PCIT Vs Macelods Pharmaceuticals Ltd (Bombay High Court)
The Bombay High Court considered an appeal under Section 260A of the Income-tax Act filed by the Revenue against the order dated 31 January 2023 of the Income Tax Appellate Tribunal, Mumbai Bench, which had rejected the Revenue’s appeal against the Commissioner of Income-tax (Appeals)’s common order dated 27 June 2018 for Assessment Year 2012-13.
The Revenue proposed the question of law whether the Tribunal was justified in holding that research and development (R&D) expenditure was allowable without allocating it to units claiming deduction under Sections 80IB/IC of the Income-tax Act, where profits and gains of multiple units were granted deduction from total income.
The High Court observed that the proposed question was illusory and that the issue was essentially factual, as also noted by the Tribunal. The record showed that the assessee had claimed a deduction of Rs.102.18 crores under Section 35(2AB) in respect of R&D expenditure incurred by two DSIR-approved R&D units situated in Mumbai. The Assessing Officer, however, apportioned part of this expenditure amounting to Rs.50,21,51,424 among units eligible for deduction under Sections 80IB/IC.
Before the Assessing Officer and the Commissioner of Income-tax (Appeals), the assessee contended that the R&D expenditure related exclusively to independent R&D units and had no connection with the manufacturing units claiming deduction under Sections 80IB/IC. The assessee relied on the Bombay High Court decision in Zandu Pharmaceutical Works Ltd. Vs. CIT (ITA No.8 of 2007), submitting that only expenditure having a direct nexus with an eligible industrial undertaking could be attributed to it.
