DSIR Approval Binding: ITAT Allows Section 35(2AB) Deduction for R&D Expenses

Matrix Clothing Pvt. Ltd. Vs ACIT (ITAT Delhi)

In a batch of cross appeals involving assessment years 2016-17, 2018-19 and 2019-20, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) adjudicated disputes concerning reopening of assessment, disallowance of manufacturing expenses, Research and Development (R&D) expenditure, and deduction claimed under Section 35(2AB) of the Income Tax Act.

For AY 2016-17, the assessee challenged the reopening of assessment and the disallowance of deduction under Section 35(2AB), while the Revenue challenged the deletion of additions relating to alleged excessive manufacturing expenses and R&D expenditure. The assessee had originally filed its return declaring income of Rs.11.74 crore, later revised to Rs.9.90 crore. An assessment under Section 143(3) was completed on 30.12.2018. Subsequently, a survey under Section 133A was conducted on 27.03.2019, following which reassessment proceedings under Section 148 were initiated on the grounds of alleged excessive manufacturing expenses and R&D expenditure.

The Tribunal first considered the issue relating to deduction under Section 35(2AB). It noted that the CIT(A) had upheld the disallowance by relying upon directions of the Dispute Resolution Panel for AY 2017-18 instead of independently examining the issue. The Tribunal observed that in the assessee’s own case for AY 2017-18, a coordinate bench had already allowed the deduction after considering the approval and certification issued by the Department of Scientific and Industrial Research (DSIR). The earlier order held that once DSIR had certified the expenditure eligible for deduction under Section 35(2AB), the Assessing Officer could not disregard the certificate without following the procedure prescribed under Section 35(3). Since no such procedure had been followed, the Tribunal deleted the disallowance and allowed the deduction claimed by the assessee.

On the Revenue’s appeal regarding alleged excessive manufacturing expenses of Rs.23 crore, the Tribunal upheld the findings of the CIT(A). The CIT(A) had observed that the Assessing Officer made the addition by comparing the ratio of manufacturing expenses to turnover during the survey period with earlier years. The assessee demonstrated through audited financial statements that the manufacturing expense ratio in FY 2018-19, the survey year, was actually higher than in FY 2015-16. It was also pointed out that no similar addition had been made in assessments for AYs 2017-18, 2018-19 and 2019-20 despite scrutiny assessments. The Delhi High Court had also stayed reopening proceedings for AYs 2014-15 and 2015-16 on similar grounds. The Tribunal found no rebuttal from the Revenue and confirmed deletion of the addition.

Regarding disallowance of R&D expenditure amounting to Rs.10.74 crore, the Tribunal again upheld the CIT(A)’s order deleting the addition. The CIT(A) observed that although the Assessing Officer alleged that no R&D activity was found during survey, he had accepted that the expenditure had actually been incurred and had allowed similar actual R&D expenditure in subsequent years while only disallowing weighted deduction claimed under Section 35(2AB). The Tribunal agreed that the Revenue’s position was contradictory and upheld deletion of the disallowance.

The Tribunal then considered the validity of reopening under Section 148. It noted that the reassessment had been initiated solely on the basis of alleged excessive manufacturing expenses and R&D expenditure. Since both additions had already been deleted, the very basis of reopening no longer survived. Relying upon judicial precedents including ATS Infrastructure Ltd. v. ACIT and other decisions, the Tribunal held that the reopening itself was unsustainable in law and quashed the reassessment proceedings.

For AY 2018-19, the assessee challenged disallowance of interest expenditure, deduction under Section 35(2AB), amounts advanced to joint venture entities, and cyber security loss. The assessee did not press the cyber security loss issue. The Tribunal deleted the interest disallowance because the related addition concerning loans in AY 2017-18 had already been deleted in earlier proceedings. The disallowance under Section 35(2AB) was also deleted following the earlier order in AY 2017-18. However, the issue relating to amounts advanced to joint venture entities was restored to the Assessing Officer for fresh factual verification, consistent with earlier years.

