Appeal allowed on weighted deduction, travel expenses remanded. Revenue's appeals dismissed. Assessee's cross-objections partly allowed.

The Tribunal allowed the assessee's appeal regarding the disallowance of weighted deduction under Section 35(2AB) and remanded the issue of domestic travel expenses for reconsideration. The Tribunal dismissed the Revenue's appeals on all grounds, including the upward adjustment by TPO, capitalization of interest towards CWIP, and allowance of forex gain under Section 80IB. The cross-objections filed by the assessee were partly allowed, with some grounds dismissed as infructuous.

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Issues Involved:
1. Disallowance of weighted deduction claimed under Section 35(2AB).
2. Deduction of domestic travel expenses under Section 35(2AB).
3. Disallowance of employees' contribution to ESI.
4. Treatment of excise duty refund as capital receipt or eligible for deduction under Section 80IB.
5. Upward adjustment made by the TPO.
6. Capitalization of interest towards CWIP under Section 36(1)(iii).
7. Allowance of forex gain while calculating deduction under Section 80IB.

Detailed Analysis:

1. Disallowance of Weighted Deduction Claimed Under Section 35(2AB):
The assessee's appeal contested the disallowance of Rs. 22,32,326 claimed under Section 35(2AB) for contract labor, professional fees, and GET salary. The Tribunal referenced the Gujarat High Court's ruling in Claries Lifescience Ltd. (326 ITR 251), stating that once the in-house R&D facility is approved by DSIR, the entire expenditure should be allowed for weighted deduction. The Tribunal disagreed with the CIT(A) and AO's reliance on DSIR's exclusion of certain expenses and allowed the assessee's appeal on this ground.

2. Deduction of Domestic Travel Expenses Under Section 35(2AB):
The assessee claimed Rs. 10,71,019 for domestic travel expenses under Section 35(2AB). The AO did not disallow this claim, but the CIT(A) did not adjudicate it. The Tribunal remanded this issue back to the AO for consideration in accordance with the law, allowing it for statistical purposes.

3. Disallowance of Employees' Contribution to ESI:
The assessee's appeal on the disallowance of Rs. 37,982 for employees' contribution to ESI was dismissed as the payment was not made within the prescribed time limit, and the assessee did not press this ground.

4. Treatment of Excise Duty Refund:
The CIT(A) treated the excise duty refund as derived from the business of the industrial undertaking and eligible for deduction under Section 80IB. This was consistent with the Tribunal's earlier decisions in the assessee's own case for AY 2008-09 to 2010-11. The Tribunal upheld this treatment, dismissing the additional grounds raised by the assessee to treat the excise duty refund as a capital receipt.

5. Upward Adjustment Made by TPO:
The Revenue's appeal contested the deletion of the upward adjustment made by the TPO. The Tribunal noted that the CIT(A) had followed earlier orders for AY 2008-09 to 2010-11, where similar adjustments were deleted. The Tribunal dismissed the Revenue's appeal, following judicial precedent.

6. Capitalization of Interest Towards CWIP Under Section 36(1)(iii):
The CIT(A) found that the assessee had sufficient interest-free funds to cover the CWIP investments, and these investments were for business purposes. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

7. Allowance of Forex Gain While Calculating Deduction Under Section 80IB:
The CIT(A) allowed the forex gain while calculating the deduction under Section 80IB, following the decision for AY 2008-09. The Tribunal upheld this decision, dismissing the Revenue's appeal on this ground.

Conclusion:
The Tribunal allowed the assessee's appeals regarding the disallowance of weighted deduction under Section 35(2AB) and remanded the issue of domestic travel expenses for reconsideration. The Tribunal dismissed the Revenue's appeals on all grounds, including the upward adjustment by TPO, capitalization of interest towards CWIP, and allowance of forex gain under Section 80IB. The cross-objections filed by the assessee were partly allowed, with some grounds dismissed as infructuous.

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