Case Law Details
Deepak Novochem Technologies Ltd. Vs ACIT (ITAT Mumbai)
Introduction: The appeals by Deepak Novochem Technologies Ltd. against the order of the Ld. Commissioner of Income-tax (Appeals)-50, Mumbai, for assessment years 2014-15 to 2018-19, present a complex set of issues. The primary focus revolves around the disallowance of deductions under section 35(2AB) of the Income-tax Act, 1961, pertaining to in-house scientific research and development expenses. The case also touches upon alternative claims, disallowance of brought forward losses, initiation of penalty proceedings, and the levy of interest under various sections. This article aims to comprehensively analyze the key aspects of this legal dispute.
Background: Deepak Novochem Technologies Ltd. initially declared a total loss in its income tax return for the assessment year 2014-15. Subsequently, after a search and seizure action, the Assessing Officer restricted the deduction claimed under section 35(2AB) related to in-house scientific research expenses. The Ld. CIT(A) upheld this decision, leading to the filing of appeals by the assessee. The issues discussed cover multiple assessment years, with common points heard together.
Issue 1: Deduction under Section 35(2AB)
The primary issue in the legal dispute involving Deepak Novochem Technologies Ltd. relates to the interpretation of Section 35(2AB) of the Income-tax Act, 1961, which provides for a weighted deduction of 200% on expenses incurred by the assessee on in-house scientific research and development (R&D). The crux of the matter is the quantification of the eligible deduction, a process overseen by the prescribed authority, namely the Department of Scientific and Industrial Research (DSIR).
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