Tribunal invalidates power under section 263, restores assessment order, allows deduction under section 35(2AB).

The Tribunal ruled in favor of the assessee, holding that the exercise of power under section 263 was invalid. The assessment order was restored, and the deduction claimed under section 35(2AB) was deemed in line with statutory provisions, leading to the allowance of the assessee's appeal.

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Issues:
Assessment of weighted deduction u/s. 35(2AB) of the Act.

Analysis:
The appeal was against an order passed under section 263 of the Act for the assessment year 2012-13. The assessee, an Indian Company engaged in pharmaceutical products, filed its return declaring income. The assessment was completed, and the Assessing Officer assessed the total income under section 115JB of the Act due to lower tax on normal provisions. The issue arose when the learned CIT found an excess claim of Research & Development expenses due to not reducing contract Research & Development income while claiming deduction u/s. 35(2AB) of the Act. The CIT issued a notice u/s. 263 to revise the assessment order.

In response, the assessee argued that the claim of weighted deduction was as per statutory provisions and conditions. They contended that the deduction should be allowed based on Research & Development expenditure incurred, not reduced by income. The assessee cited relevant cases to support their stance. The CIT directed the AO to compute the deduction after reducing the contract Research & Development income.

During the appeal, the AR reiterated that all necessary details were provided during assessment, and the AO had allowed the deduction after due enquiry. They argued that the statutory provision did not require reducing income for weighted deduction. The AR also pointed out that the CIT did not identify any specific error in the AO's decision. The Tribunal noted that the CIT's view on reducing income for deduction u/s. 35(2AB) was not supported by the assessee's submissions or the Tribunal's decision in a similar case.

The Tribunal found that the assessment order was not erroneous as the deduction claimed was in line with statutory provisions and previous decisions. The CIT's exercise of power u/s. 263 was deemed invalid and unsustainable. Consequently, the Tribunal set aside the CIT's order and restored the assessment order, allowing the assessee's appeal.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the exercise of power u/s. 263 was invalid, and the assessment order was restored.

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