer pricing adjustments relating to deduction under section 80IC.
For AY 2017-18, the assessee had claimed weighted deduction under section 35(2AB) on capital expenditure incurred on scientific research. During assessment, the Assessing Officer (AO) disallowed the claim in the absence of approval in Form 3CL, although 100% deduction for revenue expenditure was allowed. The Commissioner of Income Tax (Appeals) [CIT(A)] directed the AO to allow deduction based on the amount certified by the Department of Scientific and Industrial Research (DSIR) in Form 3CL. The assessee contended before the Tribunal that, while giving effect to the CIT(A)’s order, the AO allowed only 100% of the certified capital expenditure instead of the weighted deduction of 200% provided under section 35(2AB). The assessee also argued that the uncertified capital expenditure should alternatively be allowed as deduction under section 35(1)(iv), relying on the Tribunal’s decision in Ashok Leyland Ltd.
