2024 (3) TMI 97 - AT - Income Tax

Disallowance of weighted deduction u/s. 35(2AB) - appellant was not carrying on research activity at the address mentioned in Form 3CL but incurred at Kalunga, Rourkela - amount certified by the Ministry of Science and Technology, Government of India in Form-3CL - HELD THAT - From From-3CL, we find that the total expenditure incurred for in-house R D facility eligible for deduction u/s. 35(2AB) is Rs. 22.68 Lakhs. The amount has been claimed u/s. 35(1) of the Act as deduction by the assessee while filing the revised return o f income. The pleading of the Ld. AR is that the actual expenditure which was not disputed by the Revenue and which is certified by the Ministry of Science and Technology may be allowed during the impugned assessment year without any weighted deduction deserves consideration. Thus since the amount certified by the Ministry of Science and Technology, Government of India in Form-3CL amounting to Rs. 22.68 Lakhs corresponds with the claim made by the assessee while filing the return of income, we direct the Ld. AO to allow the actual expenditure incurred by the assessee for in-house R D facility. Accordingly, these grounds raised by the assessee are allowed.

Summary

Issues involved:
The judgment involves the disallowance of weighted deduction claimed under section 35(2AB) of the Income Tax Act, 1961 for the assessment years 2005-06 and 2007-08, along with the denial of R&D expenditure deduction.

Issue 1: Disallowance of weighted deduction for AY 2005-06:
The assessee, a company in the steel industry, claimed weighted deduction under section 35(2AB) in its return of income for AY 2005-06. The Assessing Officer (AO) rejected the claim, leading to an appeal before the Commissioner of Income Tax (Appeals) who partly allowed it. The appellant further appealed to the Tribunal, challenging the disallowance. The Tribunal considered the Ministry of Science and Technology's approval of the research activities and directed the AO to allow the actual expenditure incurred for in-house R&D facility, as certified by the Ministry, amounting to Rs. 22.68 Lakhs. Consequently, the grounds raised by the assessee were allowed, leading to the appeal being allowed in favor of the assessee.

Issue 2: Disallowance of weighted deduction for AY 2007-08:
In the appeal for AY 2007-08, similar grounds were raised regarding the disallowance of weighted deduction under section 35(2AB). The Tribunal, applying its decision from the AY 2005-06 appeal, allowed the grounds raised by the assessee for AY 2007-08 as well. The Tribunal directed the AO to allow the actual expenditure incurred for in-house R&D facility, leading to the appeal being allowed in favor of the assessee.

Separate Judgment by Judges:
The judgment was delivered by SHRI DUVVURU RL REDDY, HON'BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON'BLE ACCOUNTANT MEMBER.