ITAT Decision: Assessee Wins on R&D Disallowance & 100% Depreciation Claim &D

The ITAT allowed the Assessee's appeal and dismissed the Revenue's appeal regarding the disallowance of in-house Research and Development activities and the claim for 100% depreciation on pollution control equipment. The ITAT directed the authorities to accept the certificate signed by 'Scientist-G' for R&D activities and upheld the Assessee's entitlement to 100% depreciation on the equipment, dismissing the Revenue's differing view.

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Issues:
Cross-appeals by Assessee and Revenue against the orders of CIT(A)-V, Hyderabad regarding disallowance of 'in-house Research and Development activities' and capital expenditure of R & D, and 100% depreciation on pollution control equipment.

Analysis:
1. In-house Research and Development Activities Disallowance:
The Assessee claimed deduction for R & D expenditure and capital expenditure. The Assessing Officer (AO) disallowed the claim as the prescribed authority's approval was not furnished in Form 3CM. The revised claim was also disallowed as the forms were signed by 'Scientist-G' instead of 'Secretary, DSIR.' Before the CIT(A), the claim under sections 35(2AB)/35(1)(ii) was not allowed. However, the ITAT considered the relevant forms and DSIR certificate, directing the authorities to accept the certificate signed by 'Scientist-G' as valid under the Delegation of Business Rules. The claim was allowed, and the AO was directed to work out the deduction as claimed.

2. Depreciation on Pollution Control Equipment:
The Assessee claimed 100% depreciation on pollution control equipment. The AO allowed only 15% depreciation due to lack of relevant documents. The CIT(A) allowed 100% depreciation after verifying the equipment details and certificates by the Chemical Engineer and Chartered Engineer. The ITAT affirmed the CIT(A)'s findings, stating that the Assessee was entitled to 100% depreciation on assets capitalized before 30th September and 50% on assets capitalized after that date. The claim for assets installed in the financial year 2007-08 was already allowed at 50% in the earlier year, so the AO's different view was dismissed. The Revenue's appeal on these issues was also dismissed.

In conclusion, the Assessee's appeal was allowed, and the Revenue's appeal was dismissed by the ITAT, confirming the decisions regarding the in-house R & D activities disallowance and depreciation on pollution control equipment.

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