Tribunal upholds decision granting weighted deduction for R&D expenditure despite procedural delay

The Tribunal upheld the decision in favor of the assessee, affirming that the delay in obtaining necessary forms for research and development expenditure under sections 34(2AB) and 35(2AB) was beyond the assessee's control. Despite the failure to prove obtaining permission before incurring expenditure, the Tribunal emphasized compliance with rules and approval by the prescribed authority, ultimately allowing the weighted deduction. The Tribunal dismissed the Revenue's appeal and affirmed the decisions of the lower authorities in favor of the assessee.

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Issues:
1. Failure to obtain permission of prescribed authority before incurring expenditure u/s 34(2AB).
2. Inability to prove obtaining permission of prescribed authority before incurring expenditure u/s 35(2AB).

Issue 1: Failure to obtain permission of prescribed authority before incurring expenditure u/s 34(2AB):
The Revenue contested the order of the ld. First Appellate Authority, arguing that the assessee did not take permission of the prescribed authority before incurring any expenditure u/s 34(2AB). The ld. Commissioner of Income tax (Appeals) ruled in favor of the assessee, stating that the delay in obtaining Form No.3CL was due to reasons beyond the assessee's control, as it was issued by the Government of India after the assessment order. The Commissioner directed the Assessing Officer to verify the necessary forms and allow the weighted deduction u/s 35(2AB) to the assessee. The Tribunal upheld this decision, emphasizing that the assessee had applied for approval in accordance with the rules and complied with the conditions for claiming the deduction. The Tribunal highlighted that the prescribed authority had approved the research and development facility, and the delay in submitting Form No.3CL to the Income-tax Department should not penalize the assessee. The Tribunal concluded that the assessee met the requirements under section 35(2AB) of the Act, and affirmed the direction of the Commissioner of Income tax (Appeals).

Issue 2: Inability to prove obtaining permission of prescribed authority before incurring expenditure u/s 35(2AB):
The assessee declared a loss and claimed research and development expenditure u/s 35(2AB) of the Act. The ld. Assessing Officer disallowed the claimed deduction, citing lack of submission of approval from the prescribed authority. However, the ld. Commissioner of Income tax (Appeals) ruled in favor of the assessee, directing the Assessing Officer to allow the weighted deduction after verifying the necessary forms. The Tribunal concurred with this decision, emphasizing that the approval for the research and development facility was granted by the prescribed authority, and the delay in submitting Form No.3CL should not hinder the assessee from claiming the deduction. The Tribunal highlighted that once the facility is approved, the entire expenditure incurred on its development should be allowed for weighted deduction u/s 35(2AB) of the Act. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the decision of the ld. Commissioner of Income tax (Appeals).

In conclusion, the Tribunal upheld the decision in favor of the assessee, emphasizing compliance with the rules and the approval granted by the prescribed authority for research and development activities, despite delays in submitting necessary forms.

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