FULL TEXT OF THE ORDER OF ITAT DELHI

The instant batch of four cases i.e. the assessee’s and the Revenue’s cross appeals ITA Nos. 2686 & 2842/Del/2022 (A.Y. 2016-17) alongwith the former twin cases ITA Nos. 2687 & 2688/Del/2022 (A.Ys. 2018-19 & 2019-20) arise against the CIT(A)-27, New Delhi’s orders dated 16.09.2022 in case Nos. CIT(A), Delhi-6/10522/2019-20, CIT(A), Delhi-27/10409/2017- 18 and Delhi-27/10824/2018-19, in proceedings u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short “the Act”), respectively.

2. Heard both the parties at length. Case files perused. We proceed assessment year wise for the sake of convenience and brevity.

A.Y. 2016-17

ITA Nos. 2686 & 2842/De1/2022, assessee’s and the Revenue’s cross appeals

3. A combined perusal of both these assessee’s and the Revenue’s cross appeals indicates that the former has pleaded it’s substantive grounds inter a/ia challenging validity of reopening as well as claiming section 35(2AB) deduction of Rs.2,12,50,158/-; disallowed to the extent of Rs.1,77,08,389/-in assessment order dated 31.12.2019 as enhanced to Rs.2,12,50,158/- in the lower appellate discussion.

4. The Revenue on the other hand also raises its as many substantive grounds that the learned CIT(A) has erred in law and on facts in reversing the Assessing Officer’s action disallowing the assessee’s alleged excessive manufacturing expenses of Rs.23,00,93,853/- and R&D expenses of Rs.10,74,07,000; respectively.

A few relevant facts may be discussed.

5. There is any hardly dispute between the parties that the assessee herein M/s Matrix Clothing Pvt. Ltd. is a company who had filed it’s return on 17.110.2016 declaring income of Rs.11,74,59,910/-. This followed it’s revised return dated 28.11.2017 as well reducing the above declared income to Rs.9,90,56,110/-. There is further no issue that the Assessing Officer thereafter framed his section 143(3) regular assessment on 30.12.2018 inter alia disallowing the assessee’s section 80JJAA deduction, interest on loans etc. which resulted in assessment of its total income to Rs.12,61,52,840/-.

6. Now comes the relevant issues between the parties. Learned departmental authorities appear to have carried out a section 133A survey at the assessee’s business premises on 27.03.2019. It was on the basis of some alleged evidence(s) against the assessee that the learned Assessing Officer recorded his reasons to believe that its taxable income liable to be assessed had escaped assessment. We make it clear that he had recorded his twin reasons for setting into motion section 148 proceedings against the assessee i.e. excessive manufacturing expenses to the tune of 17%; of total receipts of Rs.46.65 (in crores) and R&D expenses of Rs.10.74 (in crores); respectively. All this culminated in the learned Assessing Officer’s impugned/assessment framed in the assessee’s case on 31.12.2019 disallowing/adding manufacturing expenses, R&D expenses, section 35(2AB) deduction and depreciation on assets related to R&D; involving varying sums, respectively. Needless to say, the learned CIT(A)’s impugned lower appellate order has granted part relief to the assessee except to the extent of enhancement of it’s section 35(2AB) deduction disallowance amounting to Rs.2,12,50,158/- (supra).

This is what leaves both the parties aggrieved who have filed their instant cross appeal before the tribunal.

7. We first of all advert to the assessee’s sole substantive ground on merits claiming section 35(2AB) deduction of Rs.2,12,50,158/-. It is noticed from a perusal of paragraphs 9 to 9.1.4 at pages 23 to 26 of the lower appellate discussion that he had followed the Dispute Resolution Panel (“DRP”) directions in the succeeding assessment year 2017-18 upholding the very disallowance against the assessee than having examined the issue on merits at length as contemplated u/s 250(6) of the Act. It is in this factual backdrop that we sought to ascertain the final status of the assessee’s corresponding substantive grounds in the said latter assessment year. We are informed that the earlier learned co-ordinate bench order dated 01.12.2025 in it’s appeal ITA No. 760/Del/2022 has already held it eligible for the very relief; reading as under:

“15. Ground Nos. 3.8 to 3.11 raised by the assessee are challenging the confirmation of disallowance of deduction claimed by the assessee of Rs.3,88,77,284/- u/s 35(2AB) of the Act.

