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2020 (3) TMI 540 - AT - Income TaxExemption claimed u/s 35 (2AB) - claim not made by the assessee company in its return of income for the A.Y. 201-12 - approval of expenditure for the impugned year in prescribed form has not been received from the competent authority - HELD THAT - We find that an identical issue has been considered by the Tribunal in assessee own case for AY 2010-11 2020 (2) TMI 508 - ITAT MUMBAI where it has been held that once, R D facility has been recognized by the competent authority, then deductions provided u/s 35(2AB) cannot be denied, merely for the reason that approval of expenditure for the impugned year in prescribed form has not been received from the competent authority. In view of the matter and consistent with view taken by the co-ordinate bench in assessee own case for earlier years, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were erred in denying the benefit of weighted deductions claimed u/s 35(2AB) in respect of expenditure incurred for research and development activities in in-house R D centers, even though the R D facility has been recognized by the competent authority. Hence, we direct the Ld. AO to allow weighted deductions claimed by the assessee towards R D expenditure u/s 35(2AB) - Decided in favour of assessee.
Issues Involved:
1. Denial of exemption under Section 35(2AB) of the Income-tax Act, 1961. 2. Allowance of deductions under Sections 35(1)(i) and 35(1)(iv) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Denial of exemption under Section 35(2AB) of the Income-tax Act, 1961: The assessee, engaged in manufacturing enzymes, claimed a weighted deduction for R&D expenditure under Section 35(2AB) of the Income-tax Act, 1961. The R&D facilities were recognized by the Department of Scientific and Industrial Research (DSIR). However, the Assessing Officer (A.O) denied the deduction on the grounds that the R&D facilities were not approved by the Secretary, DSIR, and the necessary approval in Form 3CM was not available for the assessment year in question. The assessee argued that their R&D facilities had been recognized by DSIR since AY 2001-02 and had continuously claimed deductions up to AY 2008-09, which were accepted by the department. The CIT(A) upheld the A.O's decision, stating that approval from the Secretary, DSIR, was mandatory for claiming the weighted deduction. Upon appeal, the Tribunal found that the issue was covered in favor of the assessee by its own case for AY 2010-11, where it was held that once the R&D facility is recognized by the competent authority, deductions under Section 35(2AB) cannot be denied merely because the approval of expenditure in the prescribed form was not received. The Tribunal noted that the R&D facilities were initially recognized by the DSIR and that the assessee had filed an application for approval, which was pending. The Tribunal emphasized that the existence of the R&D facility and its recognition by the competent authority were sufficient for claiming the deduction. The Tribunal directed the A.O to allow the weighted deduction under Section 35(2AB). 2. Allowance of deductions under Sections 35(1)(i) and 35(1)(iv) of the Income-tax Act, 1961: The revenue challenged the CIT(A)'s decision to allow deductions under Sections 35(1)(i) and 35(1)(iv), despite the assessee not claiming these deductions in its return of income. The Tribunal found that the issue was covered in favor of the assessee by its own case for AY 2010-11, where it was held that the assessee is entitled to weighted deductions under Section 35(2AB) for R&D expenditure. The Tribunal directed the assessee to withdraw the alternative claim under Section 35(1)(i), as the primary claim under Section 35(2AB) was allowed. Conclusion: The Tribunal allowed the appeals filed by the assessee for AY 2011-12 and AY 2012-13, directing the A.O to allow the weighted deductions claimed under Section 35(2AB) of the Income-tax Act, 1961. The appeal filed by the revenue for AY 2011-12 was dismissed. The Tribunal's decision was based on the recognition of the R&D facilities by DSIR and the legal precedents that supported the assessee's claim for weighted deductions.
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