ITAT affirmed weighted deduction eligibility u/s 35(2AB) for ...

Tax Tribunal Allows Weighted Deduction for Domestic R&D Expenses u/s 35(2AB), Separates Foreign Research Cost Treatment.

January 25, 2025

Case Laws     Income Tax     AT

ITAT affirmed weighted deduction eligibility u/s 35(2AB) for in-house scientific research expenditure. While R&D expenses incurred within India qualify for weighted deduction, foreign R&D capital expenditure is allowable u/s 35(1)(iv). The Tribunal distinguished between domestic and international research expenses, maintaining that revenue R&D expenditure incurred outside India was already permitted in the assessment. Product development expenses were classified as revenue expenses. The ruling establishes clear parameters for tax treatment of research expenditure based on geographical location and nature of expense, overturning AO's blanket disallowance of foreign expenditure.

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