ITAT Pune allows appeals, directs AO to delete disallowed amounts for assessment years 2013-14 & 2014-15.

The ITAT Pune allowed the appeals, directing the Assessing Officer to delete the disallowed amounts for both assessment years 2013-14 & 2014-15. The Tribunal held that the deduction under section 35(2AB) should have been allowed as weighted deduction at 200% of the expenditure claimed by the assessee, rather than being restricted to 100%. The appeals were partly allowed, setting aside the disallowances made by the Ld. CIT(Appeals).

---

---

Issues:
Appeals against disallowance of expenditure under section 35(2AB) of the Income Tax Act, 1961 for assessment years 2013-14 & 2014-15.

Analysis:
1. The appeals were filed by the assessee challenging the disallowance of expenditure incurred on in-house Research & Development Facility under section 35(2AB) of the Income Tax Act, 1961. The issue pertained to the disallowance of weighted deduction claimed by the assessee for the assessment years 2013-14 & 2014-15.

2. The Assessing Officer disallowed a portion of the claimed deduction as the expenditure was not reported in Form 3CL issued by the Department of Scientific and Industrial Research (DSIR). The Ld. CIT(Appeals) confirmed the disallowance, leading to the appeals before the ITAT Pune.

3. The assessee contended that the expenditure was eligible for weighted deduction under section 35(2AB) and argued that the requirements of Rule 6(7A)(b) were not applicable for the relevant assessment years. The assessee cited previous favorable decisions in their own case for assessment years 2010-11, 2011-12, and 2012-13 where similar issues were decided in their favor.

4. The ITAT Pune referred to previous judgments in the assessee's own case and another case from the Bangalore Bench of the Tribunal, emphasizing that prior to 1.7.2016, Form 3CL had no legal sanctity. The Tribunal held that the deduction under section 35(2AB) should have been allowed as weighted deduction at 200% of the expenditure claimed by the assessee, rather than being restricted to 100%.

5. Based on the consistent view taken in favor of the assessee in previous cases and considering the legal precedents, the ITAT Pune allowed the appeals and directed the Assessing Officer to delete the disallowed amounts for both assessment years 2013-14 & 2014-15.

6. Consequently, the ITAT Pune partly allowed both appeals of the assessee for the assessment years 2013-14 & 2014-15, setting aside the disallowances made by the Ld. CIT(Appeals).

7. The judgment was pronounced on 23rd March 2021 by Shri Inturi Rama Rao, Accountant Member, and Shri Partha Sarathi Chaudhury, Judicial Member. The appeals were represented by Shri Krishna V Gujarathi for the assessee and Shri S.P Walimbe for the Revenue.

---