16. We have heard the rival submissions and perused the material available on record. During the year under consideration, the assessee company claimed deduction u/s 35(2AB) of the Act amounting to Rs. 3,88,77,284/- as expenses incurred in Research and Development (R&D). Notice u/s 142(1) of the Act was issued to the assessee company to furnish the details of item-wise expenditure along with nature of expenses for claiming deduction on account of R&D u/s 35(2AB) of the Act. The assessee submitted its reply vide letter dated 31.03.2021. On perusal of the same, the Id. AO noticed that the assessee company has claimed their regular business expenditure such as expenses towards purchase of fabric and processing cost of Rs. 266.60 lakhs; employee cost of Rs. 103.49 lakhs; travelling and convenience cost of Rs. 11.31 lakhs totaling to Rs. 381.40 lakhs on account of revenue expenditure. The Id. AO observed that it is not understandable as to why the regular business expenditure could be treated as R&D expenditure. The Id. AO stated that the assessee failed to discharge its onus to prove that the claim of expenditure towards R&D was actually incurred towards R&D not towards any other activity. This was sought to be buttressed by the Id AR by stating that assessee had duly furnished its reply to the notice dated 15.04.2021 by providing break up of total expenditure incurred and claimed towards R&D activities. In addition thereto, the assessee also provided the following details: –

a. list of capital assets purchased during FY 2016-17 utilized in R&D activities

b. details of capital expenditure approved by Department of Scientific and Industrial Research (DSIR) for FY 2015-16;

c. copy of invoices depicting purchase of capital assets during FY 2016-17.

It was submitted before the Id. AO that DSIR, which is a statutory authority, visited the premises of the assessee company for inspection and after duly considering the project documents and details of expenses submitted including capital expenditure, duly approved the R&D facilities of the assessee company. It was also submitted that DSIR had issued a certification in this regard approving R&D activities together with the figure for expenditure incurred towards R&D activities. On perusal of the Form 3CL enclosed in pages 292 to 293 of the paper book, we find that the DSIR had certified the R&D expenditure eligible for deduction u/s 35 (2AB) of the Act to the extent of Rs. 384.88 lakhs. The Chartered Accountant had issued a certificate enclosed in pages 285 to 286 of the Paper Book certifying the expenditure for Rs. 387.37 lakhs. In our considered opinion, once a certificate has been issued by DSIR duly certifying the figures eligible for deduction u/s 35(2AB) of the Act, the Id AO again cannot go beyond the said certificate. This issue is no longer res integra in view of the decision of the Hon’ble Karnataka High Court in the case of Tejas Network Ltd Vs. DCIT reported in 60 taxmann.com 309 (Kar-HC) wherein it was observed as under:-

“18. A plain reading of section 35(2AB)(1) would indicate that where a company is engaged in the business of biotechnology or any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on “Scientific Research” (not being expenditure in the nature of cost of any land or building) on in-house, research and development facility “as approved by the prescribed authority,” such assessee would be entitled to a deduction of a sum equal to one and half times of the expenditure so incurred. The word “Scientific Research” has been defined under subsection (4) of Section 43 of the Act, which is extracted supra and same would indicate expenditure incurred in such scientific research includes all expenditure incurred for the prosecution or the provision of facilities for the prosecution of such scientific research. However, it does not include expenditure incurred in the acquisition of rights in or arising out of scientific research. Such expenditure incurred should be approved by the authority prescribed under Section 35(2AB) of the Act read with Rules framed thereunder. The authority prescribed to grant such approval under Rule 6(18) of the Income Tax Rules, 1961 is the Secretary, Department of Scientific and Industrial Research.

