Weighted deduction available on all expenditure incurred on in-house research & development facility

Pharmanza Herbal Private Ltd. Vs DCIT (ITAT Ahmedabad)

ITAT Ahmedabad held that assessee is entitled to claim weighted deduction on all expenditure incurred by it, on in-house research & development facility. Accordingly, restricting claim of weighted deduction u/s 35(2AB) to the extent approved by the prescribed authority i.e. DSIR unjustified.

Facts- In the present case, the assessee briefly pointed out that in terms of section 35(2AB) of the Act the assessee is entitled to weighted deduction at the rate of 200% on account of expenditure incurred on scientific research in in-house research and development facility, which facility is approved by the prescribed authority, being Department of Scientific & Industrial Research (DSIR). The assessee claimed weighted deduction of expenditure incurred on scientific research as claimed in its profits and loss account, but the Department restricted the assessee’s claim of weighted deduction to the extent of expenditure which was approved by the prescribed authority i.e. DSIR in Form 3CL. Thus, alleged excess deduction claimed by the assessee was disallowed.

Conclusion- Held that amendment to section35(2AB) by the Finance Act, 2015 w.e.f. 1.4.2016. Since these assessments are prior to 1.4.2016, the amendment to section 35(2AB)) are not applicable to the same and in terms of un-amended provisions of section 35(2AB) of the Act, since we have held above that the prescribed authority was not required in law to quantify the amount of expenditure incurred on in-house research and development facility, such quantification, if any done by the prescribed authority in Form No.3CL was not required to be taken cognizance of by the Revenue authorities and the assessee is entitled to claim weighted deduction on all expenditure incurred by it, on in-house research & development facility. Therefore, we agree with the contentions of the ld.counsel for the assessee, before us that in the impugned year involved before us, the Revenue has erred in restricting the claim of weighted deduction under section 35(2AB) of the Act to the extent approved by the prescribed authority i.e. DSIR.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

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