2014 (10) TMI 1064 - AT - Income Tax

Weighted deduction u/s 35(2AB) on clinical trials outside India - AO observing that expenditure relating to clinical trials outside India have not been included by the prescribed authority in its report in Form No. 3CL, disallowed assessee s claim of weighted deduction on such expenditure - HELD THAT - On a perusal of the report of the prescribed authority in Form No. 3CL it becomes clear that such expenditure has, in fact, been mentioned in the said report of the prescribed authority. Therefore, reasoning of the AO is without any basis. Furthermore, the issue relating to claim of weighted deduction on expenditure incurred on clinical trial outside India was subject matter of dispute in appeals filed by Revenue before the coordinate bench of this tribunal in assessee s own case for the AY 2000-01 to 2002-03 and again in AY 2004-05 2005-06 2010 (1) TMI 1299 - ITAT HYDERABAD . Tribunal while deciding the issue upheld the order of CIT(A) by observing that assessee is entitled for weighted deduction on expenditure incurred on clinical trials outside India. As the CIT(A) has followed the decision of the coordinate bench of this Tribunal in assessee s own case for preceding assessment year, there is no reason to interfere with the same. Accordingly, we uphold the order of CIT(A) by dismissing grounds raised by the department.

Summary

Issues:
Allowance of weighted deduction u/s 35(2AB) on clinical trials outside India.

Analysis:
The appeals by the department were against the CIT(A)'s order regarding the allowance of the assessee's claim of weighted deduction u/s 35(2AB) on clinical trials outside India for AYs 2009-10 and 2010-11. The AO disallowed the claim as the expenditure on clinical trials outside India was not included by the prescribed authority in its report. However, the CIT(A) allowed the claim, citing that the expenditure on clinical drug trials is part of scientific research expenditure and entitled to weighted deduction. The CIT(A) also noted that a similar issue was decided in favor of the assessee by the ITAT in the assessee's own case for preceding assessment years.

Upon review, the ITAT found that the expenditure on clinical trials outside India was indeed mentioned in the report of the prescribed authority, contradicting the AO's reasoning for disallowance. The ITAT also referenced previous decisions by the Tribunal in the assessee's case, where it was held that the assessee is entitled to weighted deduction on such expenditure. As the CIT(A) had correctly applied the Tribunal's decision from the assessee's previous case, the ITAT upheld the CIT(A)'s order and dismissed the department's grounds in both assessment years.

Therefore, the ITAT ruled in favor of the assessee, dismissing the department's appeals in both AYs 2009-10 and 2010-11 regarding the allowance of weighted deduction u/s 35(2AB) on clinical trials outside India.