Tribunal Upholds Assessee's Claim for Weighted Deduction under Income Tax Act Section 35(2AB)

The Tribunal upheld the Commissioner's decision, allowing the assessee's claim for weighted deduction under section 35(2AB) of the Income Tax Act. The judgment emphasized the importance of recognizing the R&D facility by the prescribed authority for claiming deductions and rejected the Revenue's appeal against the deletion of the disallowed deduction amount.

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Issues Involved:
1. Disallowance of deduction u/s 35(2AB) of the Act
2. Interpretation of provisions of section 35(2AB) of the Act and Rule 6 of the Income Tax Rules 1962
3. Restoration of the order of the AO and vacation of the order of the CIT(A)-1

Issue 1: Disallowance of deduction u/s 35(2AB) of the Act:
The appeal by the Revenue challenged the deletion of an addition made on account of disallowance of deduction u/s 35(2AB) of the Act, amounting to Rs. 3,60,18,330, for the assessment year 2014-15. The assessee, engaged in the production and procurement of seeds, claimed deduction u/s 35(2AB) for its Research and Development (R&D) facilities, approved by DSIR. The Assessing Officer disallowed the claim, citing a discrepancy between the claimed and approved amounts by DSIR. However, the Tribunal, referencing previous decisions, held that once the R&D facility is recognized by the prescribed authority, the Assessing Officer should allow the expenditure incurred on the facility for weighted deduction under section 35(2AB) of the Act. The Tribunal reversed the Assessing Officer's order, allowing the deduction claimed by the assessee. The Co-ordinate Bench also supported a similar view in another case.

Issue 2: Interpretation of provisions of section 35(2AB) of the Act and Rule 6 of the Income Tax Rules 1962:
The appeal raised concerns regarding the interpretation of section 35(2AB) of the Act and Rule 6 of the Income Tax Rules 1962. The assessee argued that the DSIR's power was limited to recognizing the R&D facility, not quantifying the deduction claimed by the assessee. The Tribunal concurred, emphasizing that the prescribed authority's role is to approve the expenditure annually, and prior to a specific amendment in 2016, no methodology was prescribed for this approval. The Tribunal held that the Assessing Officer should allow the expenditure once the facility is recognized, rejecting the curtailment of the deduction based on the approved amount by DSIR.

Issue 3: Restoration of the order of the AO and vacation of the order of the CIT(A)-1:
The Revenue sought the restoration of the Assessing Officer's order and the vacation of the Commissioner of Income Tax (Appeals)-1's order. However, after considering the arguments and previous decisions, the Tribunal upheld the Commissioner's decision in allowing the assessee's claim of weighted deduction u/s 35(2AB) of the Act. The Tribunal found no merit in the Revenue's appeal, leading to the dismissal of the appeal for lack of merit.

In conclusion, the Tribunal upheld the Commissioner's decision, allowing the assessee's claim for weighted deduction under section 35(2AB) of the Income Tax Act. The judgment emphasized the importance of recognizing the R&D facility by the prescribed authority for claiming deductions and rejected the Revenue's appeal against the deletion of the disallowed deduction amount.

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