2021 (10) TMI 575 - HC - Income Tax

Weighted deduction u/s 35(2AB) - denial of weighted deduction of 150% u/s 35(2AB) as assessee has not filed revised return claiming the weighted deduction for the subject Assessment Year, and that the agreement with the Department, which is a condition precedent, was entered into subsequent to the Financial Year during which the deduction is claimed - HELD THAT - A few judgments are referred to for bringing home the argument that once recognition is granted, approval is not very essential and need not be considered for the reason that Section 35(2AB) is an additional incentive or deduction provided by the Act. The claim is dependent on fulfilling the requirements of the Section. This argument need not be considered for the reasons that the assessee, on the strength of a right in its favour or infirmity in the stipulation of period by DSIR, availed the writ remedy. The prayers of assessee were rejected. The result is that the conclusion recorded against the assessee by the judgment in 2010 (4) TMI 48 - DELHI HIGH COURT bars the assessee from re-agitating the same issue in subject assessment proceedings. The request of the assessee was to give approval with effect from 01.04.2004. For available reasons, and now approved by the judgment in 2010 (4) TMI 48 - DELHI HIGH COURT it has been granted with effect from 01.04.2007 to 31.03.2010. This conclusion is confirmed by the Delhi High Court. The effort of the assessee again is in respect of the very same Assessment Year for which a different conclusion is attempted to be invited from this Court. The argument for weighted depreciation is rightly rejected by all the authorities under the Act. - Decided against assessee.

Summary

Issues:
1. Entitlement to weighted deduction under Section 35(2AB) of the Income Tax Act.

Analysis:
Issue 1: Entitlement to weighted deduction under Section 35(2AB) of the Income Tax Act
The appellant, a company engaged in Research and Development (R&D) activities, claimed a deduction under Section 35(2AB) of the Income Tax Act. The appellant had two in-house R&D facilities recognized by the Government of India. The dispute arose when the Assessing Officer denied the claimed deduction on the grounds that the appellant did not file a revised return for the subject Assessment Year and that the agreement with the Department, a condition for availing the weighted deduction, was entered into after the claimed Financial Year. The Commissioner of Income Tax (Appeals) and the Tribunal upheld the Assessing Officer's decision. The appellant referred to a judgment of the Delhi High Court in a related case to support their claim. However, the Court held that the appellant's plea was not acceptable as the agreement with the Department was a condition precedent for claiming the deduction, and it was only met after the Financial Year in question. The Court also noted that the appellant's entitlement for availing benefits from an earlier date was covered by the order of the Department and the Delhi High Court's judgment. Consequently, the Court agreed with the findings of the lower authorities, ruling in favor of the Revenue and against the appellant.

In conclusion, the Court dismissed the Income Tax Appeals, upholding the decisions of the lower authorities regarding the denial of the weighted deduction claimed by the appellant under Section 35(2AB) of the Income Tax Act.