19. A perusal of the above rule would clearly indicate that the section (1) of Section 35(2AB) is the Secretary, Department of Scientific and Industrial Research (3) of the Section 35(2AB) would indicate that no company would be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operaid authority in required to development facility and for audit of accounts maintained for that facility. Said authority is required to examine the application and if satisfied that conditions provided under Section 35(2AB) are satisfied would pass an order in writing in Form No. 3CM. In the event of such application of assessee is being rejected by the prescribed authority, an opportunity of being heard would be extended by the prescribed authority to the assessee. As per sub-section (4) of Section 35(2AB) the prescribed authority would in turn submit its report to the approval of the said facility to the Director General (Income tax Exemptions) in Form No. 3CL. within 60 days as per Rule 7(A)(b) of the Rules. Approval of such expenditure incurred by a section 35(2AB) would be subject to conditions stipulated in clauses (a) to (d) of Rule 7A of the Rules. This would clearly indicate that the prescribed authority after receiving the application under Rule 3CR would examine the said application in the background of the definition found in sub-section (4) of Section 43 and on being satisfied that such application satisfies the criteria prescribed under the Act, then alone it would issue the certificate by granting its approval to the expenditure incurred by a company. To put it differently, prescribed authority is the authority under the Act which would examine the claim for grant of approval under Section 35(2AB), Pursuant to such application filed by assessee to the prescribed authority, a report would be submitted by the prescribed authority to the Director General (Income tax Exemptions) in Form No. 3CL, in order to entitle the assessee to weighted deduction and such report by the prescribed authority would be forwarded to Director General (Income tax Exemptions) within 60 days from order of approval. This order in Form No. 3CM would be passed by the prescribed authority only after being satisfied that the conditions provided in Rules (7A) and in sub-section (2AB) of Section 35 of the Act are fulfilled. Facts on hand would clearly indicate that application had been filed by assessee on 07.01.2009 and after calling for documents/information from assessee and on examination and scrutiny of such documents/information furnished by assessee, Order of approval came to be granted in favour of assessee on 18.11.2009 in Form No. 3CM vide Annexure-G.

20. It would be apt to point at this juncture itself that in the event of any question would arise before the assessing officer under Section 35 as to whether amounts certified by the prescribed authority is eligible for being allowed as expenditure and to what extent and whether such activity constitutes or constituted., or any asset is or was being used for scientific research in that regard, then assessing officer has to request the Board to refer such question to the prescribed authority as provided under clause (b) of Section 35(3). In other words, the correctness or otherwise of the order passed by the prescribed authority is not examined by the assessing officer or by the Income Tax Authority and this exercise is outsourced by the Income Tax Department and same is being done by the prescribed authority namely, Department of Scientific and Industrial Research. This is the plain meaning which can be deciphered from the perusal of above said statutory provisions. 21. Thus, reading of Section 35 (3) of the Act would clearly indicate that where the assessing officer does not accept the claim of the assessee made under Section 35(2AB), he has to refer the matter to the Board, which inturn, will refer the question to the prescribe authority. The decision of the prescribed authority would be final as could be seen from clause (b) of sub-section (3) of Section 35. Thus, it would emerge from above analysis that neither the assessing officer nor the Board is competent to take any decision on any such controversy relating to report and approval granted by “Prescribed Authority” as it involves expert view or opinion. The controversy arising out of certificate issued by the prescribed authority if any, has to be referred to the prescribed authority by the Board on such doubt being raised by Assessing Officer and also on his request. It is the prescribed authority along which would be competent to take a decision with regard to correctness or otherwise of its order of approval granted in Form No. 3CL as prescribed under Section 35(2AB) of the Act read with Rule 7A of the Rules.”

(emphasis supplied by us)

17. In the event of Id. AO not agreeing with the certificate of DSIR, then the Id. AO should follow the procedure provided in Section 35(3) of the Act. In the instant case, no such process/procedure was followed by the Id. AO. Hence, he would be left with no other option but to accept the figure certified by DSIR and grant deduction to the assessee u/s 35(2AB) of the Act. In view of the aforesaid observations and respectfully following the aforesaid judicial precedent, the Ground Nos. 3.8 to 3.11 raised by the assessee are hereby allowed.”

8. That being the case, we conclude that there is hardly any fresh reasoning available to the department to justify the impugned section 35(2AB) deduction disallowance. We thus adopt judicial consistency to delete the same in the assessee’s favour and against the Revenue in very terms.

9. Now comes the Revenue’s twin substantive grounds of the alleged excessive manufacturing expenses, R&D expenditure disallowance made by the Assessing Officer and deleted in the learned CIT(A)’s lower appellate discussion; reading as under:

“7. Ground No. 3 relates to disallowance of Rs 23,00,93,853 on account of disparity in the ratio of Manufacturing Expense to Turnover when compared to the Period 1st April 18 thru 27th March 19.

7.1 This addition has been made on estimation basis by applying the ratio of Manufacturing Expense to Turnover when compared to the Period 1st April 18 to 27th March 19 to the whole AY 2016-17.

7.2 Similar action was also taken for AY 2014-15 &. 2015-16 and notices u/s 148 were issued.

7.3 The appellant filed the WP No. 13418/2019 and 13495/2019 challenging the reopening of cases u/s 148 of the IT Act in Hon’ble Delhi High Court. 7.4 Hon’ble Delhi High Court while staying the above proceeding u/s 148 observed that “Prima facie, we find merit: in. the submission of the Petitioner that the aforesaid reasoning cannot justify the reopening of the proceedings.”

7.5 Now in case of the AY 2016-17, the arguments of the appellant are as under:

“A table has been prepared based on Audited Financials of Financial Year 2015-16, 2016- 17, 2017-18 and 2018-19 (Survey Year) giving details of Manufacturing Expenses and computing the ratio of Manufacturing Expenses to Turnover in both the years. The chart is as under:

As mentioned earlier, the survey team came to a conclusion that the Manufacturing Expenses were 8.86% of Total Turnover as per the P & L account taken out from the accounting software Tally for the period 1st April 18 thru 27th March 19. The manufacturing expenses in the final accounts consist of items which are not reflected under Manufacturing Expenses in Tally accounts but are reflected in other groupings in Tally and are only included in Manufacturing Expenses in the Final Accounts. Comparing the Manufacturing Expenses as per Tally P & L with the Manufacturing Expense as per Final Accounts is therefore not correct.

The Assessment of the year of the survey has been completed under section 143(3) without any trading additions. Copy of the Assessment Order for the assessment Year 2019-20, 2018-19 and 2017-18 are provided herein above. The ratio of Manufacturing Expenses to Turnover as per the Audited Financials and the Assessment Order is 17.20% for Financial Year 2015-16 as compared to 18.63% for Financial Year 2018-19 (Year of Survey). The manufacturing Expenses are thus more in Financial Year 2018-19 as compared to Financial Year 2015-16 when compared to Gross Revenues. The learned Assessing Officer had made the addition on the premise that the Manufacturing Expenses were far less in Financial Year 2018-19 as compared to Financial Year 2015-16. This premise is proved to be incorrect.

It is thus evident that the basis of the addition made by the Assessing Officer was based on presumptions of the survey team on 27th March 2019. Whereas the assessment of AY 2017-18, 2018-19 and 2019-20 were done by the Assessing officer after thorough scrutinizing the findings of the survey and thorough investigation and after being satisfied with the trading results for Financial Year 2018-19, passed an order u/s 143(3) without making any additions on account of the excessive claim of Manufacturing expenses.

The basis on which such addition was made by the Assessing Officer in Assessment Year 2016-17 has thus been proved to be incorrect The addition of Rs 23,00,93,853 may therefore be deleted.”

7.6 The contention of the appellant is found to be correct. The Id. AO has not made any addition by applying the ratio of Manufacturing Expense to Turnover when compared to the Period 1st April 18 to 27th March 19 to AY 2017-18, 2018-19 & 2019-20. On the other hand, the reopening on this basis for AY 2014-15 & 2015-16 has been stayed by the Hon’ble Delhi High Court. Reopening of AY 2016-17 was not stayed by the High Court because of the second issue i.e. bogus R& D expenses. In any case, it does not appear to be logical to apply the Survey findings of AY 2019-20 (date of survey 27.03.2019) to AY 2016-17 while same has not been applied to the Survey year itself i.e. AY 2019- 20.

7.7 In view of the above discussion, the addition of Rs. 23,00,93,853 on account of disparity in the ratio of Manufacturing Expense to Turnover when compared to the Period 1st April 18 thru 27th March 19 with the AY 2016-17 is hereby deleted and this ground of appeal is allowed.

8. Ground No. 4 relates to an addition of Rs 10,74,07,000 being revenue expenses incurred by the assessee on carrying out its R & D activities.

8.1 The relevant part of the submission of the appellant is as under:

“In continuation with our submission vide letter dated 28.6.2022, we would also like to bring to your knowledge the following fact of the case about the Ground of Appeal No.4 i.e., On disallowance of the expense of Rs. 10,74,07,000/-:

Your honour in the year under question the learned AO has disallowed the expense of Rs. 10,74,07,000 on the ground that no R&D work was found being done during the survey, therefore no related expenses or deductions can be allowed.

Whereas in the subsequent Assessment years namely AY 2017-18, 2018-19 and 2019- 20, the learned Assessing Officer has allowed the actual expenditure incurred on R&D activities amounting to Rs. 381.40 lacs, Rs. 926.09 lacs and Rs. 1010.61 lacs respectively on the ground that although it is clearly proved on the basis of each parameter mentioned above that the R&D expenditure purportedly incurred by the assessee-company is nothing but a mere sham and a conduit to funnel money and claim a bogus higher deduction of expenditure. Therefore, the deduction claimed as Scientific Research & Development expenditure u/s 35(2AB) of the Income Tax Act, 1961 in excess of the amount debited to the profit and loss account, amounting to Rs.3,88,77,284/-, Rs. 4,65,48,203/- and Rs. 5,25,78,131/- respectively is disallowed and added back to the total income of the assessee-company.

To substantiate the above facts, we are enclosing copies of the relevant orders passed u/s 143(3) of the Act by the learned AO as Annexures 1, 2, and 3 for your perusal.

The above shows a clear contradiction in the statement of learned AO.

In view of the above-stated facts, the addition of Rs. 10,74,07,000 may therefore be deleted.”

8.2 The contention of the appellant is found to be correct. The Id. AO has not made any addition by disallowing the expenses incurred on claimed R&D activity though he has established that there was no R&D activity taking place in the company as per the findings of the survey conducted on 27.03.2019. He is of the opinion that though these expenses have taken place but not towards R&D work and therefore the appellant is not eligible for deduction u/s 35(2AB) of the Act. By applying this logic, he had disallowed the deduction claimed as Scientific Research & Development expenditure u/s 35(2AB) of the Income Tax Act, 1961 in excess of the amount debited to the profit and loss account, for AY, 2017-18, 2018-19 and 2019-20 amounting to Rs.3,88,77,284/-, Rs. 4,65,48,203/- and Rs. 5,25,78,131/- respectively and added back the same to the total income of the assessee-company. In other words, he has accepted that these expenditures have actually been incurred by the company but not towards R&D activity and therefore only actual expenditure incurred will be allowed.

8.3 In view of the above discussion, the addition of Rs 10,74,07,000 on account of disallowance of revenue expenses incurred by the assessee is hereby deleted and this ground of appeal is allowed.”

10. The Revenue could hardly dispute that not only the impugned alleged manufacturing expenditure vis-à-vis the assessee’s turnover formed subject matter of extrapolation post-facto the above survey exercise only carried out in the year 2019 but also its stands concluded in the above extracted lower appellate discussion that neither there is any abnormality in the foregoing ratio of expenditure nor the latter item of R&D expenditure had been disallowed under the normal provisions. These clinching findings have gone un-rebutted from the Revenue side. We thus uphold the learned CIT(A)’s detailed discussion to reject the Revenue’s instant twin substantive ground as well as it’s cross appeal ITA No. 2842/Del/2022 in very terms.

11. Learned senior counsel at this stage seeks to highlight the fact that the assessee has further sought to challenge validity of the impugned reopening as well. We wish to reiterate here that the learned Assessing Officer has set into motion is the same on the twin issues of alleged manufacturing and R&D expenditure which stand deleted in the lower appellate proceedings (supra).

12. That being the case, we hereby quote ATS Infrastructure Ltd. Vs. ACIT (2024) 166 com 61 (Del.), PCIT vs. Jakhotia Plastics (P.) Ltd. (2018) 94 taxmann.com 89 (Del.)and CIT(Exemption) vs. B.P. Poddar Foundation for Education (2023) 148 taxmann.com 125 (Cal.) & PCIT Vs. Naveen Infradevelopers and Engineers Pvt. Ltd. (2025) 479 ITR 463 (Del.) to conclude that once the above twin disallowance based on reopening reasons are hereby reversed in the CIT(A)’s order, the reopening itself forming subject matter of adjudication is itself not sustainable in law. Quashed in very terms.

13. The assessee succeeds in it’s appeal ITA No. 2686/Del/2022 therefore.

A.Y. 2018-19:

Assessee’s appeal ITA No. 2887/De1/2022

14. The assessee’s instant second appeal inter a/ia pleads four substantive grounds i.e. disallowance of Rs.27,00,000/-representing interest paid to M/s Avail Financial Services Pvt. Ltd., section 35(2AB) deduction of Rs.4,65,48,203/-, amount of Rs.17,17,115/- given to it’s JV company and amount of loss to the tune of Rs.4,70,000/- incurred on cyber crime security etc. respectively, made in both the lower proceedings. Learned senior counsel submits very fairly that the assessee no more wish to press for the foregoing last substantive ground keeping in mind smallness thereof. Rejected in very terms subject to a rider that the same shall not be treated as a precedent.

15. We next notice that both the learned lower authorities have disallowed the assessee’s interest claim of Rs.27,00,000/-paid to M/s Avail Financial Services Pvt. Ltd. for the sole reason that the corresponding loans coming from the very party stood added as unexplained cash credits in A.Y. 2017-18. Learned counsel has invited our attention to paragraph 10 to 14 therein (supra) that this tribunal has already deleted the same against the department. We thus delete the impugned interest expenditure disallowance involving the very entity therefore.

16. Coming to the assessee’s second substantive ground claiming section 35(2AB) deduction disallowance of Rs.4,65,48,203/-, we note that the learned CIT(A) has followed the DRP’s directions in A.Y. 2017-18 (supra) which already stands reversed. Deleted in very terms therefore.

17. Lastly comes the assessee’s third substantive ground claiming the amount in issue of Rs.17,17,115/- given to it’s JV entity(ies) as carrying commercial expediency Ms. Jha states very fairly that the tribunal’s earlier order(s) in assessment years 2014-15 and 2015-16 have already restored the same back to the Assessing Officer for his afresh factual verification on facts etc. We thus adopt judicial consistency to restore the assessee’s instant third substantive ground back to the Assessing Officer in very terms. The assessee’s instant appeal ITA No. 2687/Del/2022 is partly allowed.

A.Y. 2019-20

Assessee’s appeal ITA No. 2688/De1/2022

18. The assessee’s third and last appeal raises four substantive grounds directed against both the learned lower authorities respective findings disallowing section 35(2AB) deduction claim of Rs.5,25,78,131/-, Rs.1,66,000/- given to it’s JV entity, yet another sum of Rs.3,13,000/- and debit balance(s) right off amounting to Rs.13,52,897/- u/s 36(vii) of the Act; respectively.

19. There is hardly any dispute between the parties that the learned CIT(A) has followed the DRP’s findings in ITA No. 760/Del/2022 regarding the assessee’s section 35(2AB) deduction disallowance which already stand reversed in our preceding detailed discussion. Deleted in very terms therefore.

20. So far as the assessee’s remaining third substantive ground are concerned, we make it clear that the same already stand restored back to the Assessing Officer in above preceding assessment years. The same are set aside to the Assessing Officer in very terms therefore. The assesse’s instant last appeal ITA No. 2688/Del/2022 is partly allowed in above terms.

21. No other ground or argument has been pressed before us.

22. To sum up, the assessee’s instant former appeal ITA No. 2686/Del/2022 is allowed its latter twin cases ITA Nos. 2687 & 2688/Del/2022 are partly allowed and the Revenue’s cross appeal ITA No. 2842/Del/2022 is dismissed; in above terms. A copy of this common order be placed in the respective case files.

Order Pronounced in the Open Court on 30/03/2026.