Ashok Leyland Ltd. Vs ACIT (ITAT Chennai)
Income Tax Appellate Tribunal (ITAT) Chennai ruled on cross-appeals filed by Ashok Leyland Ltd. and the Income Tax Department regarding deductions claimed under Section 35(2AB) of the Income Tax Act for Research and Development (R&D) expenses. The case revolved around the company’s claim for weighted deduction on its R&D expenditure, which was disallowed by the Assessing Officer (AO) due to the absence of Form 3CL from the Department of Scientific and Industrial Research (DSIR). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the disallowance, leading to the current appeal.
The dispute focused on whether the weighted deduction under Section 35(2AB) was permissible without Form 3CL. Ashok Leyland argued that the non-availability of the form should not impact the claim, while the AO maintained that the provision mandates DSIR approval. The ITAT referred to Rule 6(7A)(b) of the Income-tax Rules, which, post-amendment in 2016, requires Form 3CL for claiming the weighted deduction. Given this regulatory change, ITAT upheld the CIT(A)’s decision, denying the weighted deduction but allowing normal deduction on revenue expenses and depreciation on capital expenses.
The tribunal examined judicial precedents, including CIT v. Vegetable Products Ltd. (88 ITR 192), where the Supreme Court ruled that tax laws should be interpreted in favor of the assessee in case of ambiguity. The ITAT also considered Sobha Developers Ltd. v. CIT, a Karnataka High Court ruling that supported a taxpayer-friendly approach. Despite these precedents, ITAT concluded that the regulatory framework in AY 2018-19 clearly mandated DSIR certification, making the weighted deduction inadmissible.
