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TMI Blog2010 (3) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law, the Ld. CIT(A) erred in directing to allow the weighted deduction u/s. 35(2AB)(1) in respect of expenses incurred on clinical trials outside the approved R D Labs. 3. We have heard the learned D.R. and the learned counsel. 4. Regarding Ground No. 1 it is submitted that the A.O. erred in disallowing professional fees and reimbursement of expenses aggregating to ₹ 1,66,327/- paid to Trade Mark Attorneys by treating it as capital expenditure. It is also submitted that the A.O. has failed to appreciate that this expenditure is revenue expenditure and allowable to the assessee. The A.O. found that the assessee had incurred expenditure of ₹ 1.66,327/- towards registration of product trade m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75. After considering the reply of the assessee and perusing the assessment order the CIT(A) has directed the A.O. to withdraw depreciation and allow the professional fees and reimbursement of expenses on account of trademark as business expenditure following the ITAT orders in the earlier years,by holding as under: - 1.5 I have carefully considered the reply given by the appellant and perused the assessment order. This issue has come up before the Hon'ble ITAT in assessment year 1999-2000, 2000-01 and 2002-03 and the Hon'ble ITAT has allowed professional fees paid for attorneys in connection with application for registration of the assessee s trademark in foreign countries as revenue expenditure. The Hon'ble ITAT while deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No. 1 is rejected. 6. Ground No. 2 is against allowing of weighted deduction under section 35(2AB)(1) in respect of expenses incurred on clinical trials outside the approval of R D labs. Briefly stated the facts of this ground are that the assessee company was engaged in the manufacturing and marketing of pharmaceutical products and bulk drugs. It claimed weighted deduction of 150% under section 35(2AB)(1) of the expenditure incurred to the tune of ₹ 2,50,35,826/-. The Assessing Officer observed that the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India, in Form No. 3 CM has categorically mentioned that such expenses related to clinical trials outside the approved facilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note the language of section 35(2AB)(1), which is as under:- (2AB)(1) Where a company engaged in the business of [bio-technology or in the business of] manufacture or production of any drugs, pharmaceuticals, electronic equipments, computers, telecommunication equipments, chemicals, or any other article or thing notified by the Board incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of [a sum equal to one and on-half times of the expenditure] so incurred. [Explanation. For the purpose of this clause, expenditure on scientific research , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by way of the insertion of the Explanation. 7. We are unable to accept the view point of the learned A.R. for the reason that Explanation simply refers to and explains expenditure on scientific research as also including any expenditure incurred on clinical drug trials etc. When the said Explanation is read in juxtaposition to the main provision, it becomes patent that expenditure on scientific research must be on in-house research and development facility. It is only the expression expenditure on scientific research which has been explained in the Explanation. Such expression cannot be read de hors the main provision which contains the condition precedent for allowing weighted deduction, being on in-house research and developme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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