DCIT Vs Deepak Nitrite Limited (ITAT Mumbai)
The Mumbai ITAT disposed of appeals and cross-objections concerning Deepak Nitrite Limited for Assessment Years 2016-17, 2017-18 and 2018-19 through a common order. For AY 2016-17, the Revenue challenged the CIT(A)’s deletion of disallowances relating to weighted deduction under Section 35(2AB), balance additional depreciation under Section 32(1)(iia), and disallowance under Section 14A read with Rule 8D. The Tribunal dismissed all Revenue grounds. On Section 35(2AB), the assessee had claimed weighted deduction on R&D expenditure of ₹25.07 crore, while DSIR certified ₹24.54 crore in Form 3CL. The Assessing Officer denied weighted deduction of ₹21,06,65,416 on the differential expenditure. The Tribunal noted that, for AY 2016-17, Section 35(2AB) and Rule 6(7A) required approval of the in-house R&D facility but did not require DSIR to quantify expenditure as a condition for deduction. Since the assessee possessed valid Form 3CM approval and the Assessing Officer had not disputed the genuineness or scientific-research character of the expenditure, the Tribunal upheld the CIT(A)’s deletion of the disallowance. It held that the subsequent amendment to Rule 6(7A) requiring certification of eligible expenditure operated prospectively.
On balance additional depreciation, the Assessing Officer had disallowed ₹22,00,04,913 representing the remaining 50% relating to assets acquired and used for less than 180 days in the preceding year. The Tribunal held that the second proviso to Section 32(1) restricted the quantum allowable in the year of acquisition but did not extinguish the balance entitlement. It noted that the third proviso to Section 32(1), inserted by the Finance Act, 2015 with effect from 1 April 2016, specifically permitted the balance 50% in the immediately succeeding year. The Tribunal accordingly upheld the CIT(A)’s deletion of the disallowance.
