ITAT Upholds Deduction on R&D Expenditure, Highlights AO's Duty &DExpenditure

The ITAT upheld the decision to allow the deduction on Scientific Research & Development expenditure, emphasizing the AO's duty to refer such matters to the prescribed authority. The departmental appeal was dismissed, and the assessee's appeal became infructuous.

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Issues:
1. Non-adjudication of the specific ground before the CIT(A)
2. Allowability of deduction on account of Scientific Research & Development expenditure

Issue 1: Non-adjudication of the specific ground before the CIT(A)
The appeals by the assessee and the Revenue were decided by the ITAT Delhi concerning the 1993-94 assessment year. The assessee's appeal was against the CIT(A)-Faridabad's order, focusing on ground no. 2 related to the decision not following the Hon'ble Tribunal's decision in the appellant's own appeal for the A.Y. 1994-95. The Revenue's appeal was against the CIT(A)-Faridabad's order on the rectification petition filed by the assessee under section 154 of the Income Tax Act, 1961. The issue arose as the CIT(A) had not adjudicated on the assessee's claim of deduction on Scientific Research & Development due to a mistake. Both parties agreed on the non-adjudication of this specific ground before the CIT(A).

Issue 2: Allowability of deduction on account of Scientific Research & Development expenditure
The assessee claimed a deduction of expenditure on Scientific Research related to the business for the 1993-94 assessment year. The AO allowed revenue expenditure but disallowed capital expenditure. The CIT(A) failed to adjudicate on this issue, leading to an appeal by the assessee. The AO did not refer the matter to the prescribed authority, which was a crucial step for allowing the deduction. The ITAT, following the Punjab & Haryana High Court's decision, emphasized the AO's duty to refer such matters to the prescribed authority. The ITAT upheld the CIT(A)'s decision to allow the deduction, considering the factual scenario and legal provisions. The departmental appeal was dismissed, confirming the relief granted by the CIT(A) and rendering the assessee's appeal infructuous.

In conclusion, the ITAT upheld the decision to allow the deduction on Scientific Research & Development expenditure, emphasizing the AO's duty to refer such matters to the prescribed authority. The departmental appeal was dismissed, and the assessee's appeal became infructuous